Following the trend from May, June sales for the Xbox 360 again sagged behind the Nintendo Wii. Nintendo is now in the lead with over 11 million in sales while the Xbox 360 is at about 10.5 million in sales. In 20 months Nintendo caught and surpassed the Xbox 360 in total units sold, and for the first time a non-current generation console is leading the new next generation consoles.

Nintendo claims that they are selling the Wii consoles just about as fast as they can make them. While many have suggested that the Wii is a “gimmick system” due to the innovative controllers, there is no denying the fact that the Wii lacks the serious hard-core gaming titles that are available for the Xbox 360 and PlayStation 3.

Many analysts claim that two factors have contributed to the success of the Wii, which are that the system does appeal to an audience that is larger than just gamers and the reality that the Wii is great for youngsters that are not ready for the violent and mature nature of many of the titles on the next- generation systems.

While the price drop of the 20GB Xbox 360 to $299 while supplies last should help spur sales of those that were on the fence about buying a next generation system, there is no question that the Xbox 360 has been hurt by the reliability issues that have caused many consoles to fail. Microsoft stepped up to the plate and extended warranties and has done just about everything possible to make sure that customers were taken care of. The news that Sony will drop the price of the PlayStation 3 can’t really be good news for Microsoft.

Microsoft is in a difficult position. While they have moved many cost reductions into the Xbox 360, which has led to more reliability and gives Microsoft the ability to have a little bit more pricing flexibility, things are hard when you compare the PlayStation 3 with the Xbox 360. The simple fact that the console has been out longer and it lacks the Blu-ray drive offered by the PlayStation 3 has contributed to the decline in sales far more than Microsoft would care to admit.

Microsoft will need to continue to release a slate of titles that continues to keep gamers interested, but revisions to the system that might perhaps include a Blu-ray drive, as well as price reduction, will be necessary in order for Microsoft to compete. The announcements at E3 of the new titles did include some games that seem to be generating buzz, but the fact that some of them will be available on the PlayStation 3, as well, hurts Microsoft’s cause. Microsoft needs some exclusive titles that are very well received as well as some cost reduction and maybe a little luck to keep things going.