From Gameindustry - http://www.gamesindustry.biz/content_page.php?aid=25625

 Hufford "well aware" of ideal price for family consumer

As Microsoft reveals intentions to target families with new titles and a renewed marketing push, group product manager David Hufford has said he's well aware that USD 199 is the ideal price for the family audience.

Although the company has avoided a significant price reduction of the Xbox 360 since release in late 2005, analysts and industry watchers expect a cut in time for the Christmas period.

"We are well aware that the sweet spot of the market is really 199 bucks," said Hufford, speaking to Bloomberg.

Observing Nintendo's lower price point for the Wii, he stated: "When Mom walks into the store and sees she can get a console with a game for USD 250, she sees it as a USD 300 value. They've done a good job."

It's not only price where Microsoft intends to follow its rival's lead. Targeting the family group with new titles and a renewed marketing push is another priority, as it hopes to shake off the 'hardcore' tag that held back sales of the original Xbox.

"If we don't make that move, make it early and expand our demographic, we will wind up in the same place as with Xbox 1, a solid business with 25 million people," commented Xbox boss Peter Moore.

"What I need is a solid business with 90 million people."

According to Institutional Investor's analyst Heather Bellini, Microsoft could lower the price of the Xbox 360 as soon as September. She also believes that power in numbers could key to Microsoft's seasonal success.

"If they really are going to have a good Christmas games line-up, then they just have to have the largest number of boxes out there so that they sell the largest number of games."

So, MS is signalling a bigger family push, a possible $199 core. 2 Much-needed things. If MS can really accomplish both this year (Banjo Threeie, major push for 3rd party family titles, ect) + the price drop, MS could become a threat to Nintendo, and renew a major push for more US and European sales.

Now, if they could just fix the Japaneese sales issue, MS would be fixed.

I'm actually hoping they can the Core model personally but its good to know that MS realizes that the price of the 360 is hampering sales. The types of consumers that look for family friendly titles don't spend $300 to $400 on a console. Thats why games like Kameo and Viva Pinata never really had chance to do massive sales.

i still dont see 90 million because of Japan but defintiley higher than 25 million

The whole JP issue is that if MS ever reached moderate succuess, and ever got 30% of the 50,000,000 consoles sold per generation, MS could garner 15-17.5m sales alone in Japan.

Add in 30-40m from the US, and 20-30m from Europe, and you have near that 90m range.

Very pragmatic and realistic approach from MS. They know exactly what they need to do, now they need to do it.

I agree. MS is in the position they could EASILY combat the Wii directly, and totally malign it (in terms of it being a strong #1 in the US).

The thing I worry is that MS is too stupid to realize that the price drop is needed when H3 launches, so the Halo-ites are out of the way.

I think it's a clever move from Microsoft. If they realize this they can get easily to 50 million units sold for XBOX360. I doubt 90 million, Sony and Nintendo are moving targets, they will adjust their concepts to be able to compete.

Especially the casual games may be important for Microsoft. They will not be able to compete with Wii Sports this generation - they lack the controller concept - but they should be able to creating games that can compete with Mario Party and Rayman Raving Rabbids.

If they advertise their move good, that could work. Good news for XBOX-fans I think.

Will Nintendo make any changes on Wii pricing/packaging if the Core hits 199$ ??

Seems to me like they're still calculating if it would be better to cut prices in order to move more consoles, or keep prices up for as long as possible to fill the holes in their pockets. Remember the Xbox product line has been loosing money since day one, and dropping the price would probably eat away whatever profit they're making now.

Another negative factor for Microsoft, and probably one of the biggest things keeping people on the fence from buying Xboxes, are the red rings of death. AFAIK they're a result of cutting expenses by using cheap components, and eliminating them by moving to better (more expensive) parts would cause even more short term losses.

The 360 is definitely going to do better than the original Xbox, but there are a few problems Microsoft has to solve before having a shot at a user base of 50M+. A lot of very high quality games are coming out this year's holiday season for all consoles, and we'll probably be able to tell fairly accurately how the console war is going to end up by New Year.

Honestly, I wouldn't be surprised if Nintendo waits a month to see if Wii demand is still outstripping supply after the first couple weeks of the 360's price drop. Nintendo has already said that they could have launched at $300, and it's entirely possible that $249 with a game, the Wii will still sell well when sandwiched between the 360 core at $199 and the premium at $299 (with the Elite even higher). But if there's even a hint that Wiis are finally sitting on shelves waiting to be purchased instead of being gobbled up by people standing in line at 4 am every Sunday, expect a reactionary price drop.

If the decision were mine, my response would be to re-price the Wii at $179 without a game.  Wii Sports has been a phenomenal success at virally marketing the Wii -- the news is out there, and I think it's no longer necessary to make people buy Wii Sports.  If they want to do the two SKUs thing to keep their margins up, they could offer a Wii + Wii Sports + Wii Play with 2 remotes in the box for $249.