Microsoft Xbox is cutting the recommended retail price of its gaming console from $299 to $249 -- undercutting main rival PlayStation 2 by about $50.
Xbox, which has been in the market exactly two years this week, claims to consistently net 40 percent of weekly next-generation gaming console sales.
David McLean, regional director at Microsoft's Home Entertainment Division Australia and New Zealand, the price drop should grow market share.
'We are making a clear statement here - we mean business in Australia. We want to ensure price is not the obstacle to the ultimate Xbox experience.'
Around 340 games for Xbox had been launched and some 2.2 million games sales have been made, the company said in a statement.
'To date, there has been well in excess of 400,000 Xbox consoles sold in Australia and a total of $300 million dollars generated in retail sales,'it said.
'Xbox, while primarily a games console, has always had something for everyone,' McLean said.
The console can play video games, DVDs, CDs, facilitate karaoke and allow users to connect online via Xbox Live, he added.
Several games had also been reduced, including the Xbox Halo Elite Force Pack, Xbox Music Mixer, Project Gotham Racing 2, Amped 2 and Counter Strike, the company said.