Will a big price cut boost the Xbox 360’s fortunes?

Microsoft today slashed the price of the Xbox 360 game console, which beginning on Friday will cost as little as $199. The system comes in three versions:

• Xbox 360 Arcade, $199.99 — includes the console and one wireless controller, and a tiny 256MB of of flash-based storage. No headset, no network cable, no HD audio/video cable, and no backwards compatibility with older Xbox games. Get this only if you’re super-cheap, or are buying a birthday present for someone you don’t like very much. Was $279.99.

• Xbox 360 “Plain,” $299.99 — includes the console and one wireless controller, headset and network cable. Also has a 60GB hard drive and an HD audio/video cable. It’s compatible with the older Xbox games, too. This is the one to get. Was $349.99.

• Xbox 360 Elite, $399.99 — has everything that the plain Xbox 360 has, but it has a 120GB hard drive, and includes an HDMI cable. If you’re a serious gamer, it’s probably worth the extra $100 for the storage and cable. Oh, it’s black instead of white, like the Xbox 360 plain and Arcade. Was $449.99.

With this price cut, Microsoft is trumpeting the sub-$200 price point, of course:

“We are thrilled to be the first next-generation console on the market to reach $199, a price that invites everyone to enjoy Xbox 360,” said Don Mattrick, senior vice president of the Interactive Entertainment Business at Microsoft. “Xbox 360 delivers amazing performance at an extraordinary value with the leading online service and best lineup of games, downloadable movies and TV shows available from a console. The majority of consumers make the decision to buy consoles once the price falls to this mark, making this an important milestone for consumers and the industry.”

However, with only 256MB of storage and no high drive, and no reverse compatibility, the Xbox 360 Arcade ain’t a good deal. Get the plain edition for $299.99.