At this time last year, Sony Corp.'s PlayStation 3 videogame machine looked like a dud, outsold in the U.S. two-to-one by Microsoft Corp.'s Xbox 360 and four-to-one by Nintendo Co.'s Wii.

Now, Sony's videogames business is back in the hunt. The Wii still leads in sales world-wide, but the PS3 exceeded Xbox 360 sales in the critical U.S. market during the first three months of the year, helped by an improved selection of games, a 20% price cut last fall and the lure of models with built-in Blu-ray DVD players. Sony has also...