I agree more with Newell. The PS3 is a disaster.
Sony is doing exactly (not exactly, but close) what Nintendo did with the N64. There wasn't one specific reason that made the N64 second to the PS1, however, a whole series of events.
Nintendo and Sony had a falling out during a joint project to create a system. They cancel the project and go their separate ways. Sony decides to create a new game system using current technology, while Nintendo decides to create a system using old technology. Sony's system (PSX) uses CDs as the storage media and Nintendo (N64) stayed with their old format, the ROM cartridges. The ROM cartridges cost up to $25 to produce and CDs cost about 5 cents, costing developers too much money to produce for Nintendo's system. Third party developers leave due to production costs along with other issues, i.e. cartridge space vs. CD space. Sony becomes market leader due to product innovation and cost reduction for developers.
Now in this generation, Sony decides to stay with their tried and true method of making game systems: push the computing power and use very advanced media, Blu-Ray. Nintendo, on the other hand, creates a new way of playing and marginally raises system specifications. They also use current available technology for media, DVD. Development costs for the PS3 are much higher due to new and advanced system architecture, resulting in tougher programming requirements, HD output, along with higher prices to print to Blu-Ray Discs. Development costs for Nintendo's system is a great deal lower due to familar system architecture, no HD output, and using a cost effective method of storing data, DVD. Third party developers will only need to worry about the new controller, but ideas and imagination cost very little. Great ideas have very high return. Now third party developers are coming back to Nintendo. Nintendo will become market leader due to product innovation and cost reduction for developers.
Sorry I don't have any links to prove any of the above is true. But if you have been around videogames long enough, then you would already know most of this.