Following Sony's introduction of a £250 PS3 Slim, Microsoft has announced it is to drop the price of its Xbox 360 Elite from its current RRP of £230 down to a shade under £200.

From 28 August the Elite model - that offers 120GB of storage - will be priced at an estimated retail price of £199.99.

Meanwhile, the Xbox 360 Arcade's price actually rises £30 to £159.99 while Microsoft says the Xbox 360 Pro with a 60GB hard drive is to be phased out.

As regards the Arcade price increase, a Microsoft spokesperson has told us:

"We’re making a modest increase on the price of Xbox 360 Arcade consoles in select regions to offset exchange rate fluctuations and changes in local market conditions, while still offering the most affordable console on the market. While we will be increasing the price on Xbox 360 Arcade in some regions, we will also be dropping the price on Xbox 360 Elite. With Xbox 360 Arcade starting at £159.99, and the premium Xbox 360 Elite experience available for just £199.99, our pricing structure ensures we provide clear choice, differentiation and value at both ends of the offering".

In the States, the Elite has seen a $100 price cut down to $299, a price point that will see it go head-to-head with Sony's PS3 Slim.

Microsoft is at pains to point out that these current gen Xboxes will be compatible with the future addition of "Project Natal", the motion-sensing solution due 2010.