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Sony's timing of release was what put them in the hole they're in now.

 I think they should've delayed the announcement and the release to somewhere in the middle of this gen (maybe 2010), continuing to promote PS2 (which continues to sell until now), and then getting the jump on the next generation with blu-ray, cell, and more technological wonders that will undoubtedly be better than the 360's hardware (because right now, the line between the two consoles is pretty blur).

the problem with their timing of release is that there were already two consoles in the market that were cheaper than their own, and they sorta didn't give dev teams time to make software. I believe that only two things truly dominate console wars: timing, and price.