By Nicole Maestri and Daisuke Wakabayashi

NEW YORK/SEATTLE (Reuters) - Microsoft Corp began selling "Halo 3" on Tuesday, hoping the acclaimed alien shooter game will widen its lead over Sony Corp in the battle for industry dominance.

Some game enthusiasts lined up before dawn at a Best Buy store on New York's Fifth Avenue to grab a good seat for the launch extravaganza while others took advantage of the retailer's offer to let them pay for a copy of the game and pick it up at midnight or the next day.

Alex Escobar was the first one at the store's checkout counter, turning in a receipt to pick up his advance order.

"It is worth it. It is time to finish this fight," Escobar said, echoing the tagline for a game featuring a futuristic soldier battling to save humanity from an alien onslaught.

What had been a only a modest gathering earlier in the day had swelled to a crowd of about 500 people that cheered as buyers entered the store, resembling other big consumer debuts this year, such as the last "Harry Potter" book and Apple Inc's iPhone.

"Halo 3" is seen as the $30 billion video game industry's equivalent of a new Potter book and Microsoft is counting on the game to finally push its money-losing entertainment unit into profitability.

"This is a critical holiday in terms of winning the next-generation console fight versus our competition and nobody has anything to go up and match 'Halo,"' Shane Kim, vice president of Microsoft Game Studios, told Reuters Television.

Microsoft is backing the game with a marketing blitz that includes celebrity-studded midnight sales events at some 10,000 retailers across the United States.

Gaming retail chain GameStop Corp said the title set a record for advance orders, while Microsoft expects initial demand to surpass that for 2004's "Halo 2," which racked up $125 million in its first 24 hours.

At a Best Buy near Microsoft headquarters outside Seattle, company founder Bill Gates was cheered by a crowd of more than 500 people when he emerged from the store to shake hands.

Gates personally sold and autographed the first copy to Ritesh David, a 17-year-old who was stunned to find himself being served by the richest man in America.

"I gotta check your ID to see if you're 17," Gates said, in a joking reference to the game's "mature" rating, meaning it is intended for customers 17 and older.

SYSTEM SELLER

The first two "Halo" games have sold a combined 15 million copies and cemented Microsoft as a serious player in a video game industry that was dominated by Sony's PlayStation 2.

"Halo 3" is targeted firmly at the core Xbox audience of young males, for whom realistic combat games are a staple. It does little to widen the machine's appeal to a more casual audience that is being successfully courted by Nintendo Co Ltd's Wii console.

"It's not necessarily going to move a lot of new systems like the first 'Halo' did," said Dan Hsu, editor-in-chief of EGM, a gaming magazine.

"At the same time, with all the marketing blitz and hype, consumers will be out there," Hsu said, "and if they are thinking video games, they are thinking one of two things: 'Halo' or the Wii."

Microsoft is certainly betting that the last chapter of the Halo trilogy will give a further boost to its latest console. The Xbox 360, launched in late 2005, has already enjoyed stronger sales than the pricier PlayStation 3, which critics say so far lacks any "system-seller" games.

"I was caught between buying the PlayStation 3 and Xbox 360, but there are certain games like 'Madden '08' and this one that pushed me to Xbox 360," said Darnell Jefferson, 25, who was second in line at Best Buy, referring to the hit football game made by Electronic Arts Inc .

"Halo 3" will benefit from the absence of another blockbuster game, "Grand Theft Auto IV," whose October debut was delayed by publisher Take-Two Interactive Software Inc until some time between February and April 2008.

The latest "Halo" has drawn wide praise from reviewers for its lush settings, cinematic story and breadth of features, positive buzz that pushed Microsoft shares up as much as 3.35 percent on Monday, their biggest one-day gain since April. The stock ended 1.5 percent higher at $29.08 on Nasdaq.

(Additional reporting by Scott Hillis in San Francisco and Robert MacMillan in New York)
© Copyright 2007 Reuters.

Photo:
Gaming fan Jim Cush, dressed as the character Master Chief from the Xbox 360 video game "Halo 3", carries his copy of the game after purchasing it during a midnight sales event in New York September 25, 2007. REUTERS/Keith Bedford