Xbox spec: $50 cut in Aug.

Timed to release of major titles

In an effort to regain momentum in the video game console market, Microsoft Corp. will cut the price of the Xbox 360 by $50 early next month, sources said.

The reduction will be made Aug. 8, according to one source in the retail world, noting that the cut will come during what traditionally has been one of the slower times of the year for game hardware sales.

Asked to comment, a Microsoft spokesman said: "We have no announcements to make on pricing at this time. While price matters, content is king. And no other system is offering all the games people want to play this holiday at a better price than Xbox 360."

Still unclear is whether the cut will be made to all three versions of the Xbox 360 on the market. The Core model, which accounts for about 20% of Xbox 360 sales, retails for $299; the best-selling Pro model sells for $399, and the Elite model is about $479.

Although an Xbox price drop has been widely anticipated in the industry, just how much and when has been the subject of debate. One leading industry analyst, Michael Pachter of Wedbush Morgan, had forecast a similar reduction, which Microsoft denied.

As for the Aug. 8 date, there is significance to the timing. Not only will Electronic Arts' "Madden NFL 08" be reaching stores shelves just a few days after the drop, but Microsoft also has several other highly touted games, including "BioShock" by publisher Irrational Games and "John Woo Presents Stranglehold" from Tiger Hill Entertainment, coming for the Xbox 360 in August.

Speculation about an Xbox price cut grew after Sony Computer Entertainment America announced several weeks ago that it was dropping the price of its 60GB PlayStation 3 from $599 to $499. SCEA said this week that sales have been up 135% at its top five retail accounts since the move.

Those claims have yet to be reflected in the latest sales figures. According to the NPD Group, the Xbox 360 and PS3 continue to trail Nintendo's Wii in terms of U.S. sales. In June, Wii outsold the Xbox 360 by nearly 2-to-1, 381,800 units to 198,400 units. But with the PS3 selling only 98,500 units in June, the good news for Microsoft is that it seems to be winning the battle for the hard-core gamer.

Michael Goodman, director of digital entertainment at Yankee Group, suggested that a $50 drop would boost Xbox 360 sales but not dent the market leader. "I think the price points are still high enough that they won't stop Nintendo from maintaining their momentum," he said.

Microsoft should get a huge boost in September with the launch of the exclusive "Halo 3." At the E3 Media & Business Summit this month, Microsoft announced a special limited-edition "Halo" version of the 120GB Xbox 360 Elite Model that will go on sale shortly before "Halo" launches. Although it won't come bundled with the game, the "Halo" Xbox 360 will have special game-related content preloaded into the hard drive.

Microsoft also has an advantage in that, unlike rivals Sony and Nintendo, the Xbox 360 has been out for more than 18 months and production is running strong, meaning that there is little danger of hardware shortages on store shelves come the holidays. Nintendo, on the other hand, recently said that it will be scrambling to meet demand all the way through year's end.

Somewhat lost amid the battle for market share among the three hardware makers is the fact that the video game industry seems to be heading for a record year in the U.S. Combined hardware and software sales in June for consoles and hand-held systems reached $1.1 billion, up 31% year-over-year, while year-to-date total sales for first-half 2007 are at $6.1 billion, up 42% year-over-year.
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