Xbox 360 Fanboy is reporting that a “source close to Microsoft’s marketing department” is talking about not only a price cut for the console down to 199, but a motion controller pack-in this fall too.

According to the source, Microsoft will be positioning the Arcade bundle to directly do battle with Nintendo’s Wii. Reading between the lines, you can bet that means more family-friendly entertainment from Microsoft aimed at the Arcade bundle, which lacks many of the features found in the 60GB Xbox 360 and Xbox 360 Elite.

Additionally, the source states that the Arcade will come packaged with a 512MB memory card, the motion controller and motion-controlled mini games developed by Rare.

The motion controller “will work with all 360 consoles and will even be sold separately, bundled with an even more expansive list of mini motion controlled games.,” Fanboy reports.

This new $199 Xbox 360 Arcade bundle is supposedly releasing sometime this holiday season.