Keep breathing. That $200 price point isn't gonna stop selling consoles anytime soon. And yes, the fact that MS stated that if they sell large quantities of the 360 they will get lotsa cash means they are making money per console sold. Even arcade, obviously.

MS doesn't have to do anything to counter the PS3 price cut. If Sony were to pull an insane move right now, they wouldn't survive long enough to overtake the 360 even in the face of increasing sales: the losses they'd take are simply too huge.

If the PS3 can somehow survive as a feasible competitor long enough that Sony can actually afford to cut the price, then things might be different. But to be brutally honest, I'm not sure that can happen now; Sony would have to make major gains at its current price, and no one -not even the PS3 fanboys, which is saying something- seems to assert that this is even possible.

I have no idea if the word "crush" was ever used.

About the time PS2 was launching Sony exes were constantly saying in interviews that the Playstation was going to own the livingroom; it would be the device that did everything - games, movies, internet. (here's an example ) It was widely speculated at the time that this was a huge threat to MS (because if a playstation did all that and cost a fraction of a pc - who would want a pc?). Shortly thereafter MS announced the XBox.

If it's somehow determined that the blu-ray factor is a big cause of increased sales with the price-cut PS3 and if it's clear as day that it's destined for big things, then MS may consider implementing an internal blu-ray drive in a different sku instead of any price reductions next year.

Imagine that the Arcade-equivalent sku could undercut the cheapest PS3 making it hard to see any extra value in the PS3, having lost the blu-ray feature exclusive. Even today you can get a Lite-On 4x BD for $73 and then you'd factor in wholesale prices and a production date of mid-to late '09 then the price should be greatly reduced and $250 could be a feasible price.

Lite-On 4x BD price.
http://www.amazon.com/Liteon-Reader-Black-Retail-Pack/dp/B0010ZWYF8/ref=sr_1_2?ie=UTF8&s=pc&qid=1229815785&sr=1-2

I agree with stickball 100%, the slim is all MS needs to counter a PS3 pricecut

In fact I don't think MS will cut the price of the 360 at all in 2009, just like it didn't in 2007. MS will bring out the slim and will bundle software for a higher percieved value.

Infamy79, there was a price cut in 2007

http://www.engadget.com/2007/07/31/circuit-city-spills-all-the-xbox-360-price-cut-beans/

http://www.cnn.com/2007/TECH/08/07/xbox360.price.cut.reut/index.html

There was a $178 millions in profits only for the Entertainment and Devices Division on MS for the fiscal quarter ended Sept. 30, 2008.

http://www.microsoft.com/msft/earnings/FY09/earn_rel_q1_09.mspx
http://www.microsoft.com/msft/download/fy09/MSFTQ1-09.doc

On the hole (game divisions + eletronics + movie + entrateinement) Sony got $219.84 million profit fot the last quarter (July-September period)

http://www.usatoday.com/money/economy/2008-10-29-3703954179_x.htm

http://edition.cnn.com/2008/BUSINESS/10/29/japan.earnings.ap/index.html

For sure there will be another price cut on the xbox 360.

I think some unofficial price cut already happened this week! PS3 80gb+blu-remote and movie selling for as low as 299 here in europe(netherlands). And with more and more shops lowering the price. Did i miss something?

More price cuts? I think MS can afford even to lose some money.

http://www.amazon.com/Opening-Xbox-Microsofts-Entertainment-Revolution/dp/0761537082/ref=sr_1_1?ie=UTF8&s=books&qid=1229827624&sr=1-1

I believe that book is the primary source of information for what you're talking about. Apparently the author has access to inside information. I've never read it myself, but from what I've heard, it supports your position. (That is, one of Microsoft's primary goals in entering the console industry was to preemptively attack Sony.)

yea. I remember this.