Microsoft slashes price on Xbox

If being the first of the new generation video game consoles to break the $200 price point on the way down means you're the loser, the call Microsoft's (NYSE: MSFT) Xbox 360 the loser.

The Wall Street Journal reports (subscription required) that Microsoft is slashing the price on the basic console from $279 to $199, in an effort to boost sales before the all-important holiday season, when so many gamers (and their friends and relatives) will look to buy games. The move puts Microsoft well below Sony's (NYSE: SNE) Playstation 3 and Nintendo's Wii. According to the Journal, "Xbox 360, with a 60-gigabyte hard drive, to $299 from $349, and lowering a high-end model, with a 120-gigabyte hard drive, to $399 from $450. The company had previously offered a 20 gigabyte Xbox 360 for $299 as it sought to sell through remaining inventories of the now-discontinued product."

It's a good idea for Microsoft to make this move now, before its competitors do -- all of the consoles will come down in price relatively soon, and by being the first mover, Xbox will increase its footprint and Microsoft will benefit from increased software sales during the holiday season. In the current macroeconomic environment, price may be more of a factor in determining sales than it has been in recent console cycles.

Slashing a price by almost 30% is never a sign of success, but Microsoft and its shareholders are far better off making the move now than chasing the market down.