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I don't think Sony is going anywhere.
1 - If Blu-Ray succeeds they will make a hell of a lot of money from licensing.
2 - Even thought Sony losses money on each ps3 they sell they make it all back in software sales.
3 - PS2 had over a 50% market share last gen. PS3 has that enormous market share to pitch to. I know heaps of people who have no real interest in video games but they all know what a playstation is, they don't know what a gamecube is though.
4 - I know people who bought a PS2 just because it had a dvd player in it. Many will buy a ps3 just because it has a Blu-Ray player in it.
5 - Only hardcore gamers actually read up about all this type of crap anyway. Most people will walk into the store and see a new playstation, "omgz it's the new thing! So powerful, very pretty" and buy one. PS3 will constantly be in high demand. Xbox360 has had it's time to capture people's attention before the 'new sony' came out. I don't think people are going to care about the xbox360 when the ps3 is out. I know someone who bought an xbox360 then afterwards heard about the ps3 and now wants one of them instead because it's more powerful.
Not that I want or could ever afford a PS3, but I think it's very premature to cast sony off already.
Once again though, the facts are there:
1) Blu-ray is already showing signs of decline. Sony can't get the bigger disks working (which was the only draw that Blu-ray had over HD-DVD), and HD-DVD is selling alot better at this point.
2) Software sales are key, yes. But if you can get the same software on a less expensive console, that's what the average consumer will do. Most companies are going 3rd party for simple business reasons. If they spread the love, they make more money. And if one console fails, atleast they have the others to live off.
3) Guys, lets face facts, Sony only won last gen for one reason: They had a head start and backwards compatibility. In hardware terms they were inferior, and had they not had the software titles to back them up, and the head start, they would have already lost. Which brings me back to reply 2) which shows that solid software backing for the PS3 may not be in the cards this generation.
Then there's the fact that this gen Xbox 360 is the one with the head start, already having a large game library while the PS3 on the whole has only even announced a handful of titles. And of course there's other factors as well, such as: Nintendo and Microsoft are both branching out, bringing more game series/genres into the fold. Microsoft finally has some good looking RPGs from prominent creators coming out, which was the only reason the system is really failing in Japan (that being a previous lack of Japanese oriented software titles). And Nintendo's stocks have reached a six year high, while Sony's stocks are already going down.
4) That's a good point. But it should be noted that rumor has it that Microsoft will either be releasing an Xbox 360 with an internal HD-DVD drive, or a new bundle where they sell the external HD-DVD drive with the Xbox 360 for roughly the same price as the PS3. Which brings the war of the formats into the video game front. And as stated above, HD-DVD (at the moment) seems to be winning that war.
5) Neither hardcore gamers, nor the casual consumer need to know these facts. Really the fact that Sony's losing a ton of money on every console they sell doesn't need to be known, as it's an inevitability. The fact of the matter is that people will buy the PS3, it will probably even be a hit product. But developers arn't pleased (and when devs arn't pleased, they don't develope *cough*GameCube**cough*PSP*cough*), and financially it's killing Sony.
So sure, go out and buy a PS3, I probably would too if they ever announce a game I want badly enough (KH3 probably being on the Wii means my only true reason has gone out the window). But in this case, they won't make money for over half a decade, and by then they'll realise that that killed them. So no, Sony's death won't be immediate, they'll probably think everything is going according to plan until they get 5 years in, then they'll see how negatively their choices affected them.