UPDATE 3-Microsoft's 'Halo 3' game launches amid spectacle

(Updates with launch of sales)

By Franklin Paul and Nicole Maestri

NEW YORK, Sept 25 (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) began its midnight sales of "Halo 3," the acclaimed alien shooter game that it hopes will widen its lead over Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) in the battle for industry dominance.

While some aficionados lined up before dawn at a Best Buy store on New York's Fifth Avenue to grab a good seat for the launch extravaganza, others took advantage of the retailer's offer to let them pay for a copy of the game and pick it up at midnight or the next day.

Alex Escobar was the first one at the store's checkout counter, turning in a receipt to pick up his advance order.

"It is worth it. It is time to finish this fight," Escobar said, echoing the tagline for a game featuring a futuristic soldier battling to save humanity from an alien onslaught.

What had been a only a modest gathering earlier in the day had swelled to a crowd of about 500 people that cheered as buyers entered the store, resembling other big consumer debuts this year, such as the last "Harry Potter" book and Apple Inc's (AAPL.O: Quote, Profile, Research, Stock Buzz) iPhone.

"Halo 3" is seen as the $30 billion video game industry's equivalent of a new Potter book and Microsoft is counting on the game to finally push its money-losing entertainment unit into profitability.

"This is a critical holiday in terms of winning the next-generation console fight versus our competition and nobody has anything to go up and match 'Halo,'" Shane Kim, vice president of Microsoft Game Studios, told Reuters Television.