Sony Corp. (SNE) said on Monday it would begin selling its PlayStation 3 video game console in November for $499 in North America, challenging Microsoft Corp.'s (MSFT) early dominance in the market for next-generation machines.

Sony won the previous generation battle as its PS2 outsold the original Xbox, but Microsoft is expected to capitalize on a head start to at least gain ground this time with its Xbox 360 console in a global gaming industry expected to generate about $30 billion in revenue this year.

Sony's standard PS3 will have a 20-gigabyte hard drive and debut on November 11 in Japan and November 17 in most of the rest of the world. The unit will retail for 59,800 yen ($536) in Japan and 499 euros ($634) in Europe.

The Japanese electronics giant also showed off a motion-sensitive wireless controller, a feature similar to the controllers being offered by Nintendo Co. Ltd. in its upcoming Wii game machine.

Wedbush analyst Michael Pachter said the price was competitive and the controller would be reason enough for many gamers to wait for the PS3 rather than buy Microsoft's Xbox 360, which was launched late last year.

"I think they are going to kick Microsoft's butt," he said after Sony showed off the controller in a news conference ahead of the Electronic Entertainment Expo, the largest video game show in the world which begins later this week.

Video game fans have been waiting to see what Sony would offer, and especially at what price, in order to decide whether to wait for the PS3 or buy an Xbox 360 now.

$600 BARGAIN?

Sony will also sell a PS3 with a 60-gigabyte hard drive for $599 in the United States. All Sony's units will include a Blu-ray high-definition DVD player.

Microsoft's premium Xbox 360 package, which does not include an advanced DVD player and has a 20-gigabyte hard drive, costs $400, by comparison.

"As just a game console, it is expensive, but not if you think about it as an entertainment center," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "The price may be somewhat tough for Sony. If you consider the costs, the price probably should be higher."

The larger hard drive allows users to store more games, music and other downloaded content onto the PS3, while some software developers said the extra storage capacity allowed the machine to load games faster.

Sony's Bluetooth-powered motion-sensitive wireless controller is shaped like the controller for the current generation machine, but the advanced controller can shift objects in games when a player moves the unit, without pushing buttons.

In a demonstration, a virtual duck lifted out of a tub of water when the controller was jerked upward.

Sony expects to hit the market with 2 million PS3 consoles at launch and a total of 4 million by the end of December 2006. Analysts expect Microsoft to ship up to 8 million Xbox 360 units before Sony launches the PS3.

Ken Kutaragi, Sony's game unit head, also known as the "father of the PlayStation," told Reuters that this would be a huge year for the video game industry and Microsoft's early advantage was not a great concern.

"We have not paid much attention to market share in the past, and that is still the case," Kutaragi said on the sidelines of the Sony news conference.

The success of the PS3 is crucial for Sony as a company.

At stake is not only continued dominance in the game industry but leadership in the next generation of DVDs, the commercial viability of the Cell processor that powers the PS3 and possibly control over the future living-room electronics around the world.

It's also an expensive bet.

Tokyo-based Sony plans to take a 100 billion yen operating loss at its game division in the current fiscal year due to costs related to the PS3 launch.

Game machines manufacturers often lose money on the initial sale, but recoup those losses over the life of the product through software sales.

"Unless there are some amazing launch titles that turn up in the next six months, I think it's going to be pretty tough going for Sony," said Hiroshi Kamide, game analyst for KBC Securities. "It's still going to lose money hand over fist at these prices."

Shares of Sony fell 50 yen, or 0.88 percent, to 5,610 yen in afternoon trade on the Tokyo Stock Exchange.