I was in System Wars tonight (as usual, a guilty pleasure), and someone created a thread asking what we would do to turn around the PS3 if we were a major executive at SONY.  I thought I'd share my response on my blog as well:

*long winded*

First, Axe BR. It adds too much cost and I don't think it is a justifiable expense. Make it an add-on like the 360. This would be very painful, but so is surgery.

Second push the Cell much harder in other products (SONY or other manufacturers)-with economies of scale costs go down. Even if you're raising the manufacturing costs for your other products you can recoup over time.

Third use these savings to drop the price to compete more directly with the 360 ($350/$450 seems close enough to me).

Fourth charge for PSN, but undercut MS (maybe $30/year). Use the $$$ you rake in to further reduce losses/console while expanding capacity & capability.

Fifth reign in your PR department. Foot-in-mouth disease won't turn off 'normal' consumers immediately, but there is a trickle effect if you lose the support of hardcore gamers. It won't happen over night, but I think we can all agree it has been happening.

Sixth court developers like you want to marry them. You need them more than they need you in a 3-way console race (4-way counting PCs). Let them know they're important and give them the best development tools you can possibly create.

Seventh decide what you want to do with the PSP. I'd kill it and swallow the losses, but if you want to keep it going then make a pack in bundle ($599 for the premium PS3 + PSP). Leverage one to help the other and vice versa. Call it the 'total gaming solution' pack.

Eighth leverage your HDTV products with a rebate. I'm thinking "Buy a total gaming pack and any SONY HDTV and get a $100 rebate." Better yet, make it a coupon for 2 games, a game and a controller, or 2 controllers (or whatever).

Ninth find some way to get out of the trap you're in re: LINUX. Sure its cool for consumers, but can you imagine what the Pirates will be able to do in 6-12 months? Everything above is predicated on recouping costs over time which can't be done if your software revenues are in a death spiral.

*finger cramp*

Wow, this was actually fun.  GJ, TC.