Sony has fired the latest round in the battle of the games consoles by cutting the price of its PlayStation 2 (PS2) in the US and its predecessor, the PlayStation 1 (PSOne), around the world.

The company, which is the market leader, is responding to price cuts by both its rivals, Microsoft's Xbox and the GameCube by Nintendo.

To increase sales, it has dropped the price of the PS2 in the US from $299 to $199, the same price as the GameCube, which does not have the DVD playback capabilities of the PS2 or as extensive a games library.

GameCube: Launched in Europe in May

In Europe the PSOne will now cost �49 in the UK and 89 euros elsewhere.

Its price has also been cut in Japan, Oceania, Middle East and Africa.

Microsoft is also rumoured to be preparing a price cut for the Xbox in North America, following a recent price drop in Europe.

Nintendo dropped the price of its GameCube two weeks before its European launch and the strategy appears to have worked.

The company said it has sold 400,000 consoles since its launch at the beginning of May.

Launch

Another 500,000 are expected to be shipped to stores in the next few weeks and Andy Williams from Nintendo UK said he is delighted by the success.

He said: "It has been, without doubt, a very successful launch and this is set to continue as we bring in more stock on a regular basis in the forthcoming weeks."

Stuart Dinsey, managing editor of games trade weekly MCV, is also impressed with the figures.

He said: "Nintendo quite clearly is saying 'we're going to look to catch up as quickly as we can to Sony and we're looking to squeeze Xbox'."

On Monday, Nintendo announced its plans for online gaming in the US, due to come on stream in the autumn.

The announcement matches Microsoft's and Sony's plans for its consoles.

Last week, Sony announced it had sold 30 million PlayStation 2 consoles around the world.

"We felt that, based on that great milestone, it was good for us and good for the platform to come up with a pricing announcement very close to that," said Kaz Hirai, president of Sony Computer Entertainment of America.

Microsoft reported a "surge" in sales of its Xbox after its price was dropped just weeks after its European launch.

Since the Xbox price cut took effect on 26 April, weekly sales are running neck-and-neck with PlayStation 2, said Microsoft.

The Xbox is Microsoft's first venture into games consoles

However, exact sales figures have not been released.

"This is a marathon, not a sprint and these initial figures are extremely encouraging," said Sandy Duncan, vice president for Xbox Europe.

Sony is reporting that since February it has sold four million PS2s, indicating the introduction into the market of rival consoles has not harmed sales.

North America is the biggest market for PS2s, with 11.3 million sold since it was launched in 2000.

Japan and the rest of Asia is the second largest buyer at 9.9 million, followed by Europe with 8.8 million units sold.

Many industry observers predict that the long-term success of each of the consoles will be determined by sales during Christmas 2002.