Just looking at the interesting snippits in the Xbox 360/EDD financial report.

They shipped ~11M vs ~8M Xbox 360s and yet their cost of revenue fell 7%. The Falcon Xbox 360 wasn't superceded by Jasper in retail until November/December so chances are that 40% the Xbox 360s shipped were Falcon models for that financial year.

The overall cost of revenue was 4.3B vs 5.6B in revenue so talking about the variable costs on their own its definately affordable and the fixed costs or revisions, R+D, and advertiseing etc would be divided over a greater number of consoles so their impact would be even more dispersed.

Xbox 360 Live subscriptions increased precisely on par with the number of consoles shipped which implies that the people who aren't going online are getting Arcades or the Arcade/Premium balance has remained fairly static. Also paid downloads over Live increased by 73% which is greater than the percentage increase of total console ownership.

So looking forward the revenue from games/Live will likely be higher as the total console ownership has increased 50% over the last financial year and thats in spite of the recession, the cost of revenue per console is coming down so again it will probably cost them less money to ship more Xbox 360s this year than last year and the overall revenue will be higher. Given that the average revenue per Xbox 360 sold worldwide is probably $250, console sales now make up less than half the overall revenue of the system and this ratio will probably tip further still by the end of the year.

It does look like it is plausible considering the Live side of things are compensating. But will MS decide more profit is better?

MS will probably need it.

Although possible...

Wouldn't Microsoft hold off any pricecut until Natal launch?
It seems the logical thing to do.
Instead of taking a risk and just launching Natal, a pricedrop on all 360's would give tons of interest and would be sure to give natal a perfect launch.

Plausible and probable are two different things, of course, and the distinction is worth making.

Plausible says, "yes, they could afford a pricecut this Fall".

Probable (in my mind) says, "bide time and hold off until 2010 for an even more impactful cut".

Personally, I expect bundles and a refreshment of the SKUs available (e.g. Elite only for limited editions, changes to the Pro capacity, or whatever, y'know), but no pricecut - Natal launched with a pricecut Fall 2010?

Sony seem to be stuck in a rut. Every time they drop the price, MS will counter.

They probably will drop the price the day after Sony does.

i think ms will wait around a month to see what the sony pricecut does. if it doesn't massively effect their sales, i see no reason for them to cut the price.

Wouldn't shock me.

I bet we see all 3 companies cut the price this holiday season.

Here is what I see happening

Microsoft will NOT drop the price of the Arcade any further. They will however likely drop the price of the Elite model to around the price of the Pro, get rid of the Pro model, and later bundle both models with Natal.