Speaking to our sister site, GamesIndustry.biz, retail sources have said that Microsoft has told them the HD-DVD add-on for the Xbox 360 will be priced so that buying a 360 and a HD drive together will cost you less than the price of a 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 about the price of the unit.
Currently, the Xbox 360 retails at £279 in the UK, with the Core System (which comes minus a hard drive) going for £209. The 60GB model of the PlayStation 3 is expected to cost between £399 and £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 £130 - making an Xbox 360 and HD-DVD player bundle a potentially attractive option come 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.