What now? That's Halo 3 on 360.

That has nothing to do with your statement that N64 had PS2 graphics. (Hey, you know that's a screenshot from a PS2 game)

I'm trying to think of any way that I could make his statment seem logical at all but I can't find one...

 I don't think Sony was arrogant, I think they were blindsided. They probably had a plan that included MS and Nintendo launching in 2007 (2002 + 5), so they figured that they could launch as late as 2008; if that had happenned they would have had a very consumer friendly price point, and would likely be no worse than tied with the wii. Then out of left field MS announces they will launch in 2005 and suddenly Sony doesn't know what to do.

The day MS announced the launch date of the 360 was likely one of great panic for Sony. They probably had no idea what a PS3 was going to cost to produce at that point because they thought the lauch was so far away nothing was being done in terms getting factories set up; though they likely did know it was going to be expensive.

So Sony was left to do one of the following

1. Launch on schedule, giving MS a three year head start
2. Lauch early, giving MS and Nintendo a huge price advantage

A possible third option, redesign the PS3, while possible, would come with huge unknowns, not the least of which would be that it might end up lauching even later than their original plans.

I guess what I am saying boils down to NVidia killed the Playstation brand.

It is so simple Sony's PS3 was too late and too expensive.

Wii won because it increased the LCD TV sales. snap, crash "mom the tv doesn't work anymore!" :D (just kidding)

@astrosmash:
I partially agree with jellyfishprince.
Wii too was launched later than XB360, but nevertheless kicked the crap out of it.
Maybe a third option for Sony could have been to revamp PS2 as needed (for example adding HD output with upscaling) and launch PS3 with no hurry at all, having so time to eliminate shortcomings like too little RAM too.