And yet it is done, and profitably so. Sony's PlayStation 3 is expensive precisely because it uses new chips and optical drives whose manufacturing processes have yet to be refined. Moore's law has made the old silicon parts in a PS2 dirt-cheap; meanwhile, videogame studios continue to churn out games for it, making it an entertainment bargain.

Windows XP, meanwhile, has been relentlessly tested by consumers, businesses, and hackers; it is now reasonably bug-proof, reasonably easy to use, and ubiquitous. Windows Vista, by contrast, is slow, unpredictable, and uncertainly secure. (Microsoft claims Vista is safer, but any security expert will tell you that security holes only reveal themselves over time.) Microsoft perhaps recognizes this, since it's continuing to sell Windows XP in some poorer countries.

So far, Sony and Microsoft are focusing their selling of the old in developing markets. But why not sell the old stuff everywhere, instead of forcing the likes of Dell to jump through hoops to offer it to willing customers? That's exactly what Nintendo has done with the Wii. Essentially a repackaged GameCube with a motion-sensitive controller, the Wii has eviscerated Sony's overexpensive PlayStation 3. It's a classic triumph of the old.

The chief lesson Silicon Valley has taken from Moore's law is that new technology will always be better. Hence the relentless pursuit of the new. But Moore equally tells us that old technology will always be cheaper. Someone's going to figure out how to sell the old stuff at a profit. Why not have it be you?

Release after the jump.

Sony Computer Entertainment America Announces New 40GB Playstation(R)3 (PS3(TM)) Configuration and Price Reduction Of Current 80GB Model

New 40GB Model to be Available in North America on November 2nd for $399; Effective Immediately, 80GB PS3 to be Priced at $499

FOSTER CITY, Calif., Oct. 18 /PRNewswire-FirstCall/ — Sony Computer Entertainment America Inc. (SCEA) today announced plans to introduce a new 40GB model of its PLAYSTATION(R)3 (PS3(TM)) computer entertainment system. Beginning November 2nd, to further enhance the HD entertainment experience,
the new 40GB PS3 model will come bundled with the blockbuster movie Spider-Man(TM) 3 Blu-ray Disc(TM) (BD) from Sony Pictures Home Entertainment, and will be available in North America for a suggested retail price of $399 (USD/CND). The company also announced that effective immediately, the current
80GB PS3 model will be available in North America for $499 (USD/CND), $100 below the original launch price.

"We're pleased to offer the consumer a lower price point without sacrificing the core technology components that make PS3 the most advanced high-definition entertainment system available. Every PS3 comes with a Blu-ray drive, HDMI output, an integrated Wi-Fi connection, Cell Broadband
Engine and a built-in hard-drive," said Jack Tretton, President and CEO, SCEA. "This holiday season we'll be able to offer attractive retail pricing with a broad portfolio of outstanding games including Ratchet & Clank(R) Future: Tools of Destruction(TM), THE EYE OF JUDGMENT(TM), Uncharted: Drake's Fortune(TM), Heavenly Sword(TM), Call of Duty(R) 4: Modern Warfare, Assassin's Creed(TM), Haze(TM) and RockBand(TM)."

The new 40GB PS3 will no longer play PlayStation(R)2 titles, reflecting the availability of a more extensive line-up of PS3 specific titles. Consumers looking for backwards compatibility can take advantage of the limited PlayStation 2 backwards compatibility of the 80GB PS3.

PLAYSTATION(R)3 40GB Specification

Product name PLAYSTATION(R)3
CPU Cell Broadband Engine(TM) (Cell/B.E.)
GPU RSX(TM)
Sound Dolby 5.1ch, DTS 5.1ch , LPCM 7.1ch, AAC, others *1 *2
Memory 256MB XDR Main RAM, 256MB GDDR3 VRAM
HDD 2.5" Serial ATA 40GB
I/O USB 2.0 x2
Communication Ethernet X1 (10BASE-T, 100BASE-TX, 1000BASE-T)
IEEE 802.11 b/g Included
Bluetooth 2.0 Included (EDR)
Wireless controller (Bluetooth) Included
AV Output
Screen size 480i, 480p, 720p, 1080i, 1080p
HDMI OUT x1 *3
AV MULTI OUT x1
DIGITAL OUT x1 (OPTICAL)
BD/DVD/CD Maximum Read Speed BD 2x (BD-ROM)
Drive DVD 8x (DVD-ROM) (Read Only)
CD 24x (CD-ROM)
Dimensions Approximately 12.75in(W) x 3.86in (H) x 10.8in (D)
Weight Approximately 11 lbs

*1 A device compatible with Linear PCM 7.1 Ch. is required to output 7.1 Ch. audio, supported by Dolby TrueHD or a similar format, from the HDMI OUT connector.
*2 This system does not support output from the DTS-HD 7.1 Ch. DTS-HD 7.1 Ch. audio is output from a 5.1 or lower channel.
*3 "Deep Color" and "x.v.Color (xvYCC)" defined by HDMI ver1.3a are supported.

We're choosing to focus on the PlayStation 2 consumer with the PlayStation 2, which remains incredibly relevant, and focus on the PlayStation 3 consumer with the new 40-gigabyte model and the great software coming out... Backward compatibility is a nice secondary consideration, but it's far from the number-one priority.

Sony's taken the best of various community aspects and blended it into a theme called Game 3.0. Not an official trademark or anything, it's just their idea that video game equivalent of Web 2.0 and its user-created content would be Game 3.0 (goes along the three in PS3).

So how does it work?

Well, you have private and public areas. Imagine the Sims and the ability to customize your home, your body, your clothes, and your face. The 3D avatar and 3D environment actually looks pretty great, considering it's actually PS3-level graphics and not just something quickly thrown up (like Second Life). You can customize your personal apartment however you wish and invite buddies (other avatars) over to chat, play arcade games, launch multiplayer games, or just hang out.

There are loads of public spaces as well. These can be generic arcade halls where you can play pool and bowl, or game company sponsored areas where you can play demos of their latest games and chat with friends at the same time. There could even third-party non-game areas like movie theaters and clothing stores where you can watch trailers, movies, or try on the latest overpriced shirt from A&F.

Speaking of commercialization, there's going to be ads. Yes, there are 3d Banner ads and HD Video ads embedded inside "appropriate" areas in the public spaces. Fortunately for you, you can bring up a virtual PSP interface from anywhere and warp back home to the (presumably) ad-free space. But in your space, you can load your own pictures from your PS3 hard drive onto a picture frame or your own MP3s onto a jukebox.

This is definitely something we can see people sinking a lot of time into as far as socializing. It doesn't seem to have an economy in it like Second Life, as far as we saw, so all your money will be sent to Sony when you purchase arcade games, furniture, and more clothing for your avatar.

How about for the hardcore gamer? There's the "Hall of Fame", an actual hall with display cases that show the "achievements" (Sony's not calling it that) that you've unlocked by playing games. Not only can you browse what you have, you can go to a gigantic hall (imagine the Star Wars Imperial Senate) and view trophies for games you don't have. Or you can see what your buddies have and compare.

It doesn't have as much depth as Xbox 360's achievements, which has possibly 50+ achievements for each game, but it does give you a neat way to walk around a room and admire just how much time you've sank into playing video games.

Although PlayStation Home probably won't be a big enough feature to actually sell the console by itself, it may just be one of many features that Sony's adding to make it quite tempting to even non-gamers, a segment the Wii seems intent on dominating. – Jason Chen