The European version of PlayStation 3 will play fewer PlayStation 2 video games when it launches on March 23 compared with models launched earlier in Japan and America, Sony said on Friday.

"The backwards compatibility is not going to be as good as the U.S. and Japan models," a Sony spokesman said, according to Reuters.

"Games designed for PS3 offer incredible graphics quality, stunning gameplay and massively improved audio and video fidelity that is simply not achievable with PS and PS2 games. Rather than concentrate on PS2 backwards compatibility, in the future, company resources will be increasingly focused on developing new games and entertainment features exclusively for PS3, truly taking advantage of this exciting technology," said David Reeves, President of SCEE.

PlayStation 3 (PS3) was first launched in Japan and North America in November and the model that will be introduced in Europe will be designed differently.

Software will take over some of the functionality that was originally taken care of by dedicated chips, which means far fewer PlayStation 2 (PS2) games can be played on a European PS3 compared with the Japanese and American PS3 models which play 98 percent of old games.

So gamers with a PS2 would have to hold onto their device to play their current collection.

Some additional PS2 titles will become compatible on the PS3 system through regular downloadable firmware updates, which will be made available through the PLAYSTATION Network, from www.playstation.com or via PS3 game discs, with the first update planned for the launch date of the 23rd March 2007. Users will be able to check whether their titles are compatible with PS3 at http://faq.eu.playstation.com/bc. This site will be available on 23rd March to meet launch day.

About one million units will be available at the European launch next month, as many as were made available in the United States during the first six weeks after the launch last year.

Sony loses money at first on each PS3 sale due to high production costs.

But Nobuyuki Oneda, Sony's chief financial officer, said in January the company aims to bring the negative PS3 margin to break even toward the second half of the next business year, which starts in April, by component cost savings on chips driving the PS3.

The European PS3 will feature the Cell Broadband Engine, 60 GB hard disc drive, Blu-ray Disc player, built-in Wi-Fi connectivity, SIXAXIS wireless controller.