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Well the gamecube had lots of power, small game sizes, ok third party support, a childish look, a great price, and no non game features.

At the time I would have assumed the PS3 was going to continue the success of the PS2.

Can't compeate head on with that, so a different strategy is needed. I'd have made two systems. Release a wii like system asap that is super casual and cheap, while in a few years releasing a "big boy" system that could do better graphics than PS3 and focus to the core. First party games would come to both systems.