There is no one who can argue that the war for the consumer in this console generation has been clearly won by Nintendo. But while Nintendo continues to rack up amazing sales for their Wii console Sony and Microsoft are fighting a cruel war for their consoles: The PlayStation 3 and the Xbox 360.
For Sony the most important focus became to win the HD war that was raging between the two competing formats: HD DVD and Sony backed Blu-Ray. The inclusion of a Blu-Ray drive in the PlayStation 3 was a brilliant move in this war, but made the PlayStation 3 expensive and difficult to manufacture. Combined with the expensive and likewise difficult to produce Cell processor the price of the PlayStation 3 was way higher than that of Microsoft’s Xbox 360, while also lacking the ability to output enough numbers of SKU’s. However, what Sony forgot in this battle was the games. A few exclusives – especially compared to the Xbox 360, have ensured that a lot of faithful Sony fans shifted sides. Game developers also preferred Microsoft’s wellknown Xbox platform for developing, compared to Sony’s new Cell-processor, that required a completely new way of thinking and heavy investements of time from the game studios. The outcome of this strategy was that games was now developed on Xbox and ported (often poorly) to the PlayStation platform afterwards. Adding to the trouble was the fact that backward compatibility was less than Sony had promised – which was a big problem as the PlayStation and especially the PlayStation 2 had a lot of faithful following. All these factors played their part. Suddenly Sony was no longer the sole leader of the console scene, but is still tracking behind Microsoft and especially Nintendo. In this generation Sony wanted to win the HD war and forgot about the games and especially the developers.
Sony didn’t see Nintendo as a competitor. They only focused on graphics – not on gameplay. That was a big mistake. Games often sell on their graphics, but last on their gameplay – only a good gameplay will ensure a classic among games. Nintendo focused on gameplay and an entirely different audience, not the hardcore gamers that both Sony and Microsoft aimed for – but the casual gamer… and won big time! Now they are suffering on two accounts, however. They didn’t get third party developers behind them – and apart from Nintendo’s own titles, which were of good quality, the games that did hit the Wii was showelware. Bad ports and lausy gameplay with no depth whatsoever. The other problem, which is beginning to haunt the Wii is the lack of good graphics. Developers are abandonning the platform because of its limitations and because only Nintendo sells well on the Wii. When gameplay isn’t good people go for graphics – Nintendo can offer none of those at the moment… Even though the Wii is still selling good Nintendo have lost the gaming audience and have only the casual gamer left – which will hurt them a lot in the next generation. Nintendo was too fast in becoming, like Sony in the last generation, arrogant in their success. I think what Nintendo needs these days is a good “Wii-ality Check” 
The third party in the console war, Microsoft, has had a rough start with the RROD-problems and became the difference between Sony and Microsoft. Sony betted on the hardware, but Microsoft betted on the software. Both companies did what they have always done best. Naturally both companies spent entire fortunes on spinning both their hardware, their sotware, their platforms and their sales. Sony wasn’t ready for as serious a challenger as Microsoft had suddenly become. Microsoft on the other hand was first out the tube a full year before Sony and Nintendo and got a good headstart. This would later become highly important as this allowed Microsoft to improve their design, cut down production costs, lower prices faster and especially gather a consumer base, which is what developers look for in a platform. This got the third party developers onboard and a few years into the war it is apparent that Microsoft won the third party war with their HD console and are now cutting the prices because they can afford to. Furthermore their game attachment percentage is way higher than Sony and astronomically higher than Nintendo, which is what gaming consoles are all about.
In terms of network playability Microsoft was lightyears ahead of Sony’s PSN with their Live! services and Nintendo has barely to get their console online yet! This is also important for players – because players recruit more players to a platform and help them form their opinion.
Now the war for value is on – Microsoft already have the developers, the titles and the best online service… All with the lowest price point of the three consoles. All these factors mean that Sony is too far behind ensuring that Microsoft is now outselling Sony 2 to 1 – even though they entered the game a year earlier…
Sony might have made the best Blu-Ray player on the market this generation around, but Microsoft won the gaming platform. What Sony is left with is an all too expensive gaming console with too few titles and a good HD player for a format that is about to die before the next generation anyway. Wrong bet, I suppose!
My guess is that Sony is preparing a price cut. They simply cannot let this continue. Every day Microsoft improve their user base compared to Sony’s the developers get another reason to publish games for that platform. What Sony needs to remember is the effect they themselves created with the PlayStation 2. When your friends got a PlayStation 2 that’s what you want as well!
The great question here is what will Sony do if Microsoft keeps cutting the price of the Xbox 360?…