Nintendo Co Ltd will cut the price of its popular Wii video game console by 20 percent, responding to similar cuts by rivals Sony Corp and Microsoft Corp aimed at kick-starting demand.

Nintendo said it would lower the price of the Wii by $50 to $199.99 in the United States starting Sunday. The price in Japan will fall by 5,000 yen to 20,000 yen on October 1.

The move makes Nintendo the last among its peers to cut prices. Last month, Microsoft slashed $100 off the price of its high-end Xbox 360 console and Sony cut the price of its PlayStation 3 by $100.

Prices for both the Xbox 360 and PS3 now start around $300, though Microsoft also sells a low-end model, the Xbox Arcade, for about $200.

Nintendo has so far outsold its rivals in this generation of consoles. It has succeeded in broadening the gaming population by offering intuitive and easy-to-play games rather than focusing on life-like graphics like Sony and Microsoft.

But Wii sales have tailed off in recent months and competition was set to get tougher after its rivals cut prices.

Sony's price cut will be followed this holiday season by strong PS3 titles such as Final Fantasy XIII. Nintendo should have seen an urgent need to slow down the PS3's momentum, Rakuten Securities analyst Yasuo Imanaka said.

Japanese videogame creator Square Enix Holdings Co plans to launch the latest edition of its blockbuster role-playing game series, Final Fantasy XIII, on December 17 in Japan, helping drive holiday demand for the Sony console.

Sony said worldwide sales of the PS3 exceeded 1 million units in the three weeks since it launched a slimmer, cheaper version of the game console earlier this month, roughly matching its PS3 sales for the entire April-June quarter.

In a move to further expand a pool of popular software titles for its game console, Sony said it plans to launch the latest installment of its highly anticipated racing game series Gran Turismo 5 in March.

One of the major sales drivers for the new PS3 is its pricing. But an attractive price can be attractive for game users only when the machine is supported by a lineup of attractive game titles, Kazuo Hirai, head of Sony's game operations, said in a keynote speech at the Tokyo Game Show on Thursday.

The Gran Turismo series has so far sold more than 52 million units worldwide.

Hirai told Reuters in an interview after the speech that the game unit, Sony Computer Entertainment, aims to become profitable in the next financial year to March 2011 through higher sales of Playstation3 hardware and software as well as cost-cutting, while maintaining high levels of investment particularly in software.

We'll make sure we do our very best to become profitable next fiscal year, Hirai said.

Following the announcements of the Wii price cut and Hirai's keynote speech, shares of Nintendo closed up 0.5 percent at 24,550 yen, while Sony gained 3.1 percent to 2,670 yen and the benchmark Nikkei average rose 1.7 percent.

News of Nintendo's price cut came just as Hirai was delivering his keynote speech.

Video game industry sales have slumped over the past six months, and hardware sales in August declined by 25 percent, according to research group NPD.

Analysts have pegged the drop to cautious spending by consumers in the tough economic environment, and a dearth of top-selling games.

Long-awaited console price cuts and new games, including updates to the Halo, Guitar Hero and Call of Duty franchises are expected to boost sales in coming months.

(Additional reporting by Paritosh Bansal; Editing by Chris Gallagher and Joseph Radford)

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