Microsoft on Monday unveiled a leaner Xbox One model and a lineup of coming games as it strived to make up lost ground on Sony's market-leading rival PlayStation 4.

Xbox team head Phil Spencer used a Microsoft press event on the eve of the Electronic Entertainment Expo (E3) video game extravaganza to introduce an Xbox One S that will be priced at $299 when it hits the market in August.

"This is just the beginning," Spencer said. "We see opportunities on the horizon."

At a separate event later in the day, Sony put the spotlight on a line-up of big, beautiful games and announced that a keenly-awaited virtual reality headset that works with PS4 consoles will be released on October 13 a price of $399.

Sony late last year cut $50 off the price of PS4, making the console available for $350. Microsoft had earlier made a similar move, lowering the Xbox One price to $350 by unbundling it from a Kinect motion-sensing accessory.

Xbox One S was described as being about 40 percent smaller than its predecessor.

With an eye on the future, Microsoft is also working on a powerful new version of Xbox One designed as a platform for exquisite virtual reality and ultrahigh-graphics games, according to Spencer.

"Delivering the world's most powerful console is exactly what we want to do," he said.

The upgraded Xbox One model, dubbed "Project Scorpio," will be released at the end of next year, in time for the prime gift-giving holiday season, according to Microsoft.

Scorpio was announced early to provide game makers and other software savants time to create content or experiences for the beefed-up Xbox One.

Spencer promised that the Scorpio version of Xbox One would enable virtual reality experiences without any sacrifice of performance.

- Play anywhere -

Microsoft also announced that players would be able to hand Xbox One games off to Windows-powered computers due to a new "Play Anywhere" capability.

"Gamers have never had more choice in how and where they play," Spencer said.

Despite trends toward play on smartphones, tablets, and personal computers, industry heavyweights are not giving up consoles which have long ruled the lucrative sector.

Sony heads into E3 as a market leader, having sold more than 40 million PS4 consoles since they launched in late 2013.

While Microsoft has not released current sales figures for its Xbox One console that debuted in the market at nearly the same time, industry estimates are that they are roughly half those of PS4.

- Grand games galore -

Given that PS4 and Xbox One are in their third year on the market, and the Nintendo Wii U is in its fourth year, console makers will be out to fuel interest with big new games and enhanced features, according to analysts.

Sony provided glimpses at coming PS4 titles including a new "God of War," along with "Spider-Man," and "Days Gone."

Revered game maker Hideo Kojima appeared on stage to reveal his new studio's first project, a game called "Death Stranding."

Sony promised more than 50 games for PlayStation VR will be available within months after the launch, among them zombie-shooter "Resident Evil," one based on the iconic "Star Wars" franchise, and another on the comic book dark knight "Batman."

Xbox One game announcements included exclusive blockbusters "Gears of War" and "Halo" titles, and an intriguing new "We Happy Few" by Compulsion Games studio.

Virtual reality, streaming play and titles tailored for smartphones are expected to be hot themes at E3.

Demonstrations of content for Facebook-owned Oculus Rift headgear are once again expected to draw crowds on the show floor, which opens on Tuesday.

Oculus began selling its Rift virtual reality headsets earlier this year for $599, a price which does not include the cost of a computer that can handle the processing and graphics demands of the technology.

HTC set a price of $799 for Vive VR gear, which also requires computer systems that can handle the rich experience.

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