Sure, just like the $300 Elite will appeal to movie fans who aren't price sensitive. But the $200 Arcade will still appeal to those who aren't price sensitive as well because if one takes more than 60 seconds to think about it, then they realize they can get everything they need for ~$240 with an Arcade and watch all the movies they want. The Arcade appeals *both* to price sensitive and non price sensitive people because there really isn't a whole lot of functional difference between it and the Elite after the hdd is cheaply added. Which is why I disagree when people dismiss it as a competitor.
Doesn't work that way. If so, they'd figure out that if they add all the PS3 components, it is the best value of the 3. The fact that they chose to go Arcade route even though Elite and PS3 have better value overall means that:
* They are only willing to (or can only afford to) spend US$199 max at one go, and/or
* They don't appreciate Blu-ray or better HD
I definitely don't agree, just like I don't agree when people say the Wii is not a target by Sony. Everyone is a target. They have tried to combat the Arcade with the 'value proposition' because that's about all they can do, but I don't believe for a minute that they ignore the Arcade model as a target or threat.
Sony don't have to ignore Arcade. They simply need to focus on something else. Same against Wii. Wii's customer base consists of Nintendo fans, casuals, senior and female gamers. Sony and MS would be hard pressed to target them with the current gaming content, and image.