This same time last year the Xbox Live Arcade SKU was 279 USD. Now you can find it on sale every couple weeks at Dell for $169. I should hope sales have increased year over year after dropping the price of the console almost by half in one year!

@John Palamarchuk: "Now you can find it on sale every couple weeks at Dell for $169. I should hope sales have increased year over year after dropping the price of the console almost by half in one year"

Nice piece of exageration and spinning you got going there haven't ya?
First of all, every single brick and mortar retailer (where by far most 360 sales take place), is selling the Arcade for $199.990, not $169. Even when you come online, the biggest online retailer Amazon.com has always sold the Arcade for $199.99.
Second of all, even Dell only does these promotions from time to time, not always.
An $80 price cut from $280 to $200 only gives you a 28.57% reduction in price, not an "almost half" drop in price like you glibbly claimed.

Actually, you can very often find the 360 at this price on certain "deal catching" and "tech bargaining" sites, but it's simply because Dell often offers a % off coupon good on gaming consoles/accessories that almost always work on both 360 and PS3 (or at least this used to be the case). I doubt that the extra 15% (30 dollar) drop is what is fueling the increase in 360 sales, since you can usually use that coupon on the PS3 as well. It is certainly logical that the total price drop across the board has helped the 360, but keep in mind that they are selling many systems at 299 as well, which is much more attractive to consumers than the 399 of a year or so ago. Hitting the 199 price point was key, but those Dell coupons have likely had only a minimal impact, as they are often limited to a certain number of uses (3000 to 7000), or at least they were when I worked there.

@ David Brownfield
No one is saying that price cuts didn't contribute to higher 360 sales this year. After all, it was precisely to incresae sales that Microsoft cut the Arcade price to a more mass market price of $200. What I am quibbling with is the "dropping the price of the console almost by half in one year" bit. Let's not get carried away here
No matter how you look at it, the 360 price was not cut by 50%.

Elite: Price cut from $450 to $400 = 11% price cut
Pro : Price cut from $350 to $300 = 14% price cut
Arcade: Cut from $280 to $200 = 28.5% price cut
Even if you take account of price promotion deals from Dell(which accounts for a tiny percentage of console sales in America) you are not even close to a 50% price cut. .
As far as I know, Gamestop, the biggest video game retailer in the country, has never sold the Arcade at $169 before (at least i have never seen. them do it).

The consumer wins with those price drops. Not so with Microsoft.

"Will be profitable next year"

Now that is something MS execs have been telling the media since 2006.

And even if they make a profit, they still have to make up for all those loses that trace back to their first console (like Carl Sagan said: "billions and billions" in the red).