[wco81]

Even if MS could and was inclined to cut the price of the X360 more than $100 within a year of its launch, would it be a good idea to do so?

It would alienate a lot of people who paid $400.

It might also lower the comparative value of the X360 compared to the PS3. Lower price doesn't always win a market, as companies which tried to undercut the iPod found out. People might think a much lower price implies the older product isn't as powerful as the new one, although I don't think Sony would want to be more than $50 higher in price.

It would also depreciate the value of all those accessories where MS expects to make up some margins. Think about cutting the Premium price to under $300 within a year. After such a big price cut, could they still charge $100 for the 20 GB HDD or $50 for the wireless controller? Or $80 for the wireless adapter? If they didn't cut the accessory prices, they would comprise a much higher percentage of the console price. Two or three accessories might come out to the price of the Core under that scenario.

And what about games? Third-party publishers are the ones pushing the $60 price point. But they also want lower console prices to maximize the installed base. Will $60 games sell for a $200 console?

The price cuts would have to increase volume a lot to offset the big decreases in margins. If MS still wants to make money on this generation, a big price cut so early would not be the way to do it.