Sony is saying that overall sales are down, mainly because of the worldwide economic downturn, and that the strengthening yen is not helping. This could mean that, this year, the company is likely to see a drop in profits. The Japan-based manufacturer is now saying that a net profit of 150 billion Yen, approximately 1.55 billion dollars, is to be expected, which is basically almost 60% less than the previous year, and less than the initially estimated 2.47 billion.

Sony says that sales of televisions, compact cameras and camcorders have also gone down significantly. Interestingly, the company is also citing something called “increased price competition” as one of the reasons for its limited profit forecast. And this is where videogames come in.

Microsoft initiated a price cut for its Xbox 360 early in September and all markets, from North America to Japan, came to benefit from it. The price of the Xbox 360 Arcade version is now smaller than that of the Nintendo Wii, while the PlayStation 3 is seen by many customers as being a pricey console.

The initial impact was significant. Over the past month, in Japan, the PS3 has been selling less than the Microsoft made console, having some of the lowest sales since launch. On the North American market, the NPD Group has showed that the Sony console is way behind its rival, and the gap is likely to increase in the months to follow, with Microsoft set to profit from the holiday season shopping rush.

The dilemma Sony is now facing when it comes to the videogame market is this: should it cut prices, reneging on one of its earlier positions, and hope that it can take on Microsoft and improve financial results, or should it keep prices steady, in order to maintain revenue and keep profits from dropping? We'll probably have an answer in time for Christmas.