Mired in an overall slump, the once recession-proof video game industry is finally experiencing some adverse effects from the troubled economy.

Just ask Sony. The games giant saw losses pretty much across the board in the year's first quarter, as sales of its flagship Playstation 3 system fell from last year's 1.6 million to only 1.1 million. Its PSP handheld saw a huge drop, too, from 3.7 million to only 1.2 million.

The one bright spot? The nine year-old Playstation 2, which managed to outsell the PS3 by roughly 500,000 total units to date, despite being older than some of its fans.

Unfortunately, software sales for all three systems took a serious tumble, with PS3 games suffering a decline from 22.8 million last year to 14.8 million this year. However, the company has also noted that they've managed to reduce the production costs of the console by about 70%. Could consumers soon reap the benefits of those savings in the form of a long-awaited PS3 price cut?

Wow, Sony has actually said they got a 70% reduction in production costs?  IF Sony can drop their prices enough, it will outsell the XB360, finally...  Can you imagine, if the XB360 and PS3 were coming out NOW?  PS3 probably would have slammed it, with the thinner model, and the reduced costs in production.  It's a shame it took almost three years to compete...