Microsoft is cutting the price of its Xbox 360 computer game consoles by up to €50 in tandem with the introduction of a new high-end version this Friday.

The move follows price cuts in the US earlier this month as Microsoft readies itself for intense competition from Sony and Nintendo in the run- in to the key Christmas selling period.

The standard Xbox will now have an estimated retail price of €359.99 while the price of Xbox 360 Core has been cut by €20 to €279.99.

The new Xbox 360 Elite, which has a larger 120GB hard and an interface for connection to high definition (HD) TVs, will sell for €459.99.

The move will put pressure on Sony to follow suit as its Playstation 3 console, launched in Ireland in March, sells for €629.

Microsoft claims its video game machine is now the best-selling console in Europe with more than 30 per cent of the market by revenue. In Ireland it claims to have more than 45 per cent of the market, where its main competitors are Sony and Nintendo.

Microsoft also says it has sold more than 5.5 games for each machine sold in Europe since it was launched.

Nintendo's Wii has been the surprise success in the current generation of consoles because of its innovative motion sensitive controller .

Microsoft will release a strong line up of new games in advance of Christmas including Halo 3, Bioshock, Mass Effect, Project Gotham Racing 4, all of which are exclusive to Xbox.

Console makers generate profits from the sales of software rather than the hardware. Industry analysts who have closely examined the components used in the current generations of consoles say that Microsoft and Sony may even be making a loss for each unit sold.

Microsoft's foray into gaming with Xbox has not been all plain sailing. Last month it announced it was putting aside $1.5 billion to cover the cost of exchanging units which developed faults.