Microsoft Drops Price for Xbox One

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Apparently Microsoft Corp. (NASDAQ: MSFT) decided that giving away a copy of the Titanfall game with each Xbox One it sold was not a long-term strategic winner. Tuesday the company announced that it would begin selling the device for $399 without the Kinect feature, a drop of $100 from its original price of $499.

The new price takes direct aim at the PlayStation 4 from Sony Corp. (NYSE: SNE), which also costs $399 and does not include the Kinect-like features of the Xbox One. A motion sensor for the PS4 is available separately for about $60, and Microsoft said that it would have a Kinect add-on available for the Kinect-less Xbox One later this fall. The $399 version of the Xbox One will be available on June 9, and Microsoft will continue to offer the full $499 version as well.

Microsoft will also make available its Xbox Live membership available free for owners of Xbox One and Xbox 360. That means owners of the devices will not have to pay for access to Netflix, YouTube or Hulu through the Xbox device. Subscription fees will still apply of course. In addition, Xbox Live Gold will no longer be a requirement for access to apps and streaming media.

The failure of Xbox One sales to keep up with sales of the PS4 has been a thorn in the side of Microsoft since the games were launched last November. Through March, Sony had sold 7 million consoles to retail customers while Microsoft had sold just 5 million Xbox One units to retailers.

The Redmond company has clearly decided that Kinect is not enough of a draw to justify the $100 price premium compared with the PS4. What this means is that developers are less likely to build games that require Kinect because the games will not have as large a target market.

It also means that Microsoft has chosen to compete directly against Sony on games and programs. Which vendor will ultimately win remains to be seen, but Sony had the better start and still holds the inside track.

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