This is getting very interesting. Sales of the Wii have slowed down a lot and so Nintendo, who have resisted price drops because of the previous huge demand, will now be forced to bite the bullet. With the HD Super Wii on the way it will not be long before they are back with an offering at a premium price point.
Sony have their back to the wall because the PS3 has cost them billions. However sales are stalling purely because it is far too expensive to buy. They have no option but to drop the price if they are to survive in the market. So another platform holder will be biting that price bullet pretty soon.
Which brings us to Microsoft. The Xbox division is nice and profitable and Microsoft have enough money in the bank to buy a country, or two. Already they have made the Xbox 360 the cheapest home console in the market, as well as being the machine that brings its users the most features and benefits. So will they respond to what the competition do to maintain their price advantage? They easily can if they want to.
Microsoft have a number of options. They can bring the price of the base, Arcade, model down to $149 or even $99. This would get them nice headlines. Or they could take advantage of low hard drive prices to bring down the prices of the Pro and Elite models. Or they could just instal far bigger hard drives. Or some combination of the above.
My guess is that there will be a price move from Microsoft in response to what the competition do. Consoles are a bait and hook business model and they will soon get their profit back as the owners buy games and subscribe to Xbox Live. Which means I will finally be going to the shops and buying one.