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THIS is the PlayStation 3 - Sony's bid to dominate home entertainment.
For less than £250 the new machine produces faster and more realistic games, allows instant internet access and video calling, and also plays CDs and DVDs.
Ken Kuturagi, Sony's head of gaming, said: "This is a system to be placed in the centre of the living room around the world."
The PS3 goes on sale next spring. But Microsoft's Xbox 360, which has the same functions and a similar performance and price, will be on sale before Christmas.
Analysts predict a price war as Sony and Microsoft slug it out for control of the world's £20billion gaming market.
The battle may threaten the domination of gaming Sony has held since the launch of the original PlayStation in 1994.
The PS3 produces the most realistic video games yet as its processor is 35 times faster than the chip in the PlayStation 2. At yesterday's launch in Los Angeles the games, which cost about £40, looked almost cinematic.
They are stored on disks that can hold six times as much information as a DVD. The PS3 also has a hard drive for storing games, pictures, music and video footage. Seven people can play games on it together and it has six sockets for connecting other devices such as digital cameras or MP3 music players.
Sony hopes it will appeal to the mass market, not just dedicated gamers.
Sony has sold 80million PlayStation 2s worldwide, far more than any other console.
Some 13,000 games can be played on it - all compatible with the PS3.
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