Everybody knows the story of Nintendo's fallacy in the 90's with the N64 and the cartridge vs. CD shindig, but it's worth recalling here, if only for old times' sake.
Long story short, Nintendo didn't want to move to the CD format for its games, even though the benefits of the then-new format were undeniable. However, instead of moving on to the superior device, Nintendo was true to its beliefs (read: stubborn as always), and wound up losing an indescribable amount of marketshare. They still haven't recovered. There were many possibilities as to how and why Sony was able to topple the giant, but there is perhaps one that is more compelling than the rest: affordability. The games on Sony's suave little PlayStation, compared to those of the Nintendo 64, were cheap. And they were good.
If we were to simplify everything and translate this into a formula, it might go "good games + low cost = victory." If we then attempted to prove this theory with concrete evidence, we would point to Sony's dominance of the home console market, starting with it uprooting Nintendo.
Now, fast-forward to late 2004/early 2005, and Sony starts boasting about its new "cell processor" and its mysterious "Blu-Ray" somethingmajig. At first, there wasn't enough meat on these tidbits of information to even scrounge together a decent ensemble of rumor reports and brew up any real speculation. But if you move ahead to 2006, there are plenty things of things that can be deduced. Better still, other things are known for sure. Take this fact for example: Blu-Ray--one of Sony's key selling points for the PS3-- isn't cheap; not the players, not the discs. None of it. Gamers are already displeased in paying $10 extra for select XBOX 360 titles. So, if we're to assume PS3 software will be similar in price (a generous notion, considering how much they're losing on hardware as it is, not to mention the cost of Blu-Ray in itself), we can begin to paint a scenario in which the tables have not only turned against Sony, but they have been the ones to turn them.
Imagine the irony. With the PlayStation, Sony proved the relevance of affordability (among other things) and made 'PlayStation' the name synonymous with video-gaming. This was huge. Whether they intended it or not, cost-friendliness had become their unofficial secret weapon. And now, with their position as market leaders in more peril than ever before, they've handed that secret weapon over to two experienced, competent, serious competitors.
To be fair, it's impossible to say for sure what will or won't come to pass in the next generation of gaming, but some facts, proven by history, are impossible to ignore. Sony has faced criticism on Blu-Ray and their "cell processor" since they announced it, became the laughing stock of the gaming community after unveiling the PS3's motion-sensing controller--their "best kept secret" (read: latest hijacked Nintendo innovation), and did all this before even pinning down the price for the console. When they finally did, they shook their fanbase to the core in a bad way. The tremors are still being felt, and are occasionally strengthened by new reports of ill from the Sony camp. Since E3, the PS3 has lost at least one major exclusive title (Assassin's Creed), and have softened what grip it still had on the market after its European release date was recently pushed back to Q1 '07.
When the PS3 finally hits store shelves across the world, the only thing in its favor will be its brand name, and it will depend almost entirely on brand-loyalty in order to retain a respectable, profitable chunk of the market, let alone rule it. Even if Sony pulls it off and the PS3 is somewhat successful, the games and movies it plays are still likely to carry higher price tags than those of its competitors. And we've seen where that leads, haven't we?
Aim for the toes, Sony. Aim for the toes.