Console Price Wars: Microsoft Drops Xbox Elite Down To $299

Xbox 360 controller

Hoping to boost console sales this holiday season, Microsoft (NSDQ: MSFT) has dropped the price of its Elite Xbox 360 to $299. The $100 price cut comes just about a week after *Sony* (finally) slashed the price of the PS3, also to $299.

But to hear Xbox 360 Product Manager David Dennis tell it, the price cut had nothing to do with Sony (NYSE: SNE) or the PS3 — it’s part of Microsoft’s plan to phase out the mid-tier Xbox Pro. “We haven’t been building the Pros anymore; we’re phasing them out at a $249 price point. This is a manufacturing change that has been in the works for many months — we couldn’t just make a global supply change within a week.”

The Xbox 360 has pummeled the PS3 in terms of sales here in the U.S.; Microsoft says there are over 16 million of its consoles in homes here, while the PS3’s install base is just nine million. But analysts like NPD’s Anita Frazier are expecting PS3 sales to increase by as much as 60 percent next month, following the price cut (per InfoWeek).

Still, Microsoft isn’t necessarily looking at the PS3 as its competition. According to Dennis, the company has a more lofty — albeit unofficial — goal in mind: To reach or top Sony’s PS2 in terms of sales. Currently the best-selling console of all time, consumers have gobbled up over 138 million of them worldwide. “If you map out the sales trajectories, the Xbox 360 is tracking almost exactly in line with the PS2,” Dennis said. “While the PS3 is looking more like the Dreamcast.” (The Dreamcast was Sega’s sixth-generation console; launched in 1998, it was supposed to compete with the PS2, the original Xbox and the Nintendo GameCube, but lackluster sales ultimately forced Sega to nix production).

Microsoft does seem poised for the long haul when it comes to the console wars — particularly since it has been incorporating more multimedia and social networking features through Xbox Live. It was also the only console to show growth in unit sales (17 percent over the past seven months) thus far this year, in the midst of the gaming industry’s overall slump.

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