Microsoft has released a cheaper version of its Xbox 360 console that is aimed at families.

The Xbox 360 Arcade console will go on sale in the UK for an estimated retail price of £199.99 from 26 October 2007.

The games machine will include the full versions of the five best-selling games from the Xbox Live Arcade, including Pac-Man: Championship Edition, Uno, Luxor 2, Boom Boom Rocket and Feeding Frenzy.

Stephen McGill, head of gaming and entertainment for Microsoft UK, said Christmas was the perfect time to launch a family-oriented package that plays games, video and music.

"In addition to offering an incredible all-in-one package for families to get right into the fun, the Xbox 360 Arcade system features industry-leading family settings," he said.

"They allow parents to control what their kids are watching and playing, and we know how important that control is to families around the world."

The Christmas offering seems designed to target sales of the Nintendo Wii, as that console continues to be popular with non-traditional gamers.

The Wii claimed top spot as the best-selling games console in the world, according to figures from sales-monitoring website VG Chartz.

The £199.99 price of the Xbox 360 is now closer to the £180 charged for the Wii.

However, Nintendo UK refused to speculate on the reasons behind the launch.

"We do not comment on the activities of our competitors," a spokeswoman for Nintendo told Vnunet.com.

The latest price cut follows on from a drop to the PS3, which launched a 40GB version in the UK and followed it up with the same in the US.