It's the dev tools that were the problem. These days _I_ should be able to create a game myself, using the modern dev kits, with moderate success at using the power of any given console. The problem for the PS3 is that was not the case in the early days and probably still isn't.
Over time this corrects itself as studios build up their own tools sets to go above and beyond what the dev kits provide, but it did hinder things out of the gate. If we do see a full 10 year life cycle I expect the last 5 years of the PS3 to be its most profitable, and perhaps make the first 5 years worth it.