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Microsoft on Wednesday revealed the pricing for its Xbox 360 next-generation games console a crucial judgment in terms of its hopes for profitability and winning a lead over Sony's rival machine.
Microsoft appeared to hedge its bets announcing an unusual two-tiered pricing approach for standard and premium versions of the console.
The 360, which is expected to be launched at the end of November in time for the biggest consumer buying season, will sell for $299 and $399 in the US.
The $299 version features a DVD player, three processors and media chips that allow high-definition images and surround sound. The premium version features a wireless controller, detachable hard drive, headset and wireless remote control.
At a games conference in Leipzig, Microsoft announced higher European prices of €299 and €399, and £210 and £280 in the UK.
In another effort to beat Sony, whose PlayStation3 is not expected before the second quarter of 2006, the Xbox will be released simultaneously in three territories. Japanese pricing will be announced at the Tokyo games show in September.
Microsoft's earlier launch would give it room to cut its price to coincide with the PlayStation3 going on sale, analysts said.
Sony's PS3s will include state-of-the-art processors and DVD players and are expected to cost more than the $399 being asked for initially by Microsoft.
Console prices are steadily dropped to boost sales through the average five-year life cycles of the models.
While Sony's PlayStation business is profitable, Microsoft's Xbox division has lost $2.8bn in the past three years as the software company has staked a claim in hardware, using the console to leverage sales of games.
It aims to turn to profit with its second-generation machine by its fiscal 2007 year. This will come from machine sales, licensing fees from games, publishing of its own games software and revenues from accessories.
Microsoft is also seeing increasing revenues from its Xbox Live online gaming service, which charges a monthly subscription.
Membership was 2m at the end of the last quarter, double that of a year ago, while 22m Xbox consoles have been sold worldwide since the launch.