I have been thinking for the last couple of weeks about the ideal level of a price cut in the U.S.A. and I think I've settled on 25% across the board being the ideal target. I think that it gives the best spread to the different SKUs and hitting pretty much all major price brackets between the enthusiast $300 Elite and the cut down Arcade. It would also help encourage people to go straight to the Premium SKU and ensure that it still remains the mainline console in the lineup as going Arcade + a HDD pack would be more expensive after all.

Its also a good price cut to deal with anything that Sony does with the PS3 as well. Even if Sony does a full $100 price cut on the PS3 the Arcade is still half the price and the percentage price gap between the Premium and PS3 80GB would be the same. If Sony does a $50 price cut then the gap would actually increase.

In any case, I think at this point Microsofts goals are to maximise the userbase of the Xbox 360 to pave the way for their next generation console. Money spent here and now increasing market penetration and share will go a long way to help improve the prospects for the Xbox Evolution console which will be released whenever sometime in the future. Its all about Xbox Live, and maybe sometime in the future we'll find out what 'forward compatibility' actually means.

So what do you guys think? Does this make sense as part of a sensible Xbox 360 strategy by Microsoft?

i think this sure happen

I hope im right!

Your suggestions may be good, but I firmly believe MS will pick the equivalents to the current European price points when it's time for a price drop in the US:

$179 Arcade
$249 60GB
$299 Elite

(actually the official price of the 60GB is €239 in Europe, but for the US I think they will pick the $249 number instead)

I think they will want to move the Pro model to mass market price this year. My personal expectation is 150/230 for the Arcade/Pro split. Those price points should ensure solid sales till they are ready to move to the next gen in 2011.

I believe $199 $249 and $349 would be the best move. Reduce the highest priced consoles by $50 but leave the Arcade X360 price unchanged. The X360 models sold with HDDs make more profits than the Arcade X360

I am 50/50 split between you being right and the price cuts being a bit bigger (something like $130/$200/$270).

I'd probably go with Slime's numbers. A 25% cut sounds massive (great for gamers and sales but sounds painful for MS). Anyone know how much it costs MS to manufacture a 360 these days?

But why would MS make a drastic price drop like that all of a sudden? All the X360 price drops so far have been small, both in Europe and NA, the X360 is selling well and no one (at least not you NJ5) believes in a heavy PS3 price drop.

I don't think it's very drastic. The 360 launched in late 2005 for $300/$400, halving the price after 4 years doesn't sound very extreme.

For comparison, if Sony dropped PS3's price to $300 at the same time, they would have halved the price after just 3 years (even less than that in Europe).