Microsoft has released a stripped down version of their Xbox 360 game console named as Arcade, which comes with a reduced price tag of US$279.99. The essential difference is that Arcade edition has no hard disk what so ever, so the users have only 256 megabytes of on-board RAM for storing content. It also includes five full version Xbox Live Arcade games.

It seems that some kind of a price competition is now emerging as we are approaching next Christmas season. Sony already released their down-tuned 40GB edition of PS3 and now Microsoft responded with no hard disk at all. Rather than cutting production costs, their both are trying to differentiate the different editions of the same product. The size reduction of PS3's hard drive most likely has a near zero impact on cost, and Microsoft on the other hand has all the money and is not afraid to lose money if there is market share to be gained.