Sony rolling out new, cheaper PlayStation 3

By Christoph Steitz

COLOGNE, Germany (Reuters) - Sony Corp will launch a slimmer, cheaper version of its PlayStation 3 game console next month, hoping to jumpstart sales and win back market share from rivals Microsoft and Nintendo.

Starting in September, the latest, less bulky version of the PS3 will be rolled out at $299 in the United States, 299 euros ($422.7) in Europe and 29,980 yen ($315.6) in Japan, the company said on Tuesday.

That represents a major price cut from the existing PS3 models, which runs between $399 to $499 and have proven less popular than Microsoft's Xbox 360 and Nintendo's Wii.

"The main thing is that there is a significant price cut," said Ed Barton, analyst at Screen Digest. "We have argued since the beginning that there must be a substantial cut and this is a positive development."

Sony's new PS3 comes with a 120 gigabyte hard disk, but consumes 34 percent less power than the original model and is 32 percent smaller, Sony Computer Entertainment Chief Executive Kazuo Hirai said at the Gamescom video game trade show in Cologne, Germany.

"In 2004, as you may recall, we launched a slim version of PlayStation 2, a defining moment for that console, helping us to really expand the user base of PlayStation 2 further," Hirai said. "Today is that day for PlayStation 3."

The price cut comes after weeks of pressure from gaming industry leaders like Robert Kotick, the CEO of publisher Activision Blizzard Inc, who say lower console prices would spark the slumping sector.

Jesse Divnich, an analyst with Electronic Entertainment Design and Research, said he expects PS3 sales to increase a minimum of 20 percent in September.

He expects Microsoft to cut the price on its higher-end model to $299 from $399. He said Nintendo's Wii, whose sales have been declining rapidly, is in need of either a price cut or a hardware or software bundle.

"The Xbox 360 does have stronger momentum right now than the PS3, so it's going to take at least two months before I consider these systems to be at an equal level because it just takes some time for consumers to react to things like price cuts," he said.

Indeed, price cuts are not unusual for video game console makers. Microsoft's sales got a boost last September after the company cut prices on some of its Xbox 360 consoles by about $50. The Xbox 360 now sells in three models ranging from $200 and $400.

"A smaller console size does not necessarily mean more value for consumers. Starting at $199, Xbox 360 offers the best gaming and entertainment experience at the most consumer-friendly price on the market," Microsoft said in an emailed statement when asked about a comment on Sony's move and about a potential price cut for the Xbox 360.

Nintendo did not immediately have any comment about Sony's announcement.

(Additional reporting by Franklin Paul and Gabriel Madway in San Francisco; Editing Bernard Orr)