I would say Sony dropped the ball in this generation. They were positioned in pole position prior to the start of the gen, but messed up in several aspects: 1. Launch date was too late, 2. Pricing was too high, 3. Perception of consumer base was wrong.
They got too comfortable, they did so damn well with the PS2 that they thought every PS2 customer WILL buy a PS3. So although the hardware is fantastic, they might have been able to use something a little cheaper on the inside to cut down on price. They really assumed their customers would jump off bridges for them, but they didn't. Many companies that get to the top get too comfortable. If you do, you are going to lose the next round. Nintendo did it after SNES, Sony did it after PS2, Nintendo did it again after the DS (although they have recovered from their mess up with the 3DS, but they were lucky that there was no NEW handheld competition in the market, otherwise, if the PSVita had already been out, chances are many who were turned off by 3DS at the start would have hopped on the vita bandwagon).
EDIT: I need to add that Sony also underestimated their competition. They had no idea Nintendo was going to release the (at the time) unique Wii that disrupted the market, and that Xbox360 would pick up the steam rapidly with it being the only console available for a whole year plus its online innovations that Sony did not have at the time.
It takes a ton of work and innovation to REMAIN in the number 1 spot.
