Xbox Drops

It's not unusual for gamers to simulate street fights, and Microsoft's (Nasdaq: MSFT) about to treat competitor Sony (NYSE: SNE) to a little sucker punch. Mr. Softy's play for your street involves cutting the price of its Xbox gaming console to $149 from $179. This is good news to anybody who's been waiting for a better price before buying, and it's likely welcome news to investors in video game stocks, too.

The move is meant to take back some market share from Sony's PlayStation 2, which is currently still selling for $179. If you think back to the PlayStation 2 craze in 2000, you might recall that it not only enjoyed tons of fanfare (remember those gamers camped outside stores before launch day?), but it reached the market 18 months before the Xbox did. To this day, PlayStation 2's far and away the No. 1 console. Then, there's also Nintendo's GameCube to complicate matters.

While it's arguable that diehards already have their consoles of choice, this will entice those who may like video games but couldn't afford or justify shelling out $179. Meanwhile, especially now that Microsoft's made the move, it doesn't seem a question of if Sony will lower PlayStation 2 to the same price level, but when. Considering that neither Microsoft nor Sony plans next-generation versions for several years, right now there's hardly anything to get excited over other than the low price.

In a related note, the awaited console price cuts should drum up sales for some video game providers. Such names include Motley Fool Stock Advisor picks Electronic Arts (Nasdaq: ERTS) and Activision (Nasdaq: ATVI), as well as Take-Two Interactive (Nasdaq: TTWO), THQ (Nasdaq: THQI), and Acclaim (Nasdaq: AKLM). After all, the logic is that a new console is no big deal without an array of compatible games.

In last quarter's conference call (courtesy of CCBN StreetEvents), Microsoft noted Xbox growth, which offset some lagging in other areas of its home and entertainment segment. If Microsoft wants to line up loyalty for its next feature-rich, full-priced version of Xbox, now does seem the right time to strike.

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Alyce Lomax does not own shares of the companies mentioned. Most of her exposure to video games is old school... think Atari. At one time, she could play a mean game of Asteroids.