The company said Wednesday that the Xbox 360 Arcade will sell for $200, $80 less than its current price. And Microsoft knocked $50 off the price of two higher-end models: The 360 console will retail for $300, while the Elite will go for $400.
Sales of the Xbox drive the company's lucrative game sales, but result in thin margins. Higher sales of the console have pushed up expenses in recent quarters, but the company's Entertaiment and Devices division recently moved into the black as Microsoft found ways to cut production costs.
But the company is betting the price cuts will advance the company's game and online revenue. The console is also a key element in Microsoft's online strategy, as game players participate in live multi-player games on the company's Live service.
Microsoft takes in $50 for every one-year Live Gold membership for the model.
The company said in a statement that 75% of all console sales are made only after its price drops below the $200 mark.
The Xbox competes with Nintendo's Wii and
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