CouchMonkey: Very true. Which is why I stated that Japan is hungry for something new.
I think though that both the PS3 and Nintendo can really co-exist there. Basically neither system will be able to compete against the others games.
Nintendo's games will never be as emersive graphically and cinematic as Sony's. Yet Sony's games will not have the level of interaction, and divesity and creativity that comes with the new controller. Depending on what you desire in gaming those two systems can co-exist.
However, In America we are open to supporting more than one system, except this time the systems are TOO EXPENSIVE to support more than one, (unless the second is the Wii.) So I really find it hard to believe that all three systems will co-exist with realitive good hardware and software sales for all systems.
So the question is which will fall. And the easy answer that the analysists sometimes take is either Nintendo or Sony. But, Nintendo appears to be in better shape with such a unique look at gaming this generation...it will gather new fans, and bring old fans back for the system.
Xbox 360 is a sure bet will do better than the original. It has a great headstart over Sony, and by the time Sony has a good selection of truly great games, Xbox 360 will be hitting backing with its biggest guns available, namely Halo 3.
Sony, does have one card ups its sleeve....Blu-Ray Discs. If the format takes off and becomes the future standard of movies, then Sony's card up its sleeve will be a nice Ace giving Sony a set of Aces. However, if Sony's Blu-Ray loses or it takes years for people to desire a new video format, then the card is a Duece and worth nothing for Sony. In fact, it will help the competition even more, because Sony's finances will be tied up in the Blu-Ray dump.
The only question Nintendo has to answer is will people be willing to engage in a new next generation console, that doesn't graphically look next generation compared to the competition. I think the answer to that will be yes, but we will see in the future.