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Microsoft cuts Xbox price

Microsoft cut the price of its Xbox game console on Monday from $179.99 to $149.99 in a widely expected move to spur sales.
/ Source: Reuters

Microsoft Corp. Monday cut the price on its Xbox video game console, in an expected move seen as a boost to the game publishing industry ahead of its biggest gathering of the year.

Microsoft, based in Redmond, Washington, cut the Xbox price to $149.99 from $179.99 and also trimmed prices on software such as the karaoke game “Xbox Music Mixer,” “Project Gotham Racing 2” and “Crimson Skies: High Road to Revenge.” (MSNBC is a Microsoft - NBC joint venture.)

The Xbox price cut is effective Tuesday, while the software cuts take effect Monday and Tuesday.

The Xbox was released at $299 in November 2001. The price dropped to $199 in May 2002 at the E3 industry trade show and to $179 in May 2003, at the same event. The new price was widely expected to come at some point before this year’s E3.

The move is a change in strategy for Microsoft, which previously cut the XBox price only after similar pricing moves from industry leader Sony Corp.  on the PlayStation 2.

While the 2002 cuts led to a sharp upsurge sales of game consoles and software in what would have otherwise been the relatively quiet summer months, the 2003 cuts had little effect.

Since early this year, analysts and publishers have called a move to $149 necessary for the game industry to achieve its growth targets for the year, and some have even raised the idea of prices going to $129.

“We view the price cut as a moderate positive for the video game stocks as it could spur more demand for the console, which should drive more software sales as well,” J.P. Morgan analyst Dean Gianoukos said in a note.

Video game hardware and software sales come to $10 billion a year in the United States. A new generation of consoles to replace the Xbox and the PS2 is expected in about the next two years.