http://www.bloomberg.com/apps/news?pid=20601103&sid=a.7zSotFDAEU&refer=us

Microsoft Plans to Cut Xbox Price to Compete With Nintendo Wii

By Michael White

July 11 (Bloomberg) -- Microsoft Corp., the world's largest software maker, plans to cut the price of its Xbox 360 game console to compete with Nintendo Co.'s top-selling Wii.

The Redmond, Washington-based company needs to lower Xbox's $299 to $479 price to increase sales and lure customers who aren't interested in traditional combat and racing video games, Shane Kim, vice president of Microsoft Game Studios, said in an interview. He declined to say when a price cut may be announced.

``We need to compete effectively for that customer and part of that is getting to the mass market price point for the console,'' Kim said. ``We definitely are working on that area.''

Xbox 360 has trailed the $249 Wii in sales since Kyoto-based Nintendo introduced the player in November. This week, Sony Corp. lowered the price of the PlayStation 3 console, which has lagged behind both Xbox and Wii, by 17 percent to $499 from $599. Microsoft has vowed to make its video-game business profitable by next year.

In fiscal 2006, the games unit lost $1.26 billion on sales of $4.26 billion. David Hufford, a director of Xbox product management, said last month a price cut was needed to convince parents to buy the machine for their children.

Kim made the comments yesterday as Microsoft prepared for the opening of the Electronic Entertainment Expo, or E3, in Santa Monica, California, where console makers and game publishers announce new products for the coming year.

Microsoft shares lost 54 cents to $29.33 in Nasdaq Stock Market trading yesterday and have fallen 1.8 percent this year.

Films Online

In a briefing last night, the company said Walt Disney Co. will offer films for rent through Microsoft's Xbox Live online service. Time Warner Inc.'s Warner Bros. and Viacom Inc.'s Paramount studio already sell and rent movies on Xbox Live.

The Disney films to be available include ``The Queen,'' ``Bridge to Terabithia'' and ``Déjà vu,'' Microsoft said.

Xbox Live has more than 7 million members, surpassing the company's goal of 6 million members by the start of this year's E3 gathering, Kim said. The company anticipates having 10 million members by this time next year, he said.

Microsoft also announced that Osaka, Japan-based Capcom Co. is developing a version of its ``Resident Evil'' game for the Xbox 360, a move that may help bolster console sales in Japan.

Versions of the Xbox 360 sell for $299, $399 and $479 in the U.S. Wii has the lowest price among the latest generation of consoles.

Sony Price Cut

In announcing Tokyo-based Sony's price cut, Jack Tretton, president of the company's U.S. video-game business, said he expected the move to double console sales. U.S. consumers have purchased 1.38 million PlayStation 3s since its introduction in November. That compares with 2.84 million Wii players.

Microsoft has sold 5.5 million Xbox 360s in the U.S. since the console reached stores in November 2005, according to Port Washington, New York-based NPD Group Inc., which tracks sales.

The company put worldwide sales at 11.6 million units during the briefing last night and said it will introduce the top-end Xbox Elite in Europe in August, as well as a special edition ``Halo 3'' console in September.

Microsoft has no plans to announce a price cut during the E3 conference, Kim said.

For the present, the company will rely on new games to boost console sales. They include ``Rock Band,'' which allows players in different locations to connect online and play guitars and drums along with recordings of rock 'n' roll hits. The game is being developed by Electronic Arts Inc. and Viacom Inc.'s Harmonix studio in time for the holidays. 

Ok... let me paraphrase:

"Hi, I'm Microsoft. We have a lot of software coming this year and a new console coming this fall. We will cut our price, but we aren't saying when or how much right now"

I thought for sure at E3 they would announce a cut.

They should fire this guy immediately. I have no idea why he is saying this.

But I thought ms werent competing with the wii because its for children and that ps3 was their only competitor???

/sarcasm 

 :D

stay on the forum please =) 

Wow, brilliant move VP of MS games. Just when everyone is speculating a 360 price cut is coming let's give an official MS stamp to the rumor. I guess he wants to see how low 360 sales can go. It's almost like they want to the guy who manages to lose with the best poker hand at the table.

Announcement for price is something with what you keep investors happy, so they can see that M$ is doing something to compete.
If M$ would cut the price now, it would not get so much attention in media because of Sonys pricecut. They get much more attention when they are the only one to cut prices. But with pricecut right after Sony, M$ would make things look like that their strategy is just trying keep up with Sony (which they are, since they don't have an idea about what they should do).

I agree MS shouldn't cut price now, especially given the new 3 year warranty without a proven fix of for the red ring. Demand on the wii is too high to take sales from wii, so best to wait until Nintendo can almost meet demand. However, even more foolish than giving a price cut now is saying you will cut it in the future... That is what backed Sony into doing one this early... There goes half your sales as people on the edge will now wait for the price cut... and it sounds like they will not be ready to give it until November or later... there goes 4 months of sales...