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Sony confirms cheaper 40GB PS3 for Europe; U.S. version to follow?

Europe will get a stripped-down PS3 at a reduced price on October 10--but for now, Sony stops short of confirming a North American version.

40GB Sony PlayStaton 3 (PS3)
The new 40GB PS3: Are the compromises worth the reduced price tag? Sony Computer Entertainment Europe

The rumors were true, almost to the letter. Sony Europe has confirmed the existence of a new entry-level PlayStation 3. Scheduled to hit stores on the Continent on October 10, the new PS3 has been stripped down to hit a lower price point: it's got a smaller 40GB hard drive, no built-in flash media reader, and two (rather than four) USB ports. But the biggest change appears to be the loss of backward compatibility with PS2 games. Sony's release specifies that "[t]he new model is no longer backwards compatible with PlayStation 2 titles, reflecting both the reduced emphasis placed on this feature amongst later purchasers of PS3, as well as the availability of a more extensive lineup of PS3 specific titles (a total of 65 titles across all genres by Christmas)." That seems to counter conventional wisdom, since the newer PS3s were already said to be using software emulation (rather than an actual PS2 Emotion Engine chip) to play older games. In brighter news, the new PS3s retain Blu-ray playback, HDMI output, and onboard Wi-Fi.

The 40GB PS3 will retail for £300 in the U.K. and €400 across continental Europe. The existing 60GB PS3--which retains backwards compatibility--remains on the market with a price cut and a new bundle as well. There's no official word for those of us outside Europe, but it's a safe bet that PS3 sales in North America will crawl to a standstill as consumers wait for the other price-cut shoe to drop on this side of the Pond. The expected price tag will be $400--a huge bargain, considering the current weakness of the American dollar.

Of course, the PS3 had already seen a de facto price cut to $500 just a few months ago, but the PS3 has yet to generate a Halo-like hit for hardcore gamers or connect with mainstream audiences like the red-hot (and much cheaper) Nintendo Wii. Despite a couple of recent hits (Warhawk, Heavenly Sword), With keystone exclusives such as Metal Gear Solid 4 and now Unreal Tournament III pushed back to 2008, Uncharted: Drake's Fortune seems to be the only hotly anticipated PS3 exclusive slated to hit this fall. In short, Sony needs to generate some excitement in the meantime, and the prospect of a $400 PS3 just in time for the holidays sounds like a perfect recipe. Whether or not the backward compatibility issue will sour the deal remains to be seen.

What do you think: is the (presumably imminent) PS3 worth $400, or is the dearth of backward compatibility a deal breaker?