The launch was a mess because of the price point. The hardcore thought it would do well no matter what price Sony slapped on it, but people hesitated. Add on that the 360 was already out with people raving about how great the online experience was which split a decent portion off into being xbox fans. Then the wii comes along and pulls out the massive casual support which is pretty much Sony's bread and butter. They both hit Sony when they were down and from completely different angles.
Sony might have still pulled it off if they maintained their third party support, but between PS3's insane development costs (which have bankrupted multiple studios with as much as 1 failed game), and third parties scrambling to make something for the Wii, Sony got screwed over horribly.
Sony did it to themselves, they got cocky, they didn't understand their own fanbase, they didn't think Microsoft or Nintendo had anything up their sleeves and they were dead wrong. How else do you explain them going from a massive first place lead to competing for second with microsoft.
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