In a recent interview with 1UP, Sony’s Phil Harrison revealed plans to expand the PlayStation 3’s functionality to include “not just games but movies, music, HD, standard definition TV,” as part of a 10-year plan for Sony’s latest console.

Last November, Microsoft launched its own video download service, called Xbox Live Video Marketplace, which allows Xbox 360 Premium owners to purchase and download movies and TV shows. Analysts are predicting great success for Microsoft’s new service, estimating that it could generate $92 million in 2007 and as much as $762 million by 2011.

Sony has long touted since the PlayStation 2 that its gaming machines are actually multi-purpose multimedia centers. With the inclusion of a hard drive in every PS3, Sony looks better set than ever to fulfill its promise.

“Well we made a very conscious decision in putting a hard drive in every machine and a minimum of 20GB, 60GB and who knows in the future, maybe that will rise -- you know, that tends to be a trend,” said Harrison, adding that he sees the long term benefits of the hard drive. “The ten year plan of allowing people to download all kinds of digital content to their PlayStation 3 -- not just games but movies, music, HD, standard definition TV, you name it. And that was a significant investment, but it was absolutely the right thing to do.”

In response to a question if the PlayStation Network could soon see something comparable to Microsoft’s video service, Harrison said that official announcements weren’t yet ready, but did offer, “We have a hard drive, we have a commerce engine, it doesn't take a rocket scientist to figure out we will have that on the network very shortly.”

Harrison also responds to reports from earlier this month stating that PlayStation 3 price cuts may arrive as soon as sometime this year. “Well, do you know what [Sony Senior VP Takao Yuhara] said was, cost reduction, not price drop, and there's a big difference between cost reduction and price drop. So, that I believe is where the confusion came from,” Harrison explained. “Obviously, we are investing our money in making PlayStation 3s cheaper to manufacture -- that's part of our business plan.”

Analysts estimate that Sony loses as much as $301 on every PlayStation 3 sold, so any costs reductions realized will be to help soften the blow on the console maker’s bottom line. Harrison knows that price cuts are a part of every console strategy, but it appears that Sony will make adjustments only when it makes sense. “When we can, when there are savings to pass along to the consumer, we would obviously choose to do that. That's the business model,” Harrison said.