Microsoft to cut Xbox 360 U.S. price to below Wii

SEATTLE (Reuters) - Microsoft Corp MSFT.O said on Wednesday it plans to cut the U.S. prices of its Xbox 360 video game machine, lowering the price of its entry-level console to $50 below Nintendo Co Ltd's 7974.OS top-selling Wii.

Lucas Charbit (C) and Thomas Latina, both of France, play Rock Band on a Xbox 360 console at the AMD "Innovation Experience" during the Consumer Electronics Show (CES) in Las Vegas, Nevada January 7, 2008. REUTERS/Steve Marcus

The move makes the Xbox 360 the first game machine of this generation of consoles to sell for less than $200, a key mass-market price that Microsoft said historically has accounted for more than 75 percent of all machine sales.

The lower prices ahead of the crucial holiday shopping season -- a period of time when the video game industry racks up most of its sales -- puts pressure on rivals Nintendo and Sony to cut the prices of their machines.

The company said it will cut prices for its entry-level Xbox 360 Arcade, which comes without a hard drive, to $199 from its current price of $279 and it also will lower the prices of its mid-range and high-end Xbox 360 consoles by $50 each.

The new prices will go into effect on September 5.

Nintendo's Wii sells for $249 while Sony Corp's 6758.T least expensive PlayStation 3, which comes with an 80-gigabyte hard drive and a Blu-ray high-definition video disc player, retails for $399.

“Microsoft wants to drum up demand for the holiday. Microsoft’s long-term vision for the Xbox is not to turn a profit today,” said Toan Tran, analyst with Morningstar. “It’s a way to get a foothold into people’s living rooms.”

Microsoft said it will cut the price of its Xbox 360 Pro, its best-selling version which comes with a 60-gigabyte hard drive, to $299 from $349 and reduce the price of its top-end Xbox 360 Elite with a 120-gigabyte hard drive to $399 from $449.

The U.S. price cut comes on the heels of a similar price cut for the Xbox 360 in Japan where Xbox sales have been slow.

Redmond, Washington-based Microsoft has sold over 20 million Xbox 360 consoles worldwide since its introduction in late 2005 compared to 14.4 million units for the PlayStation 3 and nearly 30 million Wii units since debuting in November 2006.

In recent months, the PlayStation 3 has outsold the Xbox 360 in the United States.

“Microsoft recognized it needed to do something and I think they also can afford it,” said Michael Pachter, analyst at Wedbush Morgan. “They’ve got to make it up by penetrating more households and selling more software.”

After losing roughly $5 billion since it entered the video game console business in 2001, Microsoft turned a $426 million profit in fiscal 2008 at its entertainment and devices division, comprised mainly of the Xbox business.

The price cuts were reported earlier by BusinessWeek on its Web site.

Additional reporting by Alexandria Sage in San Francisco; Editing by Phil Berlowitz and Carol Bishopric