Microsoft cuts Xbox 360 by $50

The long awaited Xbox 360 price cut is now a reality - beginning tomorrow (August 8) the price of the games console will fall by up to $50.  This means that from Wednesday the Xbox 360 System will see a price drop from $399.99 to $349.99 while the Xbox 360 Core System gets a smaller price cut, down to $279.99 from $299.99.

This is the first Xbox 360 price cut since the console was launched in the US back in November 2005.  Compare this to Sony's PS3 which was launched in November 2006 and has already seen it's first price cut in order to stimulate sales, much to the annoyance of some who queued up for hours to be the first to get their hands on the PS3.  This long gap between console release date and the first price drop means that Microsoft had competitively priced the Xbox 360, while Sony had totally overestimated how much gamers would be willing to pay.

So what's behind this price drop?  If I wasn't cynical I'd say that it's an example of Microsoft passing on production line savings to the consumer, but I am cynical so I'm going to say this $50 cut is in response to Sony's PS3 price cut.  This latest price drop will once again put the Xbox and the PS3 head-to-head over the Holiday period, although my feeling is that sales for both consoles are going to pale compared to Nintendo's Wii.

Thoughts?