Sony One-Ups Microsoft With $399 PlayStation 4 Price at E3

Sony's "Killzone Shadow Fall" will be among the slate of games that will be exclusive to the PlayStation 4. Credit: Sony Computer Entertainment America.

Sony Corp. drew cheers Monday night when it announced the price of its upcoming PlayStation 4 console at the annual E3 video game convention in Los Angeles.

At $399, the PlayStation 4 will be $100 less expensive than Microsoft Corp.'s next-generation Xbox One console at $499 when both devices hit store shelves later this year.

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Sony scored a few more points with gamers who loudly approved at the company's press conference when executives announced the new PlayStation console will let users freely play used game discs, something that Microsoft has been unclear about with Xbox One.

Used games has been a sore topic for the industry, which has experienced declining disc sales in the U.S. for four straight years. While popular among gamers during a tough economic climate, used games sold at retailers such as GameStop are regarded by publishers as lost revenue. Just how much money publishers miss out on, however, has been hotly debated.

A screen shot of the PlayStation 4 for sale on where it can be pre-ordered for the $399 price announced yesterday (June 10) at E3.

Sony, whose PlayStation 3 has trailed in overall unit sales against the Xbox 360 and Nintendo Co.'s Wii, is in need of a competitive edge this holiday, when gamers will decide between PlayStation 4, Xbox One and Nintendo's Wii U, released last November for $299.

For Sony, the biggest competitive threat is Microsoft. Both share ambitions for becoming a gateway for digital entertainment in the living room via the game console. Over the past decade, both companies have been layering in non-gaming features including video-on-demand, streaming music, social networking and live sports broadcasts. Both have on-demand streaming music services -- Xbox Music and Sony Music Unlimited. And, come November, both will be able to play Blu-ray movie discs.

As a result, the two gaming platforms have become so similar that there are only a few ways they can differentiate themselves to potential consumers. One way is through pricing. Sony is betting that its aggressive pricing will tip the scale in its favor this holiday.

Another way to lure buyers is with exclusive content. In previous years, that meant games. This year, the exclusives extended to other forms of entertainment. Sony Pictures Entertainment Chairman Michael Lynton took the E3 stage for the first time ever and promised that his studio will create exclusive content for PlayStation 4, though he did not share details, such as whether the content would be episodic or full-length feature films.

Microsoft in May announced a new episodic drama series produced by Steven Spielberg and based on the company's science-fiction combat franchise, "Halo." Microsoft also opened up a production studio in Los Angeles, headed up by former president of CBS Television Nancy Tellem, to create original shows, much the same way Netflix is producing "Arrested Development" and Amazon will be footing the bill to produce five TV show series exclusive to its Prime Instant Video service.