Microsoft to cut price of Xbox 360 in US

Microsoft said on Monday it will cut the price of its main Xbox 360 videogame console model by about 13 per cent in the US, hoping to boost sales ahead of the crucial Christmas period.

The move reduces the price of the Xbox 360 Premium model by $50, to $350, and follows a move last month by rival Sony to cut the price of its PlayStation 3 machine in the US by 17 per cent, to $500.

Faced with unexpectedly strong competition from Nintendo's cheaper Wii console, Microsoft is aiming at expanding the appeal of the Xbox 360 to an audience outside its core fan base of young men.

"As we look to the holidays we want to bring in more gamers and lower the price for those customers," the Xbox 360's group product manager, Aaron Greenberg, said in an interview.

"We're always trying to bring down cost of the box and... we always try to pass on the savings to our consumers. We feel like this is the right time to do it."

The price of the Xbox 360 Core, which does not include a hard drive, will fall $20 to $280 while the Elite model, which features a 120GB drive, six times the size of the Premium's, will fall $30 to $450. The cuts will take effect from 8 August, Microsoft said. There has been no announcement at the time of writing about price cuts in the UK.

Launched in November 2005, the Xbox 360 has gone 20 months without a price cut, the longest of any console in history. Sony's PlayStation 2 held its $300 price for 18 months after launching in the US in 2000.

"It surprised me a little bit because there's not a whole lot of market pressure on them to lower the price," said Van Baker, an analyst with market research firm Gartner.

"Is it going to make an enormous difference? No, because when it comes to consoles, it's not the price that sells the console, it's the games that sells the console, and from that perspective, Microsoft's in pretty good shape," Baker said.

The rising sophistication of consoles, which boast graphics performance that rivals personal computers costing several times as much, means manufacturers are more reluctant to drop prices. That's particularly true for Microsoft, which has yet to turn a profit on the Xbox business it launched in 2001 in a bid to challenge Sony's growing dominance in the living room.

By the end of June, Microsoft had sold 5.6 million Xbox 360s in the US, compared with 2.8 million Wiis and 1.4 million PS3s -- the latter two launched a year later.

Microsoft forecasts its entertainment and devices division, home to the Xbox, Windows Mobile and Zune digital music player businesses, to turn profitable in its current fiscal year after two years of losses totalling more than $3bn.

The company has forecast revenue at the division to grow by between 10 per cent and 19 per cent this year from sales of $6.08bn in fiscal 2007.

Greenberg said Microsoft timed the price cut to coincide with the release of Electronic Arts' Madden NFL 08, the latest installment of the publisher's top-selling American football franchise.

"Summer tends to be seasonally slow, but we definitely see a big uptick starting with Madden, and accelerating through the end of the year," Greenberg said.

Microsoft is also banking on the highly anticipated final episode of Halo, its flagship game franchise, to be a major profit driver this year. The game hits stores on 25 September.

Story Copyright © 2007 Reuters Limited. All rights reserved.