Microsoft Cuts Xbox 360 Prices In The U.S. ...

After the same has happened in Japan, and following the rumors of a following price drop in the U.S., it’s now official: Starting Friday, Xbox 360 prices are going down.

The Xbox Arcade previously priced at $280 is now $199.99. It’s now below the “magical” $200 mark, where historically 75% of console sales occur after the price drops below this value, according to Microsoft.

The mid-range, 60GB version of the Xbox is now $50 cheaper, dropping to $299.99, and the 120GB Xbox Elite is now $399.99, down from $500.

Microsoft has taken full advantage of its head start, its consoles being released one year earlier than those of rivals Nintendo and Sony, and it has allowed them to reach the $200 mark before the start of the fourth quarter, the time of year where sales are highest for any technology company.

Not only that, but even after Sony’s price adjustments, their variants of the PS3 console sell in the United States for $399 and $499 respectively, which means that the Xbox Elite, Microsoft’s upper-tier bundle, sells for the same price as the PS3’s low-end package.

Although the PS3 package is technically more powerful, the Xbox 360 takes better advantage of its hardware, and in practice is faster, according to some game developers. Not only that, but lower price and wider selection of games available for the Xbox 360 are likely to give it an important sales advantage over the PS3.

Microsoft also made an announcement back in July that there would release an updated version of Xbox Live, intended to make it more social and user-friendly by adding features such as individual Avatars and the new Primetime service which streams movies and TV shows from a number of different channels. It is scheduled to be launched in December. This, coupled with the recent price drops, point to the fact that Microsoft are expanding their console lineup ever more toward a mass market, so in the end, their price cuts are looking more like a strategy to increase their profit, rather than a measure to cut losses.

Sony cannot well afford to do the same and drop prices on the PS3 because this would start problems with other Blu-ray player manufacturers who have bought the Blu-Ray license from Sony. Their sales would be threatened were Sony to drop prices for the PS3 below stand-alone Blu-Ray players.

Since its release in 2006, the Sony Playstation 3 has sold 5.08 million units, and while the Xbox 360 released a year earlier has sold 10.6 million units so far, the PS3 has had bigger sales than Microsoft’s console during the past few months. It will remain to be seen if this is to change.

Seemingly above the dispute however, is Nintendo’s Wii, which in spite of the fact that it sports less powerful hardware than both Sony’s and Microsoft’s consoles, has sold more units than both of them combined in the past six months. Even though during the month of July, Wii sales dropped to 555,000 units, compared to the 667,000 that were sold in June, they sold more than Sony, whose PS3 sales went down to 225,000 units from 406,000 in June, but were still better that those of Microsoft, which sold 205,000 Xbox 360s, down from 220,000.

Update: Of course Microsoft has high hopes related to the current price cut. A Microsoft official said for The Wall Street Journal that about 75% of game hardware sales have typically happened after console makers drop prices below $200.

Also, speaking for BusinessWeek (which was amongst to broke the price cut news), an official from GameStop estimated that the sales of Xbox 360 will jump anywhere from 1.5 times to three times current levels.