Right now, we are still in year 1 of this generation of consoles. It's not over yet by a long shot. Compared to certain other systems, I wouldn't expect the PS3 to be replaced by the next generation for a longer time then the competitors will.

Sales will obviously increase quite a bit and hold onto the increased sales throughout the year and potentially end up with even more sold this holiday season then we would have expected it to do before the reality of the $399.99 PS3 to come out this year. How much will it increase? I guess we'll see how that shakes out soon. MS sold 11 million (approximately) at the $400 price point before they dropped the price down $20-50. It goes to show that there is a market that can do quite well at the $400 level. Once the games come out that people want, it will truly pick up even more.

There is no way on God's green earth that I would pay $399 for a Playstation without a hint of backward compatiblity ...

@madskillz

Please lets not ruin the fantasy for them. Almost all of them seem oblivious to the fact the rumor specifically states no backwards compatibility. Yet some of them seem to think there will be some sort of emulation. That is a serious point you made who will buy a Playstation 3 that will not play games from the previous two machines. Supposedly even the hardware for emulation is being removed.

Dodece, I think PS1 games will still play. As far as I know, PS1 emulation is software only.

I think new SKU will result in close to double the sales, with sales staying stable or even increasing towards the holidays.

After the holidays things will start to cool down, even with all the big game releases. It will level off around 40 K with occassional bumps due to big game releases.

gorgepir: Yes, PS3 has already lost. People don't believe it, but the war was decided when Nintendo and Sony came up with their respective business plans 2-3 years ago. Nintendo's plan was good, Sony's was bad. The best Sony can hope for at this point is to come back and steal second place from Microsoft thanks to constant price-slashing.

Edit: actually, the best Sony can hope for is for Nintendo to really drop the ball on its "blue ocean" business plan.  If Nintendo and third parties fail to come up with more interesting products along the lines of Wii Sports, the "Wii fad" argument could come true.

I wonder if they removed the backwards compatibility intentionally, regardless of price. What I mean is that because the PS3 will not have the best BC many PS2 owners may buy a PS2 in the coming years to tuck away in case their system fails. I am one of those people, actually, since my PS2 is over 5 years old and has seen better days. This could help with their 10 year cycle they are shooting for. Strange that this comes from the company who brought us backwards compatibility.

LOL ... thanks for my morning laugh. I know for a fact that the hardware emulation - the Emotion Engine - was last spotted in the PS3 60gb. FTR, the 80gb has software emulation, not hardware, and I can bet you my Wii that the 40gb won't have hardware either. It's a $27 chip that made the machine worth something, IMHO. Without it, you have a machine so seriously gimped it's not funny. I would actually pick up a 60gb, even a 20gb PS3 if I felt it was worth the price of admission. However, based on the lackluster lineup I've seen thusfar, I would rather pay bills and get caught up financially than dropping $500 for this gimped system.

I don't think backwards compatability will be a huge problem for the new PS3...I've always felt that it was a nice but unecessary feature. Granted, all recent "winners" on the market have had backwards compatability - Wii, DS, PS2, and GBA - but I think that's a coincidence.

I could be wrong though. I guess we'll know when we hear how well the 40 gig PS3 sells.

@Madskillz

Knowing that most gamers who will buy a PS3 already have a PS2, I think they would care less if the 40 gig has no backwards compatibility.

The 80GB PS3 still has hardware emulation for the PS2's GPU. The Emotion Engine was removed but the Graphics Synthesizer is still present. The 40GB model is supposed to be without both the Emothion Engine and the Graphics Synthesizer. So unless they makes some serious upgrades the current software emulator won't have any backwards compatibility on the 40GB PS3.