Im going to deconstruct these rumors and bring out what they actually mean.

1. The Elite is cancelled out as standard and is strictly made to be limited edition bundles.

- The price gap now between the highest 360 and lowest PS3 is $0. With the standard Elite gone, the gap will officially be $100. That is huge.

- Like the NA and Euro **Exclusive** RE bundle, I have a hunch that MS will use the Elite for AAA multiplats in the future. This is to sway the people on the fence that will buy a console just to play this AAA game.

Whats more enticing, a $399 custom 360 with RE5 ($60 value) + SFTHD Remix ($15 value) or a $399 PS3 with RE5 sold seprately? These future Elite bundles are used to bring in the new adopters instead of going to the PS3. All this depends on is how much $$$ MS is prepared to fork over to keep this trend up.

2. Arcade getting upgraded internal memory or a 20 gig harddrive.

- This will increase the value of the console and actually make it an easier buy for both casuals and even hardcore gamers, especially if the 20 gig rumor proves true.

3. Pro will get a HDMI cable, new games bundled, an 80 gig harddrive, $20 price cut.

- This I feel is the most effective way to battle PS3 price wise. Allready $100 cheaper, the HDMI cable, bundled games (most likely more new) will provide more value since the $399 PS3 has neither. And the hard drive being 80 is meant to say to customers: we have the same amount as them at $100-$120 less. Its very psychological.

Conclusion:

- The Elite being only limited not only makes the price gap between the standard 360 and PS3 $100, and it will more likely convert the fence sitters onto 360's side with the limited edition bundles.

- The Arcade will have enough value to match its price point, making it a much easier buy.

- The Pro will be so competitive that the $399 PS3 will be hard pressed to compare. The PS3 has bluray and wifi, but the pro will have $100 worth of bundled games, HDMI cable, Headset, component cables, and $100-$120 less sku-wise. From a gaming perspective, the Pro can hold its own with value as it will have many thigns the PS3 wont have.

Offcourse this will get more intense if PS3 gets a price cut, but well cross that bridge when it comes. Thoughts?

pro+wifi already=same price as the PS3 for less hard drive capacity, no blu ray and no online gameplay. Add in even one year of Live and the 360 is more then the PS3.

I don't see how the value proposition really changes here unless they are going to start throwing in online for free or include wifi (which the cheap Wii has had from the beginning, it can't cost more then 10-15 dollars to implement).

Very good post. I aree on almost everything.

Wow...great. I'm gonna have to get myself a new Xbox this year. This is great news.

So it's your conclusion that MS is restructuring all their prices, profits, and losses to combat a platform they are already beating? I dont see why that is necessary.

I believe this move repesents a new phase in the 360 life-cycle. The price drops will help increase demand some, but realistically their will not be huge YOY growth for the 3 year old console. It is time for MS to focus on pushing software which will be the bread and butter for the 360 for now on. In other words, while sony and nintendo are still focusing o increasing installed base, the 360 is focusing on software volume since they have attained installed base goals (well, reasonable goals, thier target was 1 billion at one point.)

 you didnt even read........

he Pro has things the PS3 doesnt have. $100 of bundled games, component cables, headset, $100 less sku wise, and if the rumors are ture, a HDMI cable and another $20 less sku wise.  

360 has value too, gaming value.

 They know a PS3 price cut is coming. They are preparing for that. Offcourse they are winning now. this is the counterattack.

Welcome to the world of competetive business.

   does getting kung fu panda free really count as a perk?  I wouldn't play games like that 10 minutes if I was being paid.  The bundled games have been consistantly pretty awful (compared with the PS3 which bundles REALLY good games like Uncharted and Metal Gear Solid 4 that people actually want to play).

   I got component cables with my PS3, I don't think thats a difference.  The Wifi overwrites the 100 dollar SKU savings (I mean 100 dollars for non N wifi?  Come on, you can get a linksys card for a PC that does N for 30 bucks or less).  Live overwrites the HDMI cable and cheap 10 dollar headset. 

  Any way you slice it the 360 is not a particularly good value proposition.  It has a low entry price, but then the accessories cost ungodly ammounts (120GB HD for 150 bucks, 100 bucks for wifi, 50 dollars a year for online play ect).  You can have a 500 GB seagate hard drive you can put in the PS3 for 60 bucks, wifi is free and online play is free, now thats after purchase value.

I believe the rumor about the Elite being discontinued will happen. This has already been reported by Kotaku. I think they will bring it back for some big multiplat releases as a limited edition sku. By the way, Sony will most likely do the same thing with the 160 gig Uncharted sku.

I don't think MS will ever put in a hard drive in the Arcade model. According to Peter Moore, the hard drive in the original Xbox was a major problem for them against the PS2. It added too much cost. 20 gig drives are hard to find these days and would probably cost more than an 80 gig drive. MS has a good thing going with the Arcade, I doubt they would screw it up with mandatory storage. Also, it is unlikely that they will cut the price of the Arcade at all. It is already $50 cheaper than it's nearest competitor.

I am on the fence about bundling the HDMI cable. These cables only cost $5 for the consumer, but not all 360 owners will use HDMI. Why add the cost when it will not benefit all of your customers. The correct approach is to bundle the proprietary cable and allow the customer to purchase their own cable. Like Sony does.