Microsoft is cutting the price of the HD DVD player it offers as an add-on to Xbox 360 game consoles in the US and will give away five free HD DVD movies with player purchases, a sign the battle between the HD DVD and the Blu-ray Disc high definition formats is heating up.

The HD DVD player will sell for $179 (£90) in the US from August 1, down from $199 (£100). Between August 1 and September 30 buyers will receive five free HD DVD movies chosen from a selection of 15, Microsoft said. The company indicated the free HD DVD movie offer was the same as that offered by Toshiba, which is offering titles including Apollo 13, Seabiscuit, Constantine, Casablanca, We Were Soldiers, U-571, Blazing Saddles, and more.

Microsoft will also offer the movie '300' on its online service Xbox Live on demand starting August 14.

The price reduction of the Xbox 360 HD DVD player may be aimed at Sony. Sony, which is championing Blu-ray Disc technology against HD DVD, reduced the price of the PlayStation 3 (PS3) in the US by $100 (£50) in anticipation of the launch of a newer version of the game console.

The PS3, which contains a Blu-ray Disc player, now costs $499 (£250) in North America with a 60GB hard-disk drive. A newer version of the PS3 with an 80GB hard-disk will sell for $599 (£300) when it launches in August. The Xbox 360, on the other hand, sells for $399 (£200) with a 20GB hard drive, while the 120GB Xbox 360 Elite costs $479 (£240). Neither of the Xbox prices includes the HD DVD player.

Sony and other members of the Blu-ray Disc camp have been able to boast a large base of users of its HD technology because of the number of PS3s sold.

Microsoft put out the HD DVD player for its Xbox 360 game machines as a way to compete with the PS3. The company is in the HD DVD corner, with Toshiba and other companies.