As of Friday, Microsoft is dropping the U.S. prices of all three Xbox 360 models. The entry-level Arcade model with no hard drive drops from $279 to $199--the cheapest current-generation game console on the market. The basic model with a 60GB hard drive falls to $299 from $349, and the Elite, with a 120GB hard drive, drops to $399 from its previous $449 price. The Arcade and base model prices now bracket the Nintendo Wii, which is priced at $249. The entry-level Sony Playstation 3 is $399.
I'm not sure that the price drops will make a huge different in sales for Microsoft, but it will certainly keep the product price-competitive with Nintendo. However, I think that it's long past time that Microsoft introduce a version that's a media extender first and a game console second. The Elite has everything it needs to be a HD PVR, except for digital or analog video inputs. Even the Arcade can be a usable SD media extender in streaming mode. Microsoft is positioning the Xbox 360 as a set-top box for Mediaroom IPTV systems, but with digital or analog inputs, it could do a lot more.