Microsoft has finally announced the rumored 60GB Xbox 360 model and a $50 price cut for the outgoing 20GB Pro model.

The new 60GB Xbox 360, which offers three times the storage space of its predecessor, will retail for $349 when it hits stores in "early August".

The 20GB model has been reduced from $349 to $299 "while supplies last".

Microsoft still offers the entry-level hard drive-less Xbox 360 Arcade model for $279, and the 120GB Xbox 360 Elite for $449.

Microsoft hopes that Xbox 360 users will fill the larger hard drive with paid downloadable content from Xbox Live Marketplace.

Xbox 360s also include a one-month "gold" membership to Xbox Live.

Although the 20GB Xbox 360 is dropping in price by $50, the fact that it's in limited supply means that Microsoft will only temporarily have a sub-$300 hard drive-equipped console.

Rival Sony has suggested that it will not be cutting the price of the PS3 anytime soon. The 40GB PS3 retails for $399, still within range of the new 60GB Xbox 360.

Nintendo's Wii has been selling strongly at $249, $30 less than the Xbox 360 Arcade.