Company attempts to undercut Playstation, Wii

Aiming to vanquish Sony’s Playstation 3 and gain ground on the Nintendo Wii, Microsoft on Monday cut the price of its Xbox 360 videogame console by $50.

Move was widely expected, as store circulars advertising the price have leaked to videogame blogs in the past several weeks. Industryites also expected Microsoft to retaliate after Sony slashed the price of the PS3 by $100 last month.

Microsoft cut the price a week ahead of the release of the first huge game of the fall: Electronic Arts’ “Madden NFL ’08.” Tech giant is hoping a price cut will help make the 360 the console of choice for “Madden” players and drive sales.

The biggest driver of 360 sales, however, will likely be “Halo 3,” which comes out exclusively for the console in late September.

“Grand Theft Auto IV,” previously expected to be the fall’s third huge game for the 360, was recently delayed until last spring.

The most popular version of the 360 is getting a retail price cut from $400 to $350. The “elite” version, which boasts a large hard drive for those who download lots of content from the Internet, is falling from $480 to $450. The basic “core” version, which doesn’t have a hard drive and has sold poorly, will drop from $300 to $280.

Move comes a month after Microsoft admitted that a large number of Xbox 360′s are defective and had to extend the device’s warranty to three years and take a $1 billion-plus charge to address the problem. Resul-tant bad press and Sony’s effort to capitalize on it may have played a role in the decision to cut the price.

Though game sales to existing owners have been very strong, sales of the 360 have been relatively soft this year. Microsoft missed its target of shipping 12 million consoles by June, a year and a half after it launch, by 400,000 units.

Though it performed better than the PS3 in the first half of the year, data from industry tracker NPD showed that the 360 was outsold in the U.S. by Nintendo’s Wii and Sony’s Playstation 2.

Many industryites believes that the upcoming holiday season is critical for both Microsoft and Sony as the PS3 and 360 battle to be the dominant console amongst hard-core gamers and try to stay competitive with Nintendo’s Wii for casual players.

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