Retail sources in the UK have told GamesIndustry.biz that Microsoft has intimated to them that the HD-DVD add-on for the Xbox 360 will be priced such that console and peripheral combined are cheaper than Sony's PS3.
At E3 last week, Microsoft once again discussed its plans to launch a HD-DVD component for the Xbox 360 later this year, but did not reveal any further information regarding the pricing of the unit.
Currently, the Xbox 360 retails at GBP 279 in the UK, with the Core System version selling for GBP 209, while the 60GB model of the PlayStation 3 is expected to cost between GBP 399 and GBP 419 when it arrives in late November.
Microsoft's alleged comments to UK retailers seem to suggest that the HD-DVD peripheral, which allows playback of high definition movies using Toshiba's next-generation DVD standard, will be priced below GBP 130, making an Xbox 360 and HD-DVD player bundle into a potentially attractive option at Christmas.
Sony's PlayStation 3 features a built-in Blu-Ray drive, which also offers playback of high definition movies, but in this case using Sony's competing next-generation DVD standard - which many industry commentators are tipping as the likely winner of this standards war, due to strong support from many movie studios and other content creators.
Some analysts, including respected videogames industry analyst Michael Pachter of Wedbush Morgan Securities, have suggested that the success or failure of Blu-Ray could directly lead to the success or failure of the PlayStation 3 - with the system being seen as good value despite its high price point if Blu-Ray is widely adopted, but Sony faced with being lumbered with an expensive and unappealing component for the console's five year lifespan if Blu-Ray is a failure.