Losing money on the Arcade is not a big problem, if they sell enough Premiums and Elites to get it back. Since 360's hard drive is proprietary, Microsoft can assure a minimum level of revenue as they control the standalone hard drive prices too.

This is a good option:

1. Platinum: You pay $50 per year. You get online play, 2,000 MS Points yearly (and you can let them roll over and they'll accumulate) and free demos that have additional levels AND a browser interface. You'd also get a 10gb online storage bin.

2. Gold: You pay $25 per year. You get online, timed demos and everything you get with LIVE now. You get a 1gb online storage bin.

3. Silver: Free. You get online, limited demos that are delayed a week or two. Ad-supported too, but you get bombarded with tons of offers.

4. Bronze: Free. You get limited online - just twice a month. Ad-supported too but not as bad as with Silver.

Sony pays Nvidia...

Sony pays IBM

Microsoft pays noone.

See the difference between owning I.P and licensing it?

@Bold, what do you think consumers must have thought after Sony a third off the top a little less than a year after launch? Well they obviously didn't decide against buying the PS3.

The real question they will ask is "Why is the PS3 so expensive" Not "Why is the Xbox 360 so cheap".

I don't think MS will cut prices until one of two things happen:

The PS3 shaves the 360 lead to 5M
The PS3 is consistently selling the 360 by 3 to 1 WW

If the figures are correct, MS doesn't need to cut the price until the holidays, if then. I think they could ride the lead to like 3M. MS is in the driver's seat. They don't need to counter the Sony price cut. Not this time ...

I really dont see why the 360 needs to be even cheaper. In Australia the middle 360 (60 gig) is like $300 cheaper then a ps3 and im pretty sure the next model up is $200 cheaper, the arcade its like $450 cheaper. I bought my dad the arcade the other day puerly because its soooooooooo cheap! and for casual gamers the arcade 360 is 110% perfect! and $450 cheaper then a ps3!

The ps3 would need to drop $200 to be on a competing level with the 360 in Aus and I doubt it will get cut that much, considering the looses Sony has incured. And even though they have cut production costs if they drop the price they will be right back where they started, making a huge loss.

Sony may not be caring to strongly about Ms current win in the HD gaming market and they may be looking puerly at their own sales. If they continue to make their target at the current price there is no need for the company to drop the price. Just because we see everything as a competition doesnt mean the business world has to.

A price drop may put sony in a worse financial position then if they maintain the price with current sales. Financial position should be sonys number 1 priority right now, not winning a console war.

How about some FREE Xbox Live just generally for all :) wooo that would definitely be a dream come true lol...but you guys have some great ideas...we need some of these mentalities working up in the gaming business for sure

$50 drop across all skus in september. case closed. make bundles.

Just like 08.

Does everyone still think Sony will price drop despite those losses? Granted they need to get it going but maybe a $50 cut and some downward pressure on the prices for movies? The sooner Blu-Ray takes off the better for them.

MS posted the first full-year profit in their E div. last year. Is the middle of the worst recession since the 30's the time to run in the red? I'll be surprised if the arcade gets a drop before late 2010. I'd love a break on a 60G HD, a controller or the wireless add-on. That would move product if not consoles. Maybe bundle some online games and a headset with the pro? Should be interesting.

$19.99 for 1 yr Xbox LIVE would be very attractive to even casuals.