After several months of increasingly dismal sales, Microsoft has finally cut the price of its Xbox 360 video game console in the United States. The price cuts not only make the console more affordable; they actually make the low-end Xbox 360 less expensive than market-leader Nintendo Wii. The price cuts go into effect Friday, September 5.

Microsoft sells three versions of the Xbox 360 and all have received a healthy price cut. The entry-level Xbox 360 Arcade, which comes with a 256 MB Memory Unit instead of a hard drive, is dropping from $279 to $199, or $50 less than the Nintendo Wii. The mainstream and best-selling Xbox 360 console, which features a 60 GB hard drive, is dropping from $349 to $299. And the high-end Xbox 360 Elite, which includes a 120 GB hard drive, drops from $479 to $399.

Microsoft has been under pressure from both ends of the market this year. Nintendo has been the constant and overwhelming sales winner, dominating this generation of video game consoles by a wide margin. But Sony's PlayStation 3 (PS3), once an also-ran, has consistently outsold the 360 this year, and analysts now expect the device to outsell the 360 overall by the time this generation of consoles is retired. Sony's least expensive PS3 is a whopping $399, which makes its resurgence over the past year all the more impressive.

Breaking the $200 price point is an important step for Microsoft, a price that the company says has historically accounted for over 75 percent of all video game console sales. Sony has previously said that it would not lower PS3 prices this year, but if the 360 price cuts have the desired effect, the company might not have a choice. Sony, like Microsoft (but unlike Nintendo), losses money on every console they sell. Microsoft has lost over $5 billion on its video game business since entering the market with the original Xbox in 2001, and Sony says it's unclear if it will ever recoup the cost of building its PS3.

Nintendo leads the current generation of video game console sales with 30 million Wii units sold since November 2006. This compares to 20 million Xbox 360s and about 15 million PS3s. But the Microsoft console has been in the market for a full year longer than the other consoles, making the sales disparity all the more alarming for the software giant.