Microsoft confirms Xbox 360 price cut, Sony worried

Arcade unit retails for GBP 159, Premium at GBP 199
Microsoft has officially cut the price of all three Xbox 360 models across Europe – with the Arcade unit selling for GBP 159.99.
The Arcade SKU now retails for less than Nintendo's Wii, asMicrosoft looks to boost sales during the busy Easter retail period andahead of the release of the highly-anticipated title Grand Theft AutoIV at the end of April.
The Premium 360 now has a recommended retail price of GBP 199.99, asaving of GBP 50, while the black Elite model will sell for GBP 259.99.
All prices come in to effect on March 14.
"Xbox 360 is now mass market in Europe," commented Chris Lewis, vicepresident of Microsoft's Interactive Entertainment Business in Europe.
"We have reached and surpassed several key milestones that form partof our long term strategic plan to achieve critical mass in Europe; andour portfolio now offers the kind of mainstream entertainmentexperiences that secure wider appeal for Xbox 360.
"These factors allow us to execute on our strategy to widen the market for Xbox 360, as planned," he added.
According to Microsoft's data, the Xbox 360 has the highest softwareattach rate of the three current generation consoles in Europe, withseven titles to every machine.
Retailers had already pre-empted Microsoft's move, with online store Amazon.co.uk slashing the price this morning following confirmation of the price drop by the German edition of the Financial Times.
"We continue to offer intense, immersive gaming experiences forgamers – but now we’re priced in a way that will allow new consumers tofind out for themselves why Xbox 360 is the ultimate in high-definitionentertainment," said Lewis.
"History shows that GBP 159.99 is the price point where a console’saudience begins to expand, and with these new ERPs in place we’re readyto bring more consumers into the Xbox 360 world."
Microsoft has stated on numerous occasions that Europe is the mostimportant battleground for the Xbox 360 in the current console war withSony's PlayStation 3.
Last month Shane Kim reiterated this point at D.I.C.E. in Las Vegas, and said that this fiscal year would be the most financially successful for Microsoft Game Studios.
He also said that the Xbox 360 should experience a longer life cycle than the original Xbox.

In the face of Microsoft's Xbox 360 price reduction,Sony will be feeling pressured to drop the price of its home console tocontinue recent sales momentum, according to analyst firm StrategyAnalytics.
However, as with other industry experts, the company believes Sonyis likely to wait until later in the year before cutting the price ofthe PlayStation 3 in Europe.
"Sony will be nervous that the PS3's recent sales surge may fizzleout now that the premium Xbox 360 undercuts the PS3 by GBP 40, and thecheapest Xbox model is almost half the price of the PS3," commentedprinciple analyst David Mercer.
"Sony will be scrutinising the daily sales reports, but willprobably try to hold out until later in the year before making its nextprice move," he said.
Following Microsoft's Entertainment and Devices division making aprofit in the last two quarters, Mercer said that the company mustcontinue to cut manufacturing costs to sustain profit.
"Microsoft must continue to drive cost out of console manufacturingin order to sustain these improvements in financial performance," hesaid.