I don't want anyone reading this article to think that I find Microsoft some kind of crazy genius company. Sony's current situation is mainly of their own making, but their situation has been severely aggravated by Microsoft's 2005 release of the 360.
As I've claimed before, the two key elements of the PS3 are the Cell processor and the Blu Ray disc drive. These two elements were supposed to be strengths of the PS3, and help Sony as a whole become a stronger company. While Cell is not the greatest processor for gaming (MS is right about that at least) it is very well designed and is going to produce great game graphics (better than the 360) despite the fact that it's better used for other things (like the protein folding program that Sony announced earlier, it's the perfect thing for that). While the old spring release date may have been optimistic for Cell, it was far from impossible.
Blu Ray has been a part of the PS3 for quite some time, although not as long as Cell. The reason Sony added in the player was to give Blue Ray a boost through sales of the PS3. Yes, it has more storage space, and yes it plays Blue Ray movies. But are you willing to pay $200 extra for that? I'm not, and from all the complaining, I suspect few people do. A year from now, sure, if the price drops. And that thought is the key to this essay. A year from now, and if the price drops. Wouldn't Sony be sitting pretty if they could release the PS3 at $500, with only one SKU? If they had waited a year they probably could have.
The reason they can't is because Microsoft was so eager to be first in this console round, they released their system in 2005. Long ago, when the inclusion of Cell and Blu Ray were planned, the next console cycle was years away. Sony had an unquestioned control of the game market, so they figured they could wait until the other console makers released their systems to put out the PS3. 2006 was the obvious target date because the Xbox and the Gamecube were out in 2001, and there are generally 5 years between systems. This should have given Sony enough time to get their new technologies locked away and into their system.
From Microsoft's perspective, Sony was looking to get most of the repeat because they were dominant last round. If MS gave Sony an unanswered Christmas like they did with the PS2, Sony would again totally dominate the console landscape. Microsoft was determined to be first this time, or at least launching at the same time as Sony. They targeted 2005 for the 360.
So, Microsoft announced November 2005, the world was shocked. Sony then pulled a very typical Sony move. They sank the Dreamcast with little more than expectations for the PS2, and they hoped to do it again to the 360. They announced a spring 2006 launch date. While I'm sure Sony wanted to launch then, they really had no idea if they would be ready. They just wanted to draw attention away from the 360. Sadly, Microsoft is not SEGA. They have more than enough money to fight the console war, and the Xbox was definitely not a failure, so Sony wasn't really going to hurt the 360 much by their usual deception tactics.
By the time the 360 actually launched, Sony knew that spring was a pipe dream, but announcing would only drive people to buying 360s, so Sony waited as long as possible to announce the "delay" of the PS3. People started to wonder if the PS3 was in trouble because launch time was approaching and there was no info about the PS3 trickling to the media. This wasn't 2000. The quick access to information provided by game news sites and the ability of the average consumer to spin conspiracy theories on forums fed doubt that Sony did not (and I suspect still does not) understand.
Why was the PS3 not ready? Cell was progressing slower than expected, but I bet that Sony could have eaten the cost of very low yields and still launched. Blue Ray was way behind schedule. Both Blu Ray and HD-DVD were being delayed by debates over the security standard. Sony was in a pretty hefty bind. Blue Ray was fixed into the PS3. They'd been trumping it up for a while, and Sony management needed it in there to ensure Blu Ray the win over HD-DVD. Sony wasn't too concerned about releasing a year after the 360, many people were more than happy to wait, especially because the PS3 was going to be better than the 360 in the graphics department, so Microsoft would have a hard time selling their unit once the better machine came out.
This is where the Blu Ray delay really started to kill Sony. Because both HD-DVD and Blu Ray were delayed, production started much later than expected. The lack of manufacturing experience with Blu Ray drives added to the cost of the PS3. The PS2 had sold big in part because it had a DVD drive. But DVD drives hand been in manufacture for 3-4 years by the time the PS2 came out, not 3-4 months. The added cost was going to come back to haunt Sony.
Nintendo wisely realized that if they sold their console on a unique idea and for much less, they would put themselves into a different market all together. Sony did the same thing. The PS3 and the 360 aren't in the same market. the price difference it too large. So people asked themselves is what the PS3 giving me worth $200 more than what the 360 giving me? If you want a Blu Ray player, yes, but if not, it's not worth it.
If Blu Ray had been in production for about a year, the PS3 would be $100 less, easy. Then it would be a whole different equation. I'm not going to dwell on Sony's PR blunders, you can read about those anywhere.
The Final chapter of this sad tale is the delay of the European launch and a reduction of units available at launch due to a shortage of Blu Ray diodes. Again, if they had been making Blu Ray players for a while, they would probably have ironed out those manufacturing problems. They realized they weren't going to have nearly enough units, so they had to delay Europe further. This presents the nightmare scenario they couldn't allow. Two unopposed holiday seasons for the 360.
The second one is especially hurtful because Microsoft will have a full supply of units this time around. No shortages for 360s. Announcing it so late is a major slap as well. The faithful stayed through the high price and bad press, waiting for their systems. They've been saving their money (cause not many people can just buy something so pricey) and now they have to wait 5 more months so Sony can get their act together?
To really understand how Microsoft really screwed Sony, imagine if they had released the 360 this year. Sony could have launched in all territories in the spring, maybe even chopping a hundred off the cost of the unit. Buy fall 2007 they definitely could. The Blu Ray player will be more of a draw then too. Frankly, I predict that Sony might outsell Microsoft in 2007, unless MS cuts its prices too (and they'd be stupid not to).
The real loss for Sony is the people who will buy a 360 and a PS3. They'll probably buy a 360 now, and wait for a price drop or the game they're waiting for (FF13, MGS4) to come out to buy a PS3. I plan on waiting.
Epilogue: I did a lot of unfounded speculation and analysis, but I'm
pretty confident I'm right. Now I'm going to go way out on a branch. Sony has
probably been working on the motion controller for a while. Ever since they got
into the lawsuit with the company sitting on the patent for controller rumbling,
I suspect Sony has been trying to find something to replace the rumble. I doubt
they were serious about the motion sensing until Nintendo showed their hand and
everyone seemed to like it. Sony hoped to win the patent dispute, or (this is
just my opinion, not fact, don't quote it as fact) bankrupt the company through
endless costly litigation. That's how they crushed Bleem back in the day. Bleem
won most of the issues in court, but ran out of money. Sadly, Sony could not
bankrupt the company because Microsoft decided to send them a fat $200 million
(I'm not sure on that figure) check to use rumble. Thus Sony was doomed to either
pay up (which their pride will not let them do) of abandon rumble. At that point,
Sony knew of the positive reation to Nintendo's motion sensing controller, so
they decided to go with the motion sensing they had previously tinkered with.
