The Technophilez

Microsoft Corp said on Thursday it will offer a free downloadable video game to users of its Xbox online gaming service after the network was plagued with connection troubles over the holidays.

Xbox Live General Manager Mark Whitten said the problems stemmed from a "massive increase" in new users of the service over the holiday season, when sales of video game hardware and software surge.

"While the service was not completely offline at any given time, we are disappointed in our performance," Whitten said in a statement.

Whitten said all Xbox Live members around the world would be able to freely download one game over the service. Games sold on Xbox Live typically cost from $5 to $20, and Whitten said Microsoft would give details of the offer in the coming weeks.

Before the holiday sales surge, Xbox Live had more than eight million members, many of whom were paying $50 a year for the premium service that lets them play online against others.

Whitten did not give details of the cause of the problems, but gaming Web sites and forums have been filled in recent days with complaints from users frustrated with the inability to sign on to the service or play online.

Microsoft confirmed previous rumors on Monday that two free games will be bundled with holiday Xbox 360 packages.

In addition to recent 360 price drops, both Forza Motorsport 2 and Marvel Ultimate Alliance will be included with Xbox 360 Pro ($350) and Xbox 360 Elite ($450) models by the end of October.

"Xbox 360 is home to the most critically acclaimed next generation games according to Metacritic.coms, the leading aggregator of game reviews from more than 100 publications," said Microsoft in a statement.

"The most-respected game reviewers have spoken and according to them, Xbox 360 has more than double the games of the Playstation 3 and Wii receiving a score of 90 or higher."

 Microsoft's Xbox 360 video game console will be $50 cheaper starting Wednesday, confirming fuzzy snapshots of leaked advertisements posted by bloggers in late July.

The company said its most popular console, which comes with a 20-gigabyte hard drive, will cost $349.

A basic console without a hard drive or wireless controllers will retail for $279, $20 less than its current price, while the Xbox 360 Elite, a black version with a 120-gigabyte hard drive and high-definition video support, will drop $50 to $449.

In July, the company clipped the price of its add-on HD-DVD player to $179, from $199.

Microsoft has been dodging questions about a console price cut since competitor Sony Corp. slashed the price of its 60-gigabyte PlayStation 3 to $499, from $599, in early July. Nintendo Corp.'s Wii, the least expensive of the so-called next-generation consoles, costs $250.

Last week, spokespeople for Wal-Mart Stores, Toys "R" Us and Microsoft all refused to say whether blurred images found online — purportedly showing weekend ad circulars reflecting the price cuts — were authentic.

Aaron Greenberg, a group product manager for Xbox 360, said in an interview Monday that the ads were real.

Greenberg also said competitors' prices had no impact on Microsoft's decision.

"In fact, we had this in our plans from the very beginning," he said, and added that the timing was linked to the release of several highly anticipated video games, including "Madden NFL 08," which hits retail shelves next Tuesday.

"There is nothing too shocking about this," said Michael Gartenberg, an analyst at JupiterResearch. He said it's normal for companies to cut console prices between one and two years after launch.

The analyst added that the $50 price cut will bring in a whole new group of customers who ruled it out at the higher price, and that Microsoft should enjoy increased sales immediately — even though the official holiday shopping season is still months away.

Microsoft also said Tuesday that the green and gold "Halo 3"-themed console, will go on sale in September for $400.

Microsoft announced the addition of Walt Disney Co. films to the Xbox 360's download service, Xbox Live, on Tuesday night at the opening news conference for the E3 Media and Business Summit.

Disney joins the ranks of Warner Bros. Home Entertainment, Paramount Pictures and Lionsgate among studios contributing high-definition titles to the fast-growing platform. Among the 35 titles that will be made available beginning Tuesday are "Bridge to Terabithia," "The Queen" and "Deja Vu."

"This is a big endorsement for us," Robbie Bach, president of the entertainment and devices division at Microsoft, said in a interview preceding the news conference. "With this partner, we have 28 TV and movie studios on Xbox Live."

Xbox still has some catching up to do in the Disney department compared with Apple's iTunes, which has a broader array of Disney films on tap as well as bigger titles, including "Pirates of the Caribbean: At World's End." That might have something to do with tight ties between Apple and Disney's Pixar.

Bach reported robust numbers for Xbox Live, which recently surpassed 7 million members. He projected reaching 10 million by this time next year.

Contrary to expectations that Microsoft would lower the price of Xbox in response to a similar move made this week by Sony Corp. for its PlayStation 3 console, Bach did not announce such a move but didn't rule it out as an option.

"July is the worst month to do something like that," he said. "It's the slowest time in every market in the world. We'll decide what we'll do in the future when we get there."

Bach sought to bolster Xbox's image in the wake of a disclosure this week that Microsoft would spend more than $1 billion to repair technical problems experienced by some owners of the console as well as extend warranties.

He noted that 11.6 million Xbox 360 consoles have been sold, 5.6 million in the U.S. In addition, Bach said that Xbox owners buy more games per console than owners of Nintendo or Sony devices. "When you look at the dollars spent on the consoles, we're dramatically ahead of our individual competitors," he said. "That's important for the marketplace because more publishers will want to develop more games."

Bach also touted Xbox's competitive advantage for the 2007 holiday season, noting that Microsoft will have the only console that can service the probable three biggest sellers out at that time: "Halo 3," "Madden NFL 08" and "Grand Theft Auto

IV."

"We think we have the best lineup of games in history," Bach said.

While Xbox has established itself as a console of choice for hardcore gamers, Bach signaled that Microsoft will take several steps to make it more accessible to a broader audience, including a set of new casual games for Xbox Live Arcade and a deal with DVD game brand Scene It? that will bring a customized new controller to the console.

Microsoft  said on Thursday it would launch the advanced version of its Xbox 360 game console, Xbox 360 Elite, on October 11 in Japan, a country where sales of its game gear trail far behind rival machines from Nintendo Co. Ltd. and Sony Corp.

The Elite's 120-gigabyte hard drive, six times bigger than the regular Xbox 360's hard drive and twice as big as that of Sony's PlayStation 3 console, can store thousands of songs as well as a library of high-definition TV shows, movies and arcade games. It will sell for 47,800 yen ($390), compared with 29,800 yen for the most basic version of the Xbox 360.

Although popular in the United States, the Xbox 360 has seen slow sales in Japan. Microsoft sold 122,565 of the consoles in the first half of this year in Japan, the home turf of Sony and Nintendo, according to data from game magazine publisher Enterbrain.

Nintendo sold 1.78 million units of its Wii and Sony sold 503,554 of its PS3 consoles during the same period.

The basic model of the PS3 sells for 49,980 yen in Japan, while the Wii sells for half that.

The Xbox 360 Elite is already sold in North America for $480.

($1=122.71 Yen)