Weird logic. It costs more than cheap BD players, thus it won't sell to who wants a BD player, and it costs more than an Arcade thus it won't sell to who wants a console? What about the fact that it combines the two?

You can buy a 360 Arcade or with $100 more you can buy a PS3 that also has wifi, free online, 120GB HDD and plays BD. Let's say that your average customer doesn't care much about the cost of Live Gold, and only is interested in the wireless in a minority of the cases. Still, how many hard disks and BR players are you going to buy with the $100 difference?

I think they willl respond with a 3 game core bundle for the Elite and a 2 game family bundle for the Arcade. This is pretty much looking like a repeat of the 2007 holiday season. Remember after the 2007 price cut the Xbox 360 was $50 cheaper than the 40GB PS3 AND the Core (not Arcade) was a gimped model @ $280.

The damage last year:

VGChartz Hardware data for the period 28th Oct 2007 to 05th Jan 2008:

Which wasn't at all that severe. The Xbox 360 dominates the U.S. relatively and the U.S dominates holiday sales relative to the rest of the world.

Lastly: It pays to remember that its the cost out the door with games and accessories you want which is important. Its the total cost of console + bundle of games you get/buy which matters the most.

Mummelmann said: You pose some interesting questions starcraft. There isn't much to do except lower the price by, say, 50 dollars or so on the top models and perhaps release some sexy bundles! They could also start selling Elite's or Pro's with a prepaid XBL Gold subscription for a given time, a year or two, just to sweeten the deal and make a slight carrot out of their awesome online. I'm really glad this is happening now, my TV will be in place in exactly one week and it seems I'll be able to buy both a PS3 and a 360 Elite for 2500NOK now... Good times!

If MS were to say, include 12 months of XBL Gold and throw in a WiFi dongle at $299, the Elite would be more comparable with the $299 PS3. I'm not even going to throw in the BD playback added value since the assumption is people are buying these to play games.

I'm not sure I'd see either happening as MS' margins are padded by both XBL subscription fees and their peripherals, the two biggest profit makers being their proprietary HDDs and the WiFi dongle.

So comparing a $250 Elite with a $299 PS3 still wouldn't look like the better value unless consumers are solely looking at price, in which case, they'd be buying a $199 Arcade.

Having a $250 Elite would also pose a problem due to MS' hardware and peripheral price structuring.

You can't charge $99 for a 120GB HDD if the difference in price between the Arcade and the Elite is only $50 (there is no longer any HDMI cable to justify a $50 price difference either). Charging $50 for an HDD, while great for the consumers, would negate the big profit margin MS previously had on those drives.

The only other option would be sell a 120GB Elite at $249, an Arcade at $199 (maybe even do another small price reduction although the margins on these SKUs have to be non-existent as is) and introduce larger HDDs (250 or 320GB) available only as separate SKUs at $99 (and no separate 120GB HDDs under $99). Charging any more than that would make it a very low volume seller at best. A $149 HDD would seem overpriced when looking at a $199 console (or less if MS chooses to cut their margins further) and would probably sell accordingly. MS could probably get away with selling 500GB HDDs at that price.

Lies, damn lies and libelule.

NPD states average selling price for a 360 in the USA is 260$.

Missing sixaxis, missing the BD player, missing battery, missing battery charger, missing online play, missing WiFi as well, missing a most likely longer shelf life as games will soon exceed the limitations of the DVD.  Yet the PS3 costs the same.

PS3 for the win.

As for wild early predictions for next year, I may as well throw out that I can see MS bundling Natal with the 120GB Elite at the same $299 price.

I'd like to see the base HDD configured Xbox come with a larger drive, but considering it took years before MS finally transitioned from 20GB to 60GB, with a premium 120GB introduced in between, the one thing MS hasn't shown is the ability to adapt to changes in storage capacity requirements in a timely manner.

They really don't have to do anything at this point. I'm sure Microsoft knew Sony was eventually going to drop the PS3's price, so Microsoft decided to drop the 360's price much earlier. Sony will probably beat them out in the short while and maybe even through the holiday season, but Microsoft already has a good price point with the 360 and has managed to get an 8 million console lead its rival. For people purely looking for a gaming system and not a Blu-Ray player, the 360 still has the Arcade model at $199 and the $299 Elite Model may look better to some because of strong IPs like Halo and Gears of War. If Sony really starts to inch closer to 360 in sales, Microsoft can respond then. Microsoft knows it won't beat Nintendo and pretty much knows it has beaten Sony this gen, so they can probably just look at how the market changes in the next few months and respond accordingly. Unless the PS3 Slim and the price-cut does miracles for Sony, they probably don't need to lower the 360's price to stay in second place until it's cost-effective for them.

I thought it was about $300.

If it was closer to $250, it would mean roughly half the consoles could be at $299, and the other half at $199. Throw in a minority percentage at $399 and you'd have about the same $260 average that NPD states.

In this instance, it all depends on how many $399 consoles you think MS is moving. Some retail outlets don't even stock them.

I think you are missing my point... people who are mainly interested in purchasing a Blu-Ray player are going to opt for the cheaper stand-alone models instead of a PS3, so that takes them out of the equation.  Now people who are mainly interested in gaming will basically be split just going by the hardware alone ($199 360 w/out Blu-Ray vs. $299 PS3 w/ Blu-Ray), so the deciding factor for them will most likely come down to each system's game library.

My point was that with the advent of more mainstream standalone players, Blu-Ray playback won't be that big of a factor in the PS3's sales going forward... it's going to come down to the games (as it always does).  So it'll be interesting to see how the PS3 does through the holidays and if it gets only a small spike in sales from the price drop, or if it continues to sell as good or better than the 360 throughout the holidays and into 2010.

Whats tomarrow?