A major price war broke out in the video gaming industry this week, and the early winner appears to be the consumer. Sony responded to growing price pressure by cutting the North American price of its PlayStation 2 game console by $100, to $199. The move had been widely expected to happen in concurrence with next week's Electronic Entertainment Expo.

Microsoft was next, dropping the price of its Xbox system from $299 to $199 in the United States. The move puts all the major game consoles--PS2, Xbox and Nintendo's GameCube--at $199. Nintendo said it has no plans to lower the GameCube's price.

Financially, Microsoft has the most to lose from price cuts. The PlayStation 2 has been on the market for almost two years and has sold more than 30 million units worldwide, giving Sony plenty of time to rein in production costs. Sony executives said late last year that they had reached the break-even point on PS2 hardware. Xbox has been available for less than six months and has been fairly expensive to manufacture from the start, owing to components such as a built-in hard drive.