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Sony Computer Entertainment Europe released the official specifications for the PlayStation 3 console, which will not include the PlayStation 2's Emotion Engine chip, thus limiting the PS3's playback capability for PlayStation 2 games.

Some analysts see the move as a positive one for the company

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This is the n-th strategical disaster made by Sony's high management....

One year ago we harshly criticized Mr. Moore for having said that backward compatibility wasn't a priority for the XBox360 and, obviously, XBox user base wasn't as wide and as strategically important as Ps2's!

The situation that analysts don't want to see is that PS2 is still outselling PS3 and if this goes on for a couple of more years it will kill the PS3: Wii and XBox360 will keep selling and developers will invest only in these two platforms, besides keep developing and releasing new great games for the PS2 which has such a big user base. A simple game industry equation that everyone seems to forget at Sony: No excellent games + higher price = no sales.

The right strategy for Sony would be to stop PS2 manufacturing, make an effort to offer 100% backward compatibility in PS3 and say: "hey, you still want to play such great games as FFXII, Bully, Okami, Shadow of the Colossus? Sure, no problem, just buy a PS3!". In this way PS2 users will start saving and switch to a PS3 within 1 year. 

Please Sony, hire me as your President and I'll take you back on track! ;p

I keep seeing many of Microsoft's new ads all around.... WOW here, WOW there...... but.... why on earth are they advertising World Of Warcraft so much???

I have the feeling that most analysts and people in the industry are somewhat underestimating the "PS2 effect". The PS2 is still going very strong and selling many more units than any other console (it sold more than 4m units just in the Q3 of 2006!)
This is a very interesting data and shows that people keep buying PS2 over the PS3: the reason? PS2 is really cheap now and games like FFXII, Okami, Bully, Shadow of the Colossus etc. are even better than most of those currently available on PS3!
I do believe this is one of the main issues for Sony: even a huge portion of their fan base still prefers to buy a PS2 today instead of saving money and wait till they can afford a PS3 tomorrow.... (like the egg and hen question ;-) ) yep, I have the strong feeling that the PS2 is going to cannibalize the PS3 at least for one or even two years (as long as software houses keep releasing such great titles on that platform) and when it ends, it will be too late for PS3 to catch up with X360 and Wii.