With the Xbox 360 having been on the market for over a year now, the rumors of an impending price cut have been constantly batted around. Microsoft even stated back in 2005 before the console first launched to expect yearly price cuts on the Xbox 360.

As certain factors started playing out in Microsoft's favor including the delay of the PlayStation 3 from spring 2006 to fall 2006 ( March 2007 for Europe) and the higher price tags of $499 and $599 respectively for the 20GB and 60GB PS3s, Microsoft backed off on talks of price cuts. When asked about an Xbox 360 price cut in early October, Peter Moore simply said "certainly not." A Microsoft spokesman followed up later in October by stating that there are "no plans to adjust the price of the Xbox 360 this year."

In a recent interview with A+E Interactive, Microsoft’s Robbie Bach is asked about the inevitable release of the next generation “Xbox 720.” Bach’s response was that the engineers are always working on the future products, but that cost reducing the Xbox 360 “seems to be the first order of business.” Lower overall component costs will likely come into play as the hardware used in the Xbox 360 ages along with a planned die shrink from 90nm currently used on the Xenon processor to a 65nm SOI process in 2007.

But while Microsoft is looking to reduce costs to improve the profitability of its Entertainment and Devices Division, it’s still unclear as to when customers will actually see any dramatic price cuts directly from Microsoft. Some vendors are taking matters into their own hands by offering special promotions or rebates with Xbox 360 systems, but Microsoft will likely let the PS3 dance around in the ring for a few rounds before it starts unloading with price cuts.