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

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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 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.

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