Honestly, the reason why the Playstation and PS2 were so dominant was because they had virtually 100% of all the major third party games and they were also up against incompetent competetion.
Back in the 90s/early 2000s they were the only "cool" game manufacturer, the only one that marketed well, they had a headstart with both the PS1 and PS2 over Nintendo, and they were easily able to pick apart their competitors.
Now ... things aren't so simple. Nintendo actually gone from having the worst mindshare/marketing to having the most. Liv Tyler plays DS, Obama is bringing a Wii to the Whitehouse, parents love it, women love it, etc. it's on the Oscars, on the Colbert Report, everyone is talking about it.
Microsoft markets just as aggressively Sony does and to the exact same audience. They challenge Sony and make them work for every exclusive they can get and try to one up them on every feature (GTAIV downloadable content for instance). MS has arguably usurped Playstation as the "hardcore" console of choice in the West.
Things change. The competetion -- give them credit are much, much, tougher than the N64s or Dreamcasts or Saturns of yester-year. As a result Sony's grip on third parties has also fallen apart without the user base, they are like a pitbull without any teeth anymore.
Even if the PS3 was cheaper, it would still be in very tough versus Nintendo and Microsoft simply because those two companies have learned from their defeats. The PS3 and PSP are the first time Sony has faced competitors that really had their act together -- and lo and behold they're not so invincible.
