US software giant Microsoft displays the
Yoshikazu Tsuno  /  AFP - Getty Images
Microsoft's next generation video game console 'Xbox 360' with an optional front panel, equipped with IBM's PowerPC on its CPU, 20GB HDD and 512MB RAM.
updated 8/17/2005 8:13:32 PM ET 2005-08-18T00:13:32

When Microsoft Corp.’s new Xbox video game console comes out this fall, consumers will be able to choose between a fully loaded system and a more basic version without a hard drive, wireless controller and other features.

The premium Xbox 360 console will sell for $399.99 in the United States, Canada and Mexico — nearly triple the price of the current system — and 399.99 euros in continental Europe, Microsoft announced Wednesday. Meanwhile, the scaled-back version, dubbed “Xbox 360 Core System,” will go for $299.99, and 299.99 euros in Europe.

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Various accessories, like a 20-gigabyte detachable hard drive and wireless controller that will come standard with the premium version, will be sold separately and can be added to the less expensive “core” console.

Other features that can be added to that console include a wireless controller and TV remote, a headset for the Xbox Live online service, and an Ethernet cable for high-speed Internet connections.

Microsoft said it remains on target to ship the new Xbox to stores in North America, Europe and Japan this holiday season, ahead of Sony’s PlayStation 3, which is slated to replace the market-leading PlayStation 2 sometime next spring.

Robbie Bach, senior vice president for Microsoft’s home and entertainment division, said the company is breaking new ground by offering consumers a choice.

“Historically, there’s been one price point and one configuration. You got it whether you wanted it or not,” Bach said.

Microsoft isn’t worried consumers will wince at the price hike. Bach noted that both versions will support high-definition visuals and play music and movies, among other features that weren’t built into original Xbox, which cost $299 four years ago. The price has since dropped to $150.

Matt Rosoff, an industry analyst with Directions on Microsoft, said he doubts enthusiasts will balk at the price increase.

“Hard-core gamers will be on board. I think the sticker shock might be in the larger audience Microsoft is trying to reach” — casual game players and neophytes, Rosoff said.

Microsoft sells its current console at a loss, because its original goal with the XBox was mainly to break into the lucrative gaming market. It makes money selling games, but doesn’t expect its home and entertainment division to post profits regularly until 2007. Rosoff said he thinks the price increase is a smart move.

“Microsoft has to cover its costs this generation in order to turn the Xbox into a profitable business,” he said.

The core console won’t be able to play games designed for the original Xbox, unless a consumer shells out $99.99 to add a hard drive. Microsoft has been asking developers working on new games to make them so they can be played on both the fully loaded and basic versions.

The company has not yet said how much it will charge for the new Xbox in Japan, where the original console has struggled to compete with PlayStation 2.

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