Wal-Mart’s ad showing the Xbox 360 price reduction.

AUG. 26, 2008 • Best Buy, Target, Wal-Mart and Radio Shack retail advertisements confirm an Xbox 360 price cut taking place in the United States. on Sept. 7. New MSRPs for the Arcade, Pro and Elite SKUs after the reduction are $199, $299 and $399.

Impact: Price cuts are always very welcome and should definitely  result in a short-term sales increase for the Xbox 360 that will probably carry through the holiday season.  Our concern, as always, is consumer confusion over the different Xbox 360 SKUs.  There is not a drastic price difference of 50% between the Arcade and Pro and 100% between the Arcade and Elite.  The Arcade requires quite a few extra steps to bring it online and does not have a hard drive.  This could end up really creating two very different types of Xbox 360 owners, making developing for the Xbox 360 like developing for the PC, where you have to decide whether to develop for the high-end or focus on the lowest common denominator.