By Niclas Mika

LEIPZIG, Germany (Reuters) - While Sony battles with Microsoft over which of their next-generation video game consoles will dominate, its seven-year-old PlayStation 2 still has a lot of life in it.

The Japanese company has sold over 100 million of the consoles globally since the 2000 launch.

Now PlayStation 2 has come down so much in price that it is cheap enough for people in Western Europe or North America to buy on a whim and affordable for consumers in emerging markets such as Eastern Europe, Sony said.

Sales are still going strong, with the PlayStation 2 outselling Sony's new flagship PlayStation 3 by a ratio of almost four to one in the second quarter of this year.

"We are committing funds for PS2 ... we encourage third parties to continue development for PS2. If they bring a PS3 version out, they can bring a PS2 version out as well," David Reeves, head of Sony's European games unit, told Reuters on the sidelines of the Leipzig Games Convention on Thursday.

"There is a lot of money still. What happened last time with PS1 is that they left a lot of money on the table by making the transition too quickly," he said.

Reeves said he expected games development for the PlayStation 2 to continue for three to four years. Other industry executives gave more cautious estimates of two to three years.

HARDCORE GAMERS MOVE ON

Game publishers said the PlayStation 2 remained an attractive platform but that the user base was changing as hardcore gamers move on to the newest consoles.

"There will be a bit of a shift in terms of consumers we will reach, in terms of the regions," said Gerhard Florin, general manager of international publishing at the world's largest video games company, Electronic Arts .

"Machines in the market may be handed on -- not to the younger brother, but maybe to the older sister to play a party game," he told Reuters on the sidelines of the Leipzig Games Convention in Germany.

EA announced a PlayStation 2 version of its forthcoming title "Rock Band" at the Leipzig fair, and Florin said the game, which allows players to perform rock songs as a solo artist or together with friends, exemplified one type of title that would be successful on the older console.

"'Rock Band' or (the trivia game) 'Smarty Pants' are not necessarily driven by processor power," he said.

EXTRA MONEY

Despite an unrivalled installed base, the economics of making a PlayStation 2 game are less straightforward than they might seem, said Yves Guillemot, chief executive of French games publisher Ubisoft .

"The problem is that you have lots of machines that stay on the market, but very quickly the retail prices are going down, so the gross margins go down," he said.

"If you can do the game on PS2 on top of other formats, it in fact is extra money. 'Ninja Turtles' sold lots of games, that was really extra money," Guillemot said.

The equation changes, however, when a title is only developed for the PlayStation 2, because those games sell at about $40 compared with $60 for a Playstation 3 or Xbox 360 game, meaning that publishers have to sell more games to turn the same revenue, Guillemot said.

Ubisoft sold 1.1 million copies of its next-generation game "Rainbow Six" in the United States alone, Guillemot said. "Doing 1.1 million on the PS2 in the U.S. today is not easy, and for the same revenue you have to do 1.6 million at $40," he said.

Sony's Reeves said there was a trend among publishers to subcontract the development of PlayStation 2 versions of a next-generation game. While producing a game for the PlayStation 3 or the Xbox 360 was initially difficult, there are already many experienced programmers for the PlayStation 2, Reeves said.

"You can set up your external company now, and in the next five years you can become a billionaire just developing for

PS2."

(Additional reporting by Christiaan Hetzner)
© Copyright 2007 Reuters.