Since you're restricting the time frame to "since the release of the PS3" I can agree with you. I think they made worse mistakes before then, notably their utter failure to release decent dev tools for the Cell, but also depending on an immature and costly disc format (I see $599US as a consequence of this mistake, rather than a mistake in itself).

The PS2 had two major reasons for early success: FFX and the PS1 library. For some time, BC was that console's major source of good games. The same was true for the DS, PS3, and Wii at first, and it would have been true for the 360 too if its BC hadn't been completely botched. That's just what happens when a new console is released; building a good library of its own takes time.

The problem with the PS3 is that it cut off BC while it was still the PS3's major source of good games. They were using old and inexpensive hardware, and later on not even hardware at all, to implement BC. Yet they cut it off, ostensibly to save a few dollars, even though it's unlikely that the money saved by these moves was even significant. When you reduce your library by that much while failing to convince the market that what's left is worthwhile, you can hardly do anything but fail, and that is what the PS3 has done.

A lack of BC wasn't the reason for a price drop.  That's just when they decided to implement the removal of BC.

At that time, BC was entirely done by software emulation outside of the PS2's GPU, which barely cost over $10 to make.

Sony even admitted that the main reason for removing BC was to get people to "buy more ps3 games."

To quote the Wall Street Journal on the matter:

But, surprisingly (not really), it looks like most of the article has been removed.  Most likely at the bequest of Sony because of this self-damning comment Tretton made.  Here's more proof of what was said:

http://www.neogaf.com/forum/showthread.php?t=200326

And I even mentioned all of this in my last pararaph (though it was rather rushed, I'll admit), and it was one of the main reasonings behind my post.

Sony didn't remove BC to allow a price drop.  That was done with the drop to 65nm Cell, plus they just ate the cost.  They just used the "new low price" to justify the removal of BC.  And, like I said in the OP, sales of the more expensive BC SKU still took 60% of the sales back when the ps3 was at the top of its game back in June and July.

And I never said the ps1 owners might've bought a ps3.  I said that as owners of a ps2, they might be interested in buying a ps3 down the road if it had BC.  You basically missed my entire point if you didn't see that.

I have a PAL 60GB - it doesnt have EE so its equivelent to an 80GB NTSC, however, I think Sony should bring back the BC when:

1. They are profiting (which they are/almost are)
2. The PS2 is finally stopped production

I think they should make BC a standard eventually, I mean look at the PS2 library for crying out loud.

I think if possible though, they should just have software emulation - if its like a 1GB software emulation so be it. It is possible to do software emulation.

Everyone has said this already, but I thought I'd add my own anecdotal evidence and opinion to the thread.

The price tag was their biggest mistake. Had the PS3 been a slightly less powerful system with a cheaper price tag, and the overwhelming initial third party support of the PS2 days, I think people would have been more forgiving about the lack of backwards compatibility.

Also, I never had a PS2. Blasphemy I know. I was poor, ended up with a gamecube and stuck with it. Though I did play a lot of the best PS2 games with friends.

I was going to get a PS3 this gen, until I found out how much they cost. I still might get one someday, but I'm currently still poor, and ended up getting a 360 because of the cheaper initial price, and the fact that it has more of the games I currently want.

Poor good ol' Playstation.

Not to go into too many specifics I disagree . Sony's biggest faliure by a mile was it's lack of cost considerations . The blu-ray tech , cell proccesor were put into the PS3 with little regard for the competition or the consumer and they suffered for it.

Every time the PS3 received a price cut it experienced sales boosts far greater than that of the 360 . The PS3 managed to outsell the 360 for long periods of time with as much as 2X the price point and with far less software support.

For the average person the PS3 isn't easily affordable , that is the biggest mistake Sony made.

I can't imagine that people would buy 360's especialy now because the PS3 lacked the PS2's libary , the 360 also doesn't have the PS2's libary so that isn't much of a drawback.

The lack of "BC" sounds like an anecdotal argument , it's more like that's the biggest Sony move you disliked . I imagine the average person who buys the PS3 cares more about what PS3 games they can play as opposed to what PS2 games they can't play . But if the average person is unable to easily buy a PS3 then whether or not it can play PS2 games is irrelevant.

Hmm maybe I did go into specifics lol.

My Argument Sumarised.

(1) . I think the consumer doesn't care about BC as much as you think they do , they buy PS3 to play PS3 games for the most part. this is also evident in the decline in PS2 sales.

(2) . The PS3 experiences crazy sales boosts when ever the price is cut and has outsold the 360 with a high price point and less software this means that.

-There is more desire for the PS3 as it has sold more at a higher price point.

-The PS3 isn't as ( or wasn't as ) dependent on strong software support as it still sold decently in dry periods.

(3) BC is irrelevant if some one can't afford a PS3 in the first place , some people just couldn't justify £425 on a gaming console even if they could afford it.

(4) Lack of BC is a loss for the PS3 but I can't imagine it helping the competitors , especialy now . With majour titles the PS3 offers major incentives as a stand alone device.

sony loses money, sony sees a quick way to lose less, sony removes bc. good idea imo.

bc will be back, maybe E3 we see a new sku come out. but i dont expect it to be back until a price cut, or a little while after the price cut to try and keep momentum.

other than that 'upgrading' to a ps3 makes perfect sense. because you are infact upgrading to a better system. now you dont have to get rid of your ps2 in this upgrade. that is the choice of the consumer.

Agreed. The overall stripping-down of the PS3 is horrible. No BC, as well the removal of the multi-media ports - flash, SD, 2 USB ports - is insane. I consider myself lucky to have been able to buy a 60-gig before they vanished. Along with 30 PS3 games, I've bought 6 PS2 games. It's a nice option to have. So is removable-portable memory storage. Just stupid, but apparently nessessary moves by Sony. And the USB reacharge cable for the contollers is an overlooked issue. It's so short I have to move my couch about 4 feet forward to play while recharging.

Wow! i never thought i could disagree with you more.  It was a smart move , not good for the consumers but most definately rewarding for Sony . Why would they want to cut out the one thing thats been treating them so well for so long ?

The BC was very important to me, since I have around 175 PS2 games and my PS2 was approaching death's door.

As a consumer, yeah the removal of the BC was a bad idea, but it's not a bad one from Sony's perspective. It was cutting into the sales of the PS3 software, since the PS2 software library is obviously superior. I understand the inclusion of BC at first, since the library for the PS3 was lacking at launch and for about the first year, but the increase of quality made Sony decide to cut back their losses on the PS3 hardware and it seems like BC was something that wasn't needed anymore.

Agree with OP 100%...