What people don't realize is when you combine both of the HD consoles you get a number that is greater than the Wii. Had Sony went the 'Wii' route, they would be in a similar position as they are now. Xbox 360 would become the primary platform of developers naturally wanting to show off and probably would be number 1 this generation.
The only mistake Sony made was making a very reliable, well-made piece of hardware at an extremely high price. They sacrificed quantity too much in the sake of quality and thought that brand loyalty and the Playstation empire alone would carry them through.
To some extent it has. The PS3 while being twice the price of it's primary competitor is still selling rather well. (Despite a myriad of issues along the way). But the dynamics have changed some what. Sony realized that price matters to most consumers far more than releasing the most cutting edge technology.
I think that Sony felt that the PS3 would be the crown jewel in their empire and decided to go all out on it. This came at a cost (to Sony) and to (their consumers).
A competitively priced PS3 hovering around the same price point as an Xbox 360 (From Day 1) would have been in front of the 360 at this point in time.
I see why Sony made the moves that they made. Some worked out, some didn't.
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