"Exhibit A: the PSX. Released in Japan in 2003, it was designed to appeal to a broader audience than the hard-core gamers attracted to the PS2. It comes with a 250-gigabyte hard drive and a simple Web browser and plays games, movies, and music. But the PSX bombed as consumers were confused by the hybrid and put off by its $800-plus price tag."
There is a fear that the system may prove more popular as a multimedia device, like the PSP, resulting in a lower attach rate for games, then lower licensing income. With the expected cost of the console, that could prove disastrous. "But since the PSP also plays music and movies, fewer people are buying games designed for it. In the PS2's initial year on the market, players bought more than three games for each machine that was shipped. For the PSP, that ratio slipped to 2 to 1."
Engadget points out that BusinessWeek's writer reveals that the PS3 "boasts a huge hard disk to store photos, music, and TV shows." Although the bundling of a hard drive has not been announced, it was widely considered to be an optional feature.
BusinessWeek has a companion story about Sony Computer Entertainment chief Ken Kutaragi, titled "Can Sony's Kutaragi Score Big?" It covers his rise to the top of Sony, his subsequent return back to the games division, and what's at stake with the PS3.
[Thanks for all the tips]