let's say they went without the cell processor AND bluray player which would cut costs. Let's say they went with similar architecture to the PS2 to cut BC costs. They would still have to take a good loss for the player, but could probably afford to cut prices the same as Microsoft. They would also have similar versions of multiplats especially early in the life cycle.
Without their year head start and the millions of units lead it brought, plus the competitive pricing of PS3 along with BC, most PS2 owners would choose to switch directly to PS3. While Microsoft would still have hits like Gears and Forza, only Halo would skyrocket to superstardom. This would also be partly due to games like GT5 being released earlier in the lifecycle of PS3 due to the easier to program for tech. Developers like Bethesda would have a much easier time porting games to PS3 and it would become the lead platform with its sales lead.
However Wii cannot be discounted and it would still achieve a good degree of success. I see Wii sales as staying mostly the same, but the PS3 would match it every step of the way as it devoured Microsoft's potential market of HD gamers while Nintendo's blue ocean strategy pays off by capturing the casuals as it did. With a healthier install base for PS3 and a much more ignorable market share for 360, the PS3 keeps FF13 as an exclusive among others. Rockstar gives PS3 exclusive content for GTA4. 360 still achieves greater success than the original Xbox as PS3 does not launch a year ahead. I believe the sales figures around this time would be more like this...
PS3: 95-100 million
Wii: 90-95 million
360: 40-45 million
Basically the PS3 steals 360's market while exclusives like Halo and Gears still draw some away. However Sony gets a much bigger slice as most would go with the Playstation brand on an even battleground with one not costing 50% more than the other. Third party games still go to Xbox but the PS3 versions sell better for the most part. The Move is never introduced as Sony has a healthy market and Kinect finds some success and helps 360 take some of the Wii market late in the cycle.
The WiiU is introduced at roughly the same time as Wii sales track mostly the same as on our timeline. Microsoft announces a successor at E3 2012 due Holiday 2013. Sony introduces a successor in January 2013 to be released at the same time as it sees a significant threat from Microsoft with its doubled market this gen. Basically the next gen release goes about the same with Microsoft perhaps launching a year earlier. Microsoft is also forced to cut Xbox live subscription fees completely and PS+ is never introduced as the PSN lives healthily with no subscription early on. The PS3's incredible exclusives help it keep distance from Microsoft thoughout the end of the cycle. There is only 1 PS3 slim which doesn't cut BC and narrows the cost to $250 for a 250gb model in 2010 to match the 360 slim the previous year for the same price. It promptly sells like crazy as the PS3 is cut to $199 before the holiday 2011 season to match 360.
Of course a dream scenarion would be that this forces Microsoft out of gaming and Sega re-enters as it sees the potential to cut into both markets as it launches the Sega (insert awesome name) to launch in 2013, but that would be impossible unfortunately.
EDIT: Ok let's say they took the bluray player out as well and just used multiple DVDs to cut costs since everyone is hung up on how they reached that price.