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Microsoft steps up to PS3's challenge with 'Elite' Xbox

Benjamin J. Romano
The Seattle Times (MCT)

SEATTLE - Microsoft will sell a high-end version of its Xbox 360 entertainment console beginning this spring in a bid to woo videophiles and gaming enthusiasts away from Sony's PlayStation3.

The company released details this week of a $480 "Elite" model with a black finish, 120 gigabytes of storage and a new output for high-definition video and audio. It is set to go on sale April 29 in the United States and Canada and will be a permanent part of the Xbox 360 line.

Analysts said these new features further strengthen the Xbox 360's role as a living-room hub for video content of all kinds and positions it to compete with other new means of delivering content such as the recently introduced AppleTV.

The Xbox 360 Elite matches most of the features of the PS3.

"By releasing a new member of the Xbox family with a bigger hard drive so you can store more content ... and by releasing it at lower price still than the PS3, I think Microsoft really keeps the pressure on Sony," said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Wash.

Sony's PS3, which hit the market Nov. 17, comes with a built-in Blu-ray player for high-definition DVDs. The PS3 costs $500 for a 20-gigabyte version or $600 for a 60-gigabyte version with a built-in wireless-network connection.

Watching high-def DVDs on the Xbox 360 requires a $200 external player.

John Rodman, Xbox group product manager, said Microsoft decided to leave that feature out of the Elite because "we don't want to force people to pay for scenarios that might not be relevant or interesting to them."

He called the announcement "the worst kept secret in the video-game business."

Video-game blogs and tech-news outlets have been thick with rumors about the Elite since last week. An Xbox 360 with a larger hard drive has been expected almost since the console was introduced in November 2005.

Microsoft said Tuesday it will also sell a 120 gigabyte hard drive for $180 that can be added to the two existing versions of the Xbox 360: the basic Core System for $300 and the $400 Pro.

Billy Pidgeon, a video-game analyst at IDC, said the addition of a third Xbox 360 configuration could confuse some consumers. He also questioned why someone would buy a 20-gigabyte Xbox 360 Pro for $400 when the Elite version will come with so much more memory.

Rodman said the Pro version "will continue to be the big business driver for us."

He would not provide specifics on how the Elite version might influence Microsoft's broader goal of showing a profit in the Entertainment and Devices Division during the company's next fiscal year, which starts July 1.

The company has no plans to cut prices on the Xbox 360, he said.

That means no change in the competitive landscape at the low end of the market, where the $250 Nintendo Wii is becoming the favorite.

"It's unlikely that either Microsoft or Sony ... is going to compete at that tier," Pidgeon said.

He said the huge memory boost in the Elite version speaks to Microsoft's success in selling content from its Xbox Live Marketplace.

"It's a buy-in to that business model in a bigger fashion," he said.

The Marketplace has seen 135 million downloads of arcade games, additional maps and levels for packaged games and other content. Four months ago, Microsoft started selling movies and TV shows in both standard and high-definition. The company said the Marketplace business has grown 400 percent since then.

It is adding more content providers to the service, including New Line Cinema and the National Geographic Channel, Microsoft also said Tuesday.

"Increasingly they're kind of positioning (the Xbox) as a super set-top box and as a hedge against the kinds of things that Apple and other competitors are doing with their set-top boxes," said analyst Rob Enderle of the Enderle Group.

Compared with the PS3, the Xbox 360 is proving a better fit with other digital-entertainment and home-networking devices, such as Microsoft's Media Center PCs, he said.

"I think it shows a fundamental difference in how the two companies are approaching the market," Enderle said.

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