Could the next generation Xbox cost $350? Colin Sebastian of Baird Equity Research (BER) seems to think so, and he's got a pretty good reason to.

According to Sebastian, since the Xbox 720 will be built from the ground up with off-the-shelf PC parts, the price of the console should not surpass $400, and could very well launch at $350. This is a bold claim, but it could turn out to be true since the sweet spot has always been $399 and under. The majority of gamers are not prepared to pay over $400, and it's a mindset that will never change.

"Our checks suggest that next-generation console hardware will be largely built from 'off the shelf' high-end PC components, along with hybrid physical/digital distribution models, enhanced voice controls and motion sensing (Kinect integration with every Xbox), and broad multi-media capabilities," says Sebastian.

Sebastian went on to state that PC hardware would allow for a more developer friendly environment. This statement has been proven correct with the PS3. The Sony console launched with the super-fast CELL processor. However, game developers were not accustomed to such an environment. Hence the reason third party games on the PS3 are usually below in quality when compared to the Xbox 360 version.

Sebastian went on to add:

"Third, it will be easier to build online services around PC chip architecture, including flexible business models (free-to-play, subscriptions) and multi-media (over the top) content offerings. For Microsoft, this design will also allow for more integration with Windows 8 and Windows Mobile devices,"

An Xbox 720 console starting at $350-$400 would be great for the hardcore and casual gamers alike. It would also help Microsoft continue its dominance in the gaming by getting the new Xbox in as many homes as possible.