Sony could have and should have followed MS' example and made the BD player an add-on attachment. Then their gaming system could have been launched 6 months earlier (it was delayed because of the BD diodes) at a much lower price point and it would be a heck of a lot more competitive today.
And they could still have released a BD attachment for relatively cheap for those who wanted it. The attachment would still have been the best BD buy and they would still have won the format war, since all they needed was relative parity in unit/player sales and they won the day through their movie studio strategy anyway (e.g. even if they only sold half as many add-on drives they still would have won)
As well, they made the decision to include a standard HDD so they already had a storage advantage over the 360. And they wouldn't have needed so many installs anyway because most of those are directly related to the BD read/transfer speed.
The only thing they would have given up is the potential multi-disk issue (see my comments on a standard HDD) and the security/scratching aspects of the disks themselves. Minor value reductions compared to what they have given up because of timing and price.
Sony's strategy was disastrous and poorly thought out from the beginning.
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