MICROSOFT is set to drop the price on its Xbox 360 games console in Australia in an effort to give the games machine a better shot at the Christmas market.

The fully-featured Xbox 360 Pro will drop from $649 to $579, while the stripped down "core" system drops from $499 to $399 - putting it on-par with Nintendo's $399 Wii.

The Xbox 360 price cuts follow similar moves made by Microsoft in the US last week. The cuts make Sony's $999 PlayStation 3 the most expensive console in the Australian market by an even greater margin.

Xbox regional director David McLean said the price of the Xbox 360 had been the same for 17 months, claiming this was the longest any console had been on the Australian market without a price drop.

The new prices had been made possible by reductions in manufacturing costs, he said. Nevertheless, there would be no price cut for the HD-DVD player accessory for the Xbox 360, he said.

Around the world, Microsoft and rival Sony have been battling the huge popularity of Nintendo's Wii, which has combined an intuitive controller, unconventional games and a low price to win over consumers, despite having far more modest technical specifications than its competitors.

"I think it's fair to say that the whole industry has been surprised by the popularity of the Wii," Mr McLean said

Nevertheless, in total revenue terms, the Xbox 360 was "well ahead" of the Wii and PlayStation 3, he said.

Mr McLean said Microsoft had seen no slow-down in sales as a result of reports of the Xbox 360 suffering overheating problems.

Microsoft announced last month it would incur costs of $US1.15 billion in the June quarter to fix what it called an "unacceptable" number of faulty Xbox 360 units.

"The way we've communicated it has given customers surety about what we have done," he said.

News Source: http://www.australlianit.com.au