No they're not failing at all. PS3 is nearly profitable right now, so they're definitely achieving their goal. PS2 is still very succesful. PSP sold 50 million... PSP Go is coming... They're not failing at all, except on fanboy websites. The recession hurts, but it's the same for microsoft.
As soon as they can, Sony will change their strategy to 'gain market share' by cutting the price, and then you'll be amazed by the sales, while if you bothered looking before last september, you'd see it already happened and PS3 was killing the 360 in sales (WORLDWIDE SALES) before the price cut.
I think MS goal with the 360 early release was to kill the PS3. While they succeeded in taking a good market share, they didn't succeed in this goal. PS3 sold what ? More than 20 million, and only 8 million less that MS before the first price cut... This particular goal is a failure.
I suspect that's why you see such things like Avatars, Natal, 1vs100... Everything casual. Mostly, MS will try to take some of the Wii crowd now. On the hardcore exclusive content side, they just can't compete with Sony 20+ studios, they just don't want to buy studios, that's not their strategy...
The rest, failure / doom threads, that's in your head... PS3 and 360 are both successful. Part of your mistakes probably come from the fact you live in the US, where the 360 is dominating. The rest of the world begs to differ though... Here in Europe, PS3 already has the same installed base as the 360, so any PS3 price cut would put the 360 far behind, leaving only the US as a dominating country for the 360.