Sonycut the price of the PlayStation 3 by $100, or 17%, in the United States on Monday, a move that should boost the video game console's lackluster sales.
The PlayStation 3, which includes a 60-gigabyte hard drive and a Blu-ray high-definition DVD player, will now cost $500, or $20 more than the most expensive version of Microsoft's Xbox 360.
The PS3 still costs twice that of Nintendo's Wii console, whose $250 price and motion-sensing controller have made it a best-seller despite its lack of cutting-edge graphics and hard disk.
"Our initial expectation is that sales should double at a minimum," Jack Tretton, chief executive of Sony Computer Entertainment America, said in an interview. "We've gotten our production issues behind us on the PlayStation 3, reaching a position to pass on the savings to consumers, and our attitude is the sooner the better."
The price drop was widely anticipated by industry analysts despite Sony President Ryoji Chubachi telling Reuters last week that the company had no immediate plans for one.
Wedbush Morgan analyst Michael Pachter said Sony's price reduction would not double sales but may boost them by 50% to about 120,000 units a month. "The greater significance is that Sony is signaling to the market that we're coming down the cost curve pretty fast in making this thing. It's a pretty consumer-friendly move," Pachter said.
Sony's move comes two days before the start of the video game industry's annual E3 trade show in Santa Monica, California, where some expect Microsoft to respond with its first price cuts on the Xbox 360.
Nintendo, whose Wii is selling so well that it is still hard to find in stores eight months after its launch, is not expected to budge on pricing.
The Xbox 360 and Wii have outsold the PS3 by several times in the crucial U.S. market, leaving Sony, whose Playstation 2 dominated the last console generation, in the unfamiliar position of playing catch up.
Sony is counting on the price cut to help it significantly grow sales of the PS3 ahead of the crucial holiday shopping season that accounts for most of the annual sales of highly profitable gaming software.
Sony is also introducing a new version of the PS3 featuring an 80-gigabyte hard drive and a copy of "Motorstorm," an off-road racing game that has already sold a million copies.
The new model will sell for $600 and is aimed at gamers who expect to download a lot of games and other content from Sony's burgeoning online network.
Sony also hopes the PS3 will win some converts following Microsoft's admission last week that the failure rate of its Xbox 360 console had been unacceptably high, forcing it to book $1 billion in repair costs.
"We're especially proud of the fact that the PlayStation 3 has the lowest failure rate of any PlayStation product. It's absolutely the gold standard," Tretton said. "The quality of the product and long-term viability is what ultimately wins."