I've never actually seen anyone say that but the 360 already costs $200, it can't really go significantly lower. Whereas the PS3 costs $400, there's still a lot of room for the price to go down.

Well Miscrosoft could afford to pay people to take XBOX 360's but that's not really a relevant point , the point is what pricing strategy could microsoft employ to bring about a good balance of short & long term gain from the XBOX brand.

The 360 is already below the price of it's competetion in the form of the Arcade , further dropping the price of the XBOX 360 arcade or Pro reduces the perceived value of the console , maybe even to a greater extent than the price of the console . As we all know perceived value is important , it's what affects the strenght/viability of a brand.

To illustrate this point look at Gucci , they sell glasses for hundreds or even thousands of $ yet it might take them as little a $15 to make a pair , this is due to the perceived value of gucci brand . Gucci could substantialy imrpove their sales and their short term position from selling their thousand dollar glasses for a hundred dollars , but how would this affect the long term premium brand image Gucci has worked to achieve ? It would certainly cheapen it and therfore damage it's ability to bring in the high profit margins in the future.

Obviously XBOX isn't a luxury brand but Microsoft don't want to run the risk of devaluing the XBOX brand , it isn't all about marketshare, they are in business to make a profit . If Microsoft drop the price of the 360 too drasticaly , too fast then the consumer will expect the price of the 720 to follow suit , they won't accept a premium priced 720 if the XBOX 360 is being sold for peanuts . However if Microsoft continue to apply the financial pressure to Sony, they may put themselves into a position of significant marketshare , if all the traditional/core developers are supporting a unified platform that is Microsoft then it'll be irrelevant how Microsoft price their next console , but as long as Sony is around (their main competition IMO) Microsoft would be wise to balance their pricing.

The PS3 is a must have console this generation. They have a lot of room for price cuts, they have the best exclusive games and the PS3 is futureproof which will guarantee it to outlive the 360 by many years.

Sony still has A LOT OF ACES up their sleeve.

The Xbox 360 HAs a mass market price

going further down won't have "much of an effect" in comparison the PS3's price cut which may actually never come (if SONY discontinue it soon)

You should look closer cuz I've seen plenty of people saying they can't cut prices no more! :p I agree that $200 is already cheap enough, but turning the 60GB sku into the new Arcade at $200 is virtually possible and I believe the only feature that it would have over the Arcade would be the HDMI output (and the harddrive). That I don't see being much of a cost and, like I previously said, the customer would see such move as a price cut.

I personally believe the XBOX 360 will have a price cut this year, $149.99 for the arcade, $249 for the Pro, and $299 for the Elite.

Its also needed to increase demand for the XBOX 360,  it would be a smart move especially in the Fall.

 I like your answer, but I disagree that lowering the price reduces the perceived value of the console, in fact, I dare to say that here in the States the 360 already is perceived as good value, and a drop in price to us is just like a good sale. Let's take for example the PS2; the PS2 never lost its value due to price drop, in fact, because PS2 sales increased with it drop to $199 and to $150 thanks to the fact that people knew the PS2 was the console of choice. The same could be said with the 360, not only has it got a strong foothold in the market, a price drop would be like Gucci having a sale of their most expensive glasses at half the price, they're still top notch glasses and people would be more willing to buy it now than they would if the price stay the same. Plus I think it's harder to compare consoles to an worn accessory. The only way the 360 would start losing value perception is if the next generation comes out, that's when consoles stop selling as they used to.

han! roll explained one of his posts o.O

in any case what I really don't understand is why the PS3 still costs 400 when it's basically a 360 with blue ray.... but really when a BR player sells below 200, how much do you think it costs to build?? oh what, is it the cell? who's the dumbnut who decided on using a chip that is barely more powerfull than the competition but 10x more expensive at launche and has no forseable price drops?? I just don't get how it can still be 400$ ...

It can still be cut. The $149, $249, $349 would be about right

360's position is currently nowhere near that of the PS2 . There's an 8% different in marketshare according to Vgchartz , IIRC the PS2 had around 70-80% marketshare last generation with the XBOX and Gamecube fighting for the scraps. One you are in a position of high marketshare then low pricing will only work to your advantage. The XBOX is still having to fight for the confidence , it doesn't have a "strong foothold" in Japan or in Europe , it is admitedly more dominant in the U.S.

Actualy the principle behind my illustration and the XBOX 360 is the same , if Microsoft drasticly and constnatly reduce the price of their console (which has less than a 1/3 of the overall market) then it has to have the effect of devaluing the XBOX brand , MS are cutting prices to stimulate a decline in demand , often people are tempted to buy a XBOX 360 because of it's low price point (IIRC The XBOX acrade is cheaper than the PSP and around the same price as the PS2 in the UK). Wheras it could be argued that Sony are cutting the price point of the PS3 to adress affordability issues , it still manages to sell decently well with it's high price point.