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RE:

It seems like Sony is going the way of the Kodak camera. Although they initially outclassed many of the other systems on the market by offering incredible hardware, the XBOX 360 offered a significant leap in graphics that put it ahead of Nintendo and arguably on par with the PS3. From this new vantage point, Microsoft cut into Sony’s niche of high-quality, high-priced, exclusive games…while lowering the entrance fee.

What stupidity is this? How did PS2 'outclass' other systems by being incredible hardware? Or are they referring to PS3 which never managed to do this really either. For all intensive purposes, it's on par with 360 (despite being capable of more) in far was mostly inferior in it's first year. And MS didn't lower the entrance fee. They raised it, but Sony went nuts and released a $600 system that they still lost, what, $300? per sale on. While MS could lower price since they'd been out a year all ready. MS can take little credit for undercutting. Sony did most of that by themselves.

The problem isn't so much what MS did. MS stayed consistent and followed the path of the original Xbox targeting core gamers (with incredible hardware). It's Sony that didn't stay consistent. PS2 wasn't very powerful and while it had great AAA games it also had the mountain for shovelware s--t that Wii inherited this gen (and grew). Sony had the broadest base possible (at the time) with PS2. But they abandoned what made PS2 work to compete mano-a-mano with MS despite the Xbox only selling 20m and losing 4 billion.

THAT is the problem with the PS3. But Sony succeeded. They made a better Xbox and lost just as much. By trying to emulate MS they split the core and lost their casual. Nintendo scoop up all the casuals (and billions) and then MS got in on the act. PS3 is still the most core centric system. That is Sony's blindness. While the core audience is your backbone, the casuals are the meat (and the fat - but you want to be fat cats here). You can't exist without them.

If Sony is going to survive in this industry, they need to distinguish themselves from 720 (although it looks like MS is going to do the distinguishing) and need to offer something to entice the casuals back. Considering Nintendo, MS, Apple and Android are all fighting for this market, Sony will have to do something revolutionary to get back in the game. Otherwise, they'll have a very vocal, demanding and dwindling core base to try to live off.