By Peter Bowes BBC News in Los Angeles

Microsoft has raised the stakes in the battle for video games supremacy by announcing ambitious plans to launch a global interactive gaming network.

Online capabilities will change video games in more profound ways that 3-D technology has so far

J Allard, Xbox

Using fast, always-connected broadband technology, Xbox Live will enable gamers to talk and interact with other players - no matter where they are.

The new online gaming service will launch in North America, Europe and Japan in the autumn.

The announcement comes as rival video game giant Nintendo said it would cut the price of its GameCube machine in Japan to 19,800 yen (�109) in a bid to regain its price advantage in the game console market.

The price cut, which takes effect on 3 June, makes GameCube the cheapest game console on the Japanese market.

"Online technology is the next revolution in video games," said J. Allard, general manager of Xbox.

"It will fundamentally transform gaming into a new form of social entertainment."

Lavish presentation

The new service was unveiled in Los Angeles at the start of the Electronic Entertainment Expo (E3).

PlayStation 2 has online ambitions

At a downtown theatre, packed with hundreds of reporters from around the world, Microsoft also staged a lavish presentation to preview some of the 200 games that will be available later this year for the Xbox system.

The Expo, which gets under way properly on Wednesday, is likely to see the major players in the video gaming world jockey for position in what is an increasingly competitive business.

Last week, Microsoft cut the price of the Xbox in the US to $199 from $299.

A day earlier, Sony made a similar reduction to its Playstation 2, while Nintendo has cut the price of its GameCube by $50 to $149.

"Xbox is driving the future of interactive entertainment," said Robbie Bach, chief Xbox officer at Microsoft.

Committed

"With so many great Xbox games from our partners, the right global vision for online games and an irresistible price for Xbox around the world, the real fun starts now."

GameCube launched in Europe this month

Sixty game companies have committed to create games for Xbox Live and at least 50 Xbox Live-enabled games are planned for release by the end of next year.

Microsoft is putting aside $2 billion for the new system, next-generation content and further development of the Xbox platform.

Xbox Live, which will be an all-in-one service utilising the system's built-in hard drive and Ethernet port to allow online play straight out of the box.

The Communicator headset will enable players - possibly thousands of miles apart - to talk to each other while competing together on the same video game.

Profound

Other features include Gamertag, a unique online ID for each player which covers all games across the global gaming service - and a friends list feature which allows people to find friends online and invite them to a game no matter which Xbox Live game they're playing.

If it all works out as planned it should be amazing

Xbox fan

"Online capabilities will change video games in more profound ways that 3D technology has so far," said Allard.

Xbox Live will support five Xbox live-exclusive games this year: Unreal Championship, MechAssault, Whacked!, NFL Fever 2003 and Midtown Madness 3.

In addition, the George Lucas's multimedia company, LucasArts, has said it will produce the first of its Star Wars Galaxies online series for the Xbox and Sony's PlayStation 2.

Xbox Live will go on sale, initially in the US, for $49.95.

The cost covers a year's subscription, an Xbox Communicator that plugs into the Xbox controller and facilitates all voice communication with other players.

Interactive service

Prices, including special offers, outside of North America are still to be announced.

As well as the media, Xbox fans were on hand at the launch of the interactive service in LA.

"I think it's great. It should be really fun connecting really easily with other players," said one enthusiastic gamer.

"If it all works out as planned it should be amazing. Basically it's a packaged solution, and I love that," added another.