Sony Blinks, Drops Price Of PlayStation 3 In North America

Also announced: a new version of the console that will include an 80-gigabyte hard drive.

Sony appears to have blinked first in the current video game console war.

The company that dominated the battle among the PlayStation 2, Xbox and GameCube announced Monday (July 9) that its current model of the eight-month-old PlayStation 3 will drop in price from $599 to $499 in North America, effective immediately. Neither Microsoft's Xbox 360 nor Nintendo's Wii have dropped in price since the systems' respective launches in November 2005 and November 2006.

Sony also announced plans for the August introduction of a new version of the PS3 that will include an 80-gigabyte hard drive — 20 GB more than the current model — and a copy of the early 2007 racing game "MotorStorm." The new model will retail for $599.

The PlayStation 3 has been the third-place console in 2007 month-to-month sales, according to NPD, a research group that tracks sales in the U.S. Dave Karraker, head spokesperson for Sony's American PlayStation division, told MTV News that part of the reason to lower the price on the 60 GB model was to get the system in more hands. "We need to increase our installed base," he said. "That's no secret to anybody."

Sony Computer Entertainment of America President/CEO Jack Tretton cited falling component costs as an added factor. "Since the introduction of the original PlayStation 3 60 gigabyte model back in November of last year, the company has been able to reach some tremendous production milestones and ultimately has been able to reduce the cost of the PlayStation 3," he said in a statement. "We want to pass those cost savings on to consumers, and as a result, we have been able to lower the price."

When the PS3 price was first announced in May 2006, Sony officials explained that the console's cutting-edge Blu-ray disc player, which plays high-definition movies, was a significant factor in the console's unusually high price. Coupled with this announcement, Karraker pointed out that Sony's standalone Blu-ray players recently dropped in price by $100, a sign of falling Blu-ray component prices.

In April, Sony streamlined its PS3 line by eliminating a $499 20 GB model that lacked built-in WiFi. Why would Sony return to having two versions of the PS3? "The thinking is we would be offering this as part of the expanded effort for downloadable content and in preparation for the extended download store that's coming," said Karraker. He said the upcoming store will give PS3 owners the ability to download TV shows and high-definition movies. The added storage will also make more room for some of the bigger downloadable PS3 games, such as this fall's "Warhawk," which Karrarker said would be about 1 GB.

Aside from the increased storage and bundled game, the 80 GB version will be identical to the 60 GB one, and will not be in a different color or receive a specialized name. That's a different strategy than the one used by Microsoft. This spring, the Xbox 360 maker added to its line of $299 and $399 Xbox 360s a $479 120 GB Xbox 360 Elite, painted black to set it apart from the other model's white finish (see "Xbox 360 Is Back In Black With Roomier Elite Console").

Console comparisons are rarely apple-to-apple comparisons. As it stands now, the Elite will offer twice the storage as the newly price-cut 60 GB PS3, but only Sony's machine has built-in WiFi and the ability to play back high-definition movies on disc (the Elite can store and play high-def movies rented from Microsoft's Xbox Live download store). Naturally the other big difference is the competing lineup of exclusive games. Those rosters will be brought to the fore this week as Microsoft and Sony showcase their lineups at the Electronics Entertainment Expo in Santa Monica, California.

The current top-selling console in America is the Nintendo Wii, which has benefited from positive reception of its unusual motion-based gameplay and its lower price. The Wii has outsold the 360 and PS3 every month this year. For example, in May — the most recent month for which NPD sales are available — the $249 Wii sold 338,000 units to the 360's 155,000 and PS3's 81,000. (The $129 PS2 sold 187,000.) The cheaper the console, the bigger sales might be. So given the falling component costs cited by Sony reps, would the company consider bringing back the 20 GB model for a lower cost, possibly $399, to make a run at Nintendo? Not quite. "I think the 20 gigabyte [version] is gone and gone for good at this point," Karraker said.

What isn't being ruled out is a continued evolution of the PS3 and more new models to come. The 80 GB version may not be the last new PS3. "We'll see how the waters churn on it," Karraker said. "If people want more hard-drive space or want something else, we'll address that and keep moving. That's no different with a car model and adding new pieces and parts that people are looking for."

He added: "If you look at what we're really focused on right now, it's increasing our installed base and creating that great content for those games. Whatever we need to do to make that happen is what we're going to do."