Now that we are beginning to enter the 360's 2nd summer it is obvious a price cut is needed start boosting sales again. Currently the 360 is look at it's second consecutive month of weak sales and is losing a lot of ground to the Nintendo Wii. Early on the belief was the the big competition for this generation's console crown would be between Sony and Microsoft. Sony had blown everyone out of the water the last two generations but has made huge mistakes that have caused the PS3 to sell barely 35K units a week in the US and well below that in Japan.

A recent report by Digitimes shows a production price comparison of the PS3 and the Xbox 360 showing the 360 is now being sold at a nice profit for Microsoft. In the US the 360 is sold for $399 and $299 respectably yet is appears the manufacturing costs for the two units are now down to $323 and $280. With the drop in production costs Microsoft could drop the price of their Pro and Core models by $50 to $349 and $249 to help the 360 compete with the Wii at the same price and increase the price difference between the PS3 which retails at $599 in the US. By dropping the price $50 the Pro 360 would still make Microsoft a $26 profit for each unit sold and offset the lose of $31 lost on each Core model sold.

Right now Microsoft has peaked the interest of the Japanese gamer with titles like Forza 2 and Trusty Bell coming to the 360 this summer. There are several big name games coming to the 360 this Fall and this should be the summer of the first true next generation Madden game. This is also a perfect time because of the game droughts the Wii and the PS3 are going through. Neither of those two consoles can complete with the shear volume of good games coming out for the 360 over the rest of the year. A price drop now could possibly salvage the Japanese market and give the 360 the boost it needs to keep it's lead in this generations console sales.

The problem could very well be the Elite SKU just introduced. This model retails for $470 and it unsure just how much this model costs to produce. Dropping the price on a model that just came out would anger the people that just purchased the unit. Microsoft could drop the price on the Core and Pro units only which shouldn't anger the fan base too much. What I think will most likely happen is Microsoft will wait for the new GPU/CPU size changes to help drop the cost of the units even more before they drop the price of the 360. The smaller GPU/CPU can place more processors on a single wafer of silicon so this will yield more processors at a lower cost. This will be a large savings for Microsoft and could mean a large price drop in the 360.

The more I look at how Microsoft decided to enter this market they made some big mistakes this generation offering multiple models. The Core is a huge liability to Microsoft because the cost to manufacture the unit does not allow Microsoft to make a profit on the machine. The Elite just adds cost and confusion to the equation. If there was one model, the Pro, then you would be in a better place to cut costs and introduce improvements along with cost savings.