NEW YORK (CNN/Money) -
Microsoft has fired the first shot in this year's video-game price wars, cutting the price of its Xbox console by $30 to about $150 in the United States.
The price cuts will go into effect Tuesday.
Industry analysts and some Microsoft officials have been expecting Microsoft to cut the price for its Xbox for some time, but at $149.99, the new price is lower than some had expected.
At the moment, though, most believe it to be a smart move.
"I think it's enough for Microsoft because there's a pretty good opportunity for Microsoft to start to sell into households that already own PS2s," said John Taylor, an analyst with Arcadia Research, referring to Sony's PlayStation 2 game player.
Stewart Halpern of RBC Capital Markets agreed: "Microsoft gets no big advantage from cutting more."
Microsoft cut the suggested price for its Xbox game-playing console last May to $179.99 from $199.99 after Sony did the same for PlayStation 2, the industry's biggest-selling game machine.
Many retailers and game publishers had expected Microsoft to cut Xbox to $150 over the holidays but that never occurred. Nintendo was the only console manufacturer to reduce prices, lowering the GameCube to $99.
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"Price cuts come when you see a need in the marketplace," Microsoft senior vice president Robbie Bach told CNN/Money last week at the Game Developer's Conference in San Jose, Calif. "We saw a lot of momentum during the holiday at good prices."
The big question now is how and when will Sony respond to Microsoft's latest price cut.
PlayStation 2 sales have been reasonably strong this year and the platform has a commanding lead over its competition, leading many in the industry to believe Sony will not match Microsoft's latest cuts immediately.
"My gut says they might wait until E3 so they won't be seen as following Microsoft," said Halpern of RBC Capital Markets, referring to the annual trade show of the computer and video game industry, to be held in Los Angeles in May.
"Given their position as the market leader, they might think 'What difference will a month make?' Not cutting would help them maintain that image."
Arcadia's Taylor said the cuts might come even further down the road. "I think Sony will do a price cut in the fall," he said. "Now, if Xbox were to catch fire and look like it's going sell 5 or 6 million units, then Sony may change it's mind, but I don't think that's going to happen."
Microsoft (MSFT: Research, Estimates) also cut prices for some software titles, including "Project Gotham Racing 2" and "Counter Strike". .
Despite rumors, Microsoft did not announce plans to bundle "Halo," the system's best selling game, with the Xbox. Analysts said the company could be holding that move in reserve until it sees how Sony (SNE: Research, Estimates) responds to the price cuts.
While games by third-party publishers such as Activision (ATVI: Research, Estimates) or Electronic Arts (ERTS: Research, Estimates) are not directly affected by the move, the price cut should benefit their bottom line.
"A lower hardware price should translate into higher hardware unit sales," said Banc of America Securities analyst Gary Cooper.
"In turn, a larger installed base of hardware should lead to higher sales of video game software. In particular, we believe that these price points will appeal to a more mass-market audience."
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