Ars Technica is reporting that a $199 Xbox 360 model will be released this September. It's not a new model but actually the current hard drive-less Arcade that currently retails for $299. In fact, all models are due for an apparent $100 price drop. The new 60gb Premium will drop to $299 and the 120gb Elite will drop to $399. Ars didn't exactly say where they got this from, other than referring to the source (jokingly) as the Mole. Maybe they have someone working inside Microsoft Games providing this info.

While the source seems a little sketchy, it's not outside the realm of possibility. The PS3 has consistently overtaken the 360 in North American sales for most of 2008. The Wii juggernaut of course shows no sign of stopping. The Wii is priced at $270 and the PS3 40gb at $399. Since the 360 is approaching its third anniversary, sales are of course going to start slowing so Microsoft may be looking to bounce back with some major price cuts in time for the Christmas season. Would I buy a 360 at $200? It is tempting but I still have to pass on it. The PS3 has a very strong game lineup for the fall, and I simply cannot afford to be buying software for two systems. Still, if you're looking for a gaming system, this might be a good choice. I would expect these units to include both the 65nm CPU and GPU, thus solving the quality issues with the system.

Source: Ars Technica