The PS3 is a failure. It's way too expensive, especially in this current market where everyone is tightening their belts, and it's been losing market share since its release. Also, Sony may never fully recover the cost of the PS3 (it's still selling at a loss, as opposed to the Xbox 360, which breaks even, or the Wii, which generates a small profit for each console sold). Sony's in a pickle, no doubt about it. So what should they do? I propose they cede the market completely.
That's right: I think they should just stop making PS3's and cede the home console market, cut their losses and get out before their lack of profitabilty destroys them. That doesn't mean they have to stop making games, though. Sega's Dreamcast died off, but Sega didn't; it's a pretty successful developer right now, and has released some really nice games (Sonic aside). If Sony announces a refresh of the God of War series, developed for the 360 (and begins work on bringing GoW3 to the 360) it could help boost the 360 enough to perhaps compete with the Wii.
If Sony leaves the market now, it'll be OK. Sure, it's wasted a lot of money on the piece of junk also called the Playstation 3, but Sony's not a game company like Nintendo, who could've well gone out of business if the Wii had failed. Sony also has its computer line (VAIO's etc) and its TV line (the Bravia). They're still profitable, not to mention it owns the only hi-def format, the Blu-Ray, which although it isn't selling so well right now, is a potential cash cow in the future. So, Sony could afford to pull out. Sure, it'll hurt in the short run, but they'll be glad in the long run not to have that money-hemmoraging albatross around their neck
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