The price cut was made possible by shrinking several components, most notably a 45nm version of the Cell processor. Overall, the PS3 Slim is 32 percent smaller than the original PS3 and consumes 34% less power. The console still loses money for Sony, but the platform as a whole is profitable as game licenses are sold to developers.

Seeking to capitalize on that success in time for the Christmas shopping season, Sony has announced a new PS3 Slim model on the official PlayStation blog. Consumers will be able to purchase a PlayStation 3 Slim with a 250GB hard drive starting November 3. The new model will sport the same internal components as the 120GB model, but will sell for $350.

Sony is counting on several new games to boost sales as well. Uncharted 2: Among Thieves, Ratchet & Clank Future: A Crack in Time, Tekken 6, and Call of Duty: Modern Warfare 2 are some of the highlighted games.

In addition to the PS3's large software library, there are also 2,300 movies available to download from the PlayStation Network’s video delivery service. A third of those movies are also available in high-definition.

The best selling console is still the Nintendo Wii, while Microsoft's Xbox 360 still struggles with heat issues leading to console failures.

Sony also recently launched the PSP Go!, which eschews physical media in favor of digital distribution.