There have been steady rumors in the last couple of days that Microsoft is planning a price cut for the Xbox 360. An alleged scan of a K-Mart add was shown in a few places, showing that the 20 GB Xbox 360 model is in line to get a 50 dollar price reduction, going under the 300 dollar mark for the first time.

The same scan showed the Arcade version of the Microsoft made console only 20 dollars cheaper than the 20 GB model, while the Elite version, which has a 120 GB hard drive, was priced at 449 dollars.

Most of the commentaries so far have focused on whether the scan was real or not and on the moment when the price cut hits. But Mike Hickey, who is an analyst at market research firm Janco Partners, believes that the main problem is whether conditions in the videogame market warrant a reduction of price or not.

Hickey stated that "There seems to be a limited amount of natural near-term catalysts on the horizon sufficient to accelerate hardware growth beyond holiday seasonality, whose ultimate consumer spend could be dampened from a hostile gas pump and general economic deterioration". In layman's terms, this means that the only incentive that Microsoft has to promote sales of the Xbox 360, at this point, is a price cut. Otherwise, sales will stagnate and maybe even fall as autumn is coming soon.

Price could be an efficient tool in differentiating the Xbox 360 from its rivals, the PlayStation 3 from Sony and the Nintendo Wii. A look at the hardware charts shows that the Wii is not likely to be affected by competition from Microsoft, but those choosing between a PS3 and an Xbox 360 might be swayed to one side or the other by the price of the consoles.

Microsoft has neither confirmed nor denied the rumors that are circulating. We are expecting the company to address the issue at the E3 videogame trade show in July.