Just as we thought the battle between Microsoft's Xbox 360 and Sony's PS3 couldn't get any more interesting, the fight has just gotten a lot more fierce. The general consensus was that 2008 would be the year of the PS3. The year it finally sinks its teeth into the market to wrestle market share away from Microsoft and Nintendo.

But before Sony could even make a move, Microsoft has pre-emptively spanked the PlayStation 3 in the face. It's unabashedly Wii'd on Sony's fire whilst giving it the proverbial finger. Effectively it's neutered the PS3 before it even had a chance to challenge. And how? By massively reducing the price of its Xbox 360 consoles.

It's staggering - £150 for an Xbox 360 Arcade? That's HALF THE PRICE of the PS3, and £20 cheaper than a Nintendo Wii - how can Sony even hope to compete with that?

PlayStation 3 vs Xbox 360

The good news (or at least, the not-so-bad news) for Sony is that no one who would consider buying a PS3 would ever buy the hard disc-less Xbox 360 Arcade. So those two models are not really competing with one another. The bad news is that the real competition comes from the Xbox 360 Premium - which will, from Friday, be priced £100 cheaper than the PlayStation 3.

Last week Sony was in good shape to go forth and have a cracking year. But now, its plans look dashed. And while Sony is publicly putting a brave face on after the news from Microsoft, you know that internally it'll be reeling.

Sony was hoping to start making a profit with its gaming arm in 2008. It's just about breaking even on hardware sales now - but it would appear that to continue competing, Sony will simply HAVE to cut its own PS3 prices. And that means more losses on every console sold.

You've got to hand it to Microsoft here. It's done Sony up like a kipper.

Done up like a kipper

First it managed to launch the Xbox 360 a whole year before the PS3. It built a large next-gen user base while Sony relied on the PS2 to wave the PlayStation flag. And what's more, Microsoft also managed to get away with a reported 33 per cent hardware failure rate, without anyone really complaining too much.

Sure, there was the class action lawsuit which cost Microsoft $1bn but, crucially, sales of the Xbox 360 have not suffered a jot.

And so, the PS3 just might be in real trouble now. But before we go and make too many sweeping statements, could it be that Sony anticipated this? Microsoft's price-cut was fairly predictable - it was no secret that cheap prices would be Microsoft's biggest weapon in the console war.

So maybe Sony will have predicted this move and planned a counter-offensive? Either way, things are about to get interesting.

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