Our friends at Joystiq got a better look at the Halo 3 Edition Xbox 360 announced at E3 and are reporting that it features an HDMI port and a 20GB hard drive. Whaaaa??? It appears to be a mutation of both the premium and elite systems: made from parts of both but stronger than either.

The main question on my mind is “How much can we expect to pay for a 360 with this unique set of features?” From a cost of production standpoint, I think Microsoft can definitely afford to produce this version for less than the elite, and possibly only marginally more than the premium. Click “read more” to find out why.

The primary item you’re paying for with the elite is the 120GB HD. Microsoft has repeatedly defended the 120GB’s stand alone price ($179.99) by comparing its cost of production to an external 2.5″ USB 2.0 harddrive of the same physical size and storage capacity, which can now be found online for around $100, but not in retail stores. Without diving too deep into that issue, the point is that the 120GB hard drive “drives” the cost of the elite (along with demand for a “custom” product).

The HDMI connectivity of the elite probably costs Microsoft less than $3. Now that motherboards with HDMI connectivity are designed and in production the marginal cost of using that motherboard in another console is negligible. The HDMI connector can be had for ~$7 online at retail buying in a quantity of one, so I’m guessing that buying wholesale quantities drops the price to less than a dollar, but I could be wrong, so I’ll call $3.

So if it costs you $3 to add HDMI connectivity and $50 to add a 120GB hard drive, what’s the better option to create a little hype for the new Halo 3 edition? I like this offering from Microsoft, and I’d like to see it bundled with a regular version of Halo 3 for only marginally more than a premium, say $449.

Some say that another SKU becomes confusing to consumers, but I ask you, how many SKUs is the average consumer concerned with? I say one. They go to the store, comparison shop, decide on a SKU, take it home, and then never think or read about Xbox 360 SKUs again. I remind you, enthusiasts are not the average consumer. Some things that we’re all up in arms about mean beans to middle-aged mom who just wants “one of the new video game machines” for her son’s Christmas gift.
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