The announcement at a press conference at the Electronic Entertainment Expo, or E3, was made after Sony Corp. said it would cut the retail price for its PlayStation 2 videogame console in North America to $149 from $179 in an effort to lure a broader array of customers.
Sony says it has shipped more than 70 million PlayStation 2 game consoles worldwide. That compares with 13.7 million Xbox consoles shipped as of the end of last year.
Xbox's video-chat service will be launched this year exclusively in Japan and eventually will make its way to the North American network.
"We particularly like the ability to launch in Japan because of the superior infrastructure for broadband,” Microsoft spokesman Peter Moore said. “You will not only be able to play against your friends, or talk to your friends – now you can actually see your friends."
Microsoft has not determined how much extra it will charge to download and operate software for the video-chat option, which will require a USB camera attached to their Xbox console; regular Xbox Live subscriptions cost about $50 a year.
Users of Xbox Live’s network will also able to “tickle” each other, as well.
"You can send a vibration to one of the participants in the chat session, which vibrates the controller they're holding," Moore said.
Industry tracking company NPD Group says video game retail sales in the United States – including software, hardware and accessories – totaled $11.2 billion last year.
And Playboy Enterprises said last month that its readers spent over $300 million on video games over the last year with more than 3.1 million readers owning a video game system.