Microsoft grabbed some headlines earlier this week with news of its Xbox 360 price cut. Not to be left out, Sony has announced that starting September it will offer a new 80GB PlayStation 3 model that has "all the functionality" as the current 40GB model, but for the same $399.99 price tag.

This probably means Sony is ditching backwards compatibility on the PS3 altogether. It also means that the Blu-ray capable 80GB unit now costs roughly the same as a 60GB 360 with an Xbox Live Gold 12-month membership, which is certain to put further pressure on Microsoft's gaming console. There's no word on whether Sony plans to make a move similar to Microsoft and reduce the price of the 40GB console until the stock is depleted or - better yet - keep it in the product mix at a lower price.

Sony also formally introduced its video download service that will allow users to buy or rent content from most major studios in both standard and high definition formats. TV episodes start at $1.99, with movies costing somewhere between $2.99 and $5.99 to rent and from $9.99 to $14.99 to buy. The video store will be available this evening, according to Sony, and can be accessed from either a PC or PS3.