The focus is expected finally to shift from consoles to games at the annual convention of the video game industry, moved from the Los Angeles Convention Center to the more low-key seaside suburb of Santa Monica this year.

E3 – the Electronic Entertainment Expo – has been dominated by Microsoft, Sony and Nintendo for the past two years as they tantalised the public with glimpses of their next-generation consoles.

But all three have now been launched and battle has commenced, with price and the quality of games proving the key factors so far in sales.

Microsoft was holding its press conference on Tuesday, the eve of the show, and Nintendo and Sony will follow with their announcements on Wednesday.

But the main developments appear to have happened before the show, with Microsoft and Sony getting their bad news out of the way in order not to spoil their enjoyment of this annual industry party.

Microsoft revealed last week it would take a pre-tax charge against profits of $1.05bn-$1.15bn as it tried to limit the potential damage from a technical flaw in the Xbox 360.

The charge will cover extended warranties for machines already sold, as well as nearly 2m made but not yet sold. Microsoft said it had got to the bottom of the problem of hardware failures, but did not disclose what it was.

The charge will add to the billions in losses incurred since Microsoft entered the console business.

Sony’s losses on its PlayStation 3 will increase after Monday’s announcement that its $599 60-gigabyte model is being cut to $499 immediately in the US. Sony was already subsidising that console to the tune of $240 at the higher price, according to a break down of the parts by the iSuppli research firm last November.

Costs of parts will have fallen since then, but Sony will still make a substantial loss on each console and its move, well before the holiday season, reveals concern at how it has fallen behind its rivals in sales.

In the US, the $250 Nintendo Wii has been outselling the PS3 by around four to one in recent months. In May, 338,000 Wiis were sold, 155,000 Xbox 360s and just 82,000 PS3s, according to the NPD research firm.

Sony will hope for a comeback with the price cut and a new line-up of games to be announced at the show.

It promises to be a blockbuster season for games later this year with the release of Halo 3, the sci-fi first-person-shooter, on September 25 for the Xbox 360. Grand Theft Auto IV, Take-Two’s criminal underworld game for both the PS3 and the Xbox 360, will follow in October and both should be previewed at E3.

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