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Developers are still in love with the PS2 because of its massive userbase, and by extension, everybody will also continue working with Sony, whether it's less exclusively or not. Even Sony will continue to release games for it rather than focusing all their efforts on PS3. This is the biggest obstacle for the PS3 to overcome, rather than anything the competition may offer. It'll happen eventually, though, to the dismay of those having fantasies of PS3 bombing.

Graphics don't matter so much as technology.

Continued PS2 sales just means continued building of the PlayStation brand.