The smaller PS3 is expected to be available Sept. 1 with a retail price of $299, and Sony said new game titles will roll out in time for the holiday shopping season. Analysts said a cheaper PS3 is the right strategy at this stage in the console's life cycle, but some suggested it may be too late for Sony to launch a comeback.

"Price was a big inhibitor for the PS3," said Michael Cai, a video-game analyst at Interpret. "Initially, Blu-ray was a driving force for PS3 sales because a lot of consumers were looking at this feature. But as the prices of stand-alone Blu-ray players continue to drop, that part of the appeal is diminishing a little bit. It was time for Sony to drop the price."

Building PS3 Demand

Sony's lower price results from a redesign of its components, from the main semiconductors and power supply to the cooling mechanism. The console itself has been completely redesigned with a slimmer and lighter body. The internal volume, thickness and weight have been trimmed to approximately two-thirds of the original 60GB PS3. Sony said power consumption has also been cut to two-thirds, which helps reduce fan noise.

The PS3 Slim offers the same feature set as the current PS3s, including a Blu-ray player and the ability to download content from the PlayStation Network. The new PS3 Slim's hard drive has been boosted from 80GB to 120GB for more storage .

With more capacity, the same core features, and a lower price, Cai said Sony should be able to drive more PS3 sales after a poor showing so far this year. The timing of the price drop is strategic, he said. Announcing the new model and pricing now gives Sony time to build market awareness so pent-up demand will help drive sales during the holiday shopping season.

"A lot of the gamers, even if they were interested in playing some of the PlayStation 3 exclusive games, held off on purchasing a PS3 because of the price, especially if they already had an Xbox 360," Cai said. "Exclusive games alone didn't give them any motivation to buy a PS3 for $400. The price drop will definitely help." (continued...)

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