Sony made, IMO, a number of 'mistakes' or strategic errors, which resulted in PS3 struggling as it has (vs comparison with PS1/PS2).
These are:
1) it figured Nintendo wasn't its main competitor, when in fact it still was (check out the Source's 100 weeks analysis to see its the Wii, not the 360, that's really hurting PS3)
2) it figured all it needed to keep 360 down was to focus on some similar games and offer a free PSN service for basic online MP - hence the initial focus on teen/mature shooters, etc. for the console
3) it figured that since Nintendo wouldn't get developer support (apart from its own first party) and that 360 would only get Western shooters, it would automatically get the Japanese developers and a broad catalogue of titles to encourage a rapid transition from PS2 to PS3 - this would be helped with full BC
4) it figured HD TV and BR uptake would be stronger, and that the PS2 would support PS3 during an initial, high price, luxury item phase before they got the costs down to where the PS3 could drop in price or the 'must have' factor would drive consumers to get one
5) it produced a great, multi-purpose console but didn't consider that MS were (admittedly too hastily) assembling a console that while not as good from a multi-purpose media point of view (mainly due to lack of inbuilt HD player) was a good games console and where using their money to ensure the console had a lot of titles (more than it would warrant on Xbox sales and then brand position anyway). One of these efforts hit major paydirt - Gears of War.
6) it missed the fact that Xbox had started gaining momentum as an alternative platform for PC gamers, and a much cheaper one at that. The 360 took this too another level with Live improvements and a strong focus on delivering a PC like shooting/online MP experience. In fact, again looking at Source's data on this site, what was missed was 360 was selling to a new type of console gamer (more I'd argue than Wii in a way) - a gamer much like certain PC gamers, who wanted top notch graphics and fast, violent online play with clans, leaderboards and a strong sense of online competitive community. BTW Achievements were the feather in this crown IMHO.
7) It linked the PS3 with BR - and took it right into a format war with Toshiba. How many potential early owners were worried their super expensive console might sudden be stuck with a dead format I wonder? A fair few I'm sure.
8) Sony didn't launch with 'their ducks in a row' - i.e while they had this home entertainment hub on their hands, they had no aligned strategy to leverage their TV, Media and Content to the max to deliver a clear message on the console's offer and why you should want one
The result is obvious to me:
a) 360 took of within its demographic, particularly in the US. Easier to develop for, and with the promise of big sales for the right game, it drew the big Western developers like a moth to a candle.
b) Wii took off and was an instant hit with the family market, something the PS3 couldn't be as it was at launch too expensive, required an HD TV to get the best out of it, was linked to BR and the idea the format would fail, and simply didn't have the family games it needed to succeed.
c) PS3 launched with a lot of 'weights' around its ankles - it was expensive, their was the fear the BR it contained would become a dead format, it didn't have games, it was difficult (and expense) to develop for, it lost BC early on when it because clear the Wii was off and running and the PS3 was becoming locked into a bigger fight with 360 than anticipated, it lost local developer support with the BC and poor sales, with many titles selling better on PS2 and some games (still actually) coming out on PS2 rather than PS3.
d) MS quickly saw a chance to pounce and pulled out its wallet and/or strategy team to get timed exclusives and former Sony exclusives on the 360 - this further delayed uptake of the machine and increased perception (again particularly in the US) that the 360 was a true alternative to the Playstation brand.
And we are were we are - the recession will hurt all companies (likely MS included but they have the cash to ride it out) and has put price front and centre for many consumers, just about the worst scenario for the PS3, while the Wii is looking unstopable and MS firmly entrenced with money to spare to keep up the pressure.
Pity, because if you have and HD TV and want to buy BR movies and play games (including online MP) the PS3 is the better overall choice - and arguably still a cheaper one that the 360 plus a separate player. But while I think Sony will claw back what they can, this generation has clearly gone anything but as planned for them.
Try to be reasonable... its easier than you think...
