In a report by Next-gen.biz, president of entertainment and devices at Microsoft Robbie Bach states: "Right now we are thinking about how to cost reduce the Xbox 360. That seems to be the first order of business."

And he goes on to say that because Microsoft beat Sony to market by some distance, Xbox 360 will be streets ahead when it comes to adopting an even lower price going forward.

"You have look at the economics. You have to ask the question, over the life cycle, who has the cost advantage? Who can price most effectively? Who can reach the price points quicker? That has a huge impact on what gets driven."

"Because we were out there first, we have a bigger installed base of consoles," he adds. "We can drive down the manufacturing curve sooner and faster. And because we designed a box that was fundamentally easier to manage on costs, we’re going to have that advantage."

The latest round of tough talking from Microsoft comes as UK retail steps up its efforts to claim vital extra sales on the sought-after hardware by offering super-competitive pricing on 360 bundles. Play.com is currently leading the way with its Gears of War premium bundle at an unprecedented £269.99, while online rival Amazon has an Xbox 360 PES 6 bundle on offer at £279.99. Full details of the current pricing slugfest are in the current edition of MCV.