I'm guessing MS will keep the 360 Arcade at $199 unless the PS3 Slim stays well above 360 sales until mid-November.  MS probably hoped having the high-end 360 in price-parity with the PS3 Slim would have a bigger off-set effect.

If PS3 sales don't ease up--and I don't see them dropping below 200k per week until after Christmas--I believe MS will drop the Arcade price to $149 before December.  They have the cash to do it, and I can't think of any hardware moving games coming out on the 360 before next year.

You do know they released a 360 elite bundle, with 2 GAMES, and an extra controller and a 120GB HDD for $299, not only that they are releasing MWF2 bundles with HALO bundles to combat the PS3.

they had to raise the price in uk.
so not likely for a while.
and they were bleeding abit last quarters.

Yes, but if those bundles don't have the desired effect, I think they'll be forced to drop the price of the low-end system.  Not that such a move is guaranteed to deliver the desired results, but I think they'll do it out of desperation.

The problem I see is that dropping the price of the high-end system, but not the low-end system, just doesn't address the market saturation issue.  The primary reason the PS3 Slim is selling like hotcakes is because lowering the baseline price opens up a console to an entirely different group of consumers who are more price sensitive.  Crossing the $200 barrier last year worked wonders for 360 sales.  Lowering the 360 high-end price by $100 this year, not so much.

If MS wants to really compete, I believe they're going to have to tap into that next lower tier.  Bundles help as some of those people will consider the deals better "values", but for someone who simply can't/won't spend more than $150 on a console, the only solution is to drop the low-end price.

They won't next year Natal will be enough.

When you look at how tiny the losses are compared to their overall earnings picture, it's like a flea on a dog's back... the losses might cause them to itch a bit, but otherwise they're not going to worry about it.

Well, in my not so humble opinion, anyway.