Sony fires first shot in gaming world war

Sony yesterday threw down the gauntlet to Microsoft by slashing the price of its PlayStation 3 console by $100 in the crucial US gaming market, a move that analysts said could trigger a price war with its main rival.

To give flagging sales a boost, Sony has brought the cost of the PS3 down to $499 in the US, making it similar in price to Microsoft's Xbox 360 Elite console, which costs $480.

"This news does not affect any other PS3 territory," said Dave Karraker of Sony Computer Entertainment America (SCEA). However, Sony Computer Entertainment Europe added: "We are making an announcement at [gaming conference] E3 on Thursday, which will be related to SCEA's announcement."

Sony's price cut comes after Microsoft's admission last week that it would take a charge of more than $1 billion against profits owing to a technical flaw in the Xbox 360 console, a move that could lead to millions of recalls.

In the US, the Nintendo Wii has been outselling the PS3 by four-to-one in recent months. The latest figures, for May, showed 338,000 Wiis being sold, 155,000 Xbox 360s and 82,000 PS3s. The PS3, at the new price of $499, is still twice the price of the $250 Wii.

"Microsoft will further cut the price of the Xbox in order to increase its appeal, particularly among casual gamers - it's an oft-stated goal of the company," said Jay Defibaugh, analyst at Credit Suisse.

Sony is the first of the three console makers to cut the price of a next-generation machine. It has come earlier than many observers expected - price reductions were thought likelier near the holiday season period, beginning in November.

The Japanese company's game unit has been posting losses on the console at existing prices.

Some observers expressed scepticism as to whether the price cut, announced on the eve of the E3 gaming conference in California - the industry's biggest - would increase sales in the US. "My view is that the price cut is still too shallow," said one analyst. "When we see a stronger content line-up, we could start seeing some reaction."

Meanwhile, Nintendo has turned the tables on its rival in Japan, where theWii outsold the PS3 six-to-one in June, says trade magazine Enterbrain. Nintendo's market capitalisation has since leapfrogged that of Sony. - ( Financial Times service)