Xbox 360 launch price will be $399.99

Microsoft plans to introduce its new Xbox 360 video-game console for $100 more than the launch price of its predecessor -- while departing from industry tradition by offering a scaled-down version for substantially less.

THE DETAILS

Xbox 360
Price: $399.99
Hard Drive: 20 GB, detachable
Includes: Wireless controller, headset, basic online membership, media remote.

Xbox 360 Core System
Price: $299.99
Hard Drive: None
Includes: Wired controller, basic online membership.

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In a move that may surprise some gamers, the company this morning announced a price of $399.99 for the hard-drive-based Xbox 360, unveiled this spring and slated to launch later this year. Microsoft also disclosed plans to simultaneously offer an alternate version -- with no hard drive and without the ability to play original Xbox games -- at the more typical $299.99 launch price.

Analysts say it's a gamble on two fronts: It's unusual for a console to debut in two distinct formats, especially with such different prices. And while consoles have launched at higher prices in the past, many game-console consumers have become accustomed to the $299 price upon release.

"Historically, if we look at the consoles that have been successful, they've launched at a price of $299 or less," said Schelley Olhava, video-game industry analyst at the IDC research firm.

Microsoft hopes to break that mold. The Redmond company is trying to end the financial losses in its console business and put itself in a position to top Sony's dominant PlayStation console franchise in market share.

The company believes $399 should be a "very attractive price point" at launch for the fully equipped Xbox 360 -- "particularly when you look at the power and versatility of these systems," said Mitch Koch, Microsoft's corporate vice president of worldwide retail sales.

At the same time, he said, the scaled-down Xbox 360 Core System will let people "get into the product, start enjoying the games and then have a fully upgradeable path to add any of the accessories or features" of the full-fledged Xbox 360.

Apart from the hard drive and some other peripherals, both versions will come with the same underlying technology, including advanced graphics and central processing capabilities.

The possibility of an Xbox 360 version without a hard drive has been a source of speculation since the company acknowledged that the hard drive would be detachable. Koch said the component of the console that enables backward compatibility -- the ability to play games made for the original Xbox -- relies on the hard drive.

That means someone wanting to play "Halo 2" or another game made for the original Xbox would need to buy the full-fledged Xbox 360 with hard drive, or continue using an original Xbox console.

Alternatively, Microsoft is selling a separate, 20-gigabyte hard drive for $99 that can be used to upgrade an Xbox 360 Core System, letting it play backward-compatible games and store large amounts of content. In addition, the company will sell a 64-megabyte memory unit for $39 for storing smaller amounts of content on the stripped-down system, although that would not enable backward compatibility.

Another difference between the two versions will be the controllers: As previously announced, the Xbox 360 will come with a wireless controller. But the stripped-down Xbox 360 Core System will come with a wired controller. Wireless controllers will be sold individually for $50.

The Xbox Live online gaming system will be playable on both the full-fledged and stripped-down Xbox 360s. Koch said game play should be the same on both versions. The company has told game developers inside and outside Microsoft to make sure their games work regardless of the presence of a hard drive.

Microsoft made the Xbox 360 pricing and version announcements Wednesday in conjunction with a German gaming conference.

Sony hasn't announced pricing for its competing PlayStation 3, which it plans to launch next year. Nintendo likewise has been quiet on pricing plans for its Revolution console, also expected to debut next year.

Microsoft's unusual strategy makes it difficult to predict how prospective buyers will react. IDC's Olhava, for one, said she isn't changing the forecast she made before the pricing announcement, anticipating 2.5 million overall Xbox 360 shipments worldwide by the end of the year, following the expected launch sometime before the holidays.

Olhava said sales of the two versions "will be very telling" about the preferences of gamers when it comes to pricing and features.

Wedbush Morgan Securities analyst Michael Pachter, who has previously suggested a $399 launch price for the Xbox 360, said it seems to be appropriate.

"It's essentially maximizing revenue without gouging the consumer," Pachter said. "It gives Microsoft the luxury of cutting the price after they sell several million units, before the Sony (PlayStation 3) launch."

Many hard-core gamers would still buy the Xbox 360 at a $399 launch price, said Ryan Erickson, 25, who runs a gaming-focused Internet cafe in Lynnwood called GameClucks. But in general, he said, most people seem to have been expecting a $299 price, based primarily on past experience.

"That's the tradition," Erickson explained.

Microsoft has said it will launch the Xbox 360 in time for the holidays this year in the U.S., Europe and Japan.

The company today announced a similar dual-pricing structure for Europe -- 299 or 399 euros, and 209 or 279 British pounds. Microsoft promised more specifics on Xbox 360 pricing in Japan soon.

Koch declined to be more specific about the timing of the launches.

Both the PlayStation 2 and the original Xbox were priced at $299 in the United States upon their respective launches. It's customary for the price of consoles to drop during their life cycles, and both currently retail for half that amount. Nintendo is selling its current console, the GameCube, for $99.

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