I don't play many video games – I actually do own a PS2 which I've let my brother borrow for about a year – but I was following E3 rather closely, mainly because half of Digg's front page stories over the past few days have been stories about E3 and because the competitive landscape has become quite intriguing. The whole next-gen console affair is very close to being a soap opera, especially for Sony, which has had to cope with delays and doubts as to the capabilities of the PS3. The essential reason for the delay might be Sony's desire to include a Blu-Ray drive on it and therefore give it an advantage in the DVD format 'war' (assuming there will be a non-inconsequential format war) but the PS3 is slated to come out in November, well after Blu-Ray players will become available (I'm going on memory here so I could be wrong). Sony has proven itself very good at inflating expectations for upcoming products so I don't think the payoff for the delay will be in the technology, and I do not foresee the PS3 will be technologically much better than the 360. Sony has also managed a good amount of ill will regarding how it treats its customers (think rootkit – yes, different division but same parent company) and tries to enforce its proprietary standards (atrac) when the market doesn't want them. They're betting that brand loyalty will push the PS3 to become the #1 console, but it seems to be more than that: it's almost as if they expect people to buy the PS3 as the default choice. This should not be surprising as Sony has been quite arrogant in the past and combined with Sony's misdeeds might be enough to ensure I do not buy one out of priciple (not I was necessarily going to buy one at 500 bucks, but still).
Where does that leave Sony? They've garnered a great deal of bad press over the PS3, and I strongly doubt they'll be able to exceed expectations about the PS3's technology. I don't know what they'll be doing for the online component, but they'll need a good product to compete with XBox Live. I expect the PS3 to become a lead weight around Sony's neck. They might come out on top in terms of pure numbers, but they will not maintain the type of dominance over the game market they had with the PS2.
The XBox 360 launched months ago and has a rather big head start, which Microsoft does not appear to have been able to take advantage of owing to shortages of the console in stores. Also the first incarnation had no next gen DVD capabilities, but I believe it was a good business move nonetheless. Whatever early lead MS can muster for the 360 is more important, IMO. The really interesting thing seems to be XBox Live which some people feel could grow into a platform to offer greater media connectivity in the home, and Microsoft would have a coherent strategy for turning the 360 into a real media device instead of just a gaming device. We won't know until Sony's offering is finalized.
So what then of the 'Wiivolution'? They're everyone's second choice, according to MS and Sony. MS and Sony seem to believe that this console war will be between them, but I suspect it will a lot tighter than last time around.There's a lot of goodwill that Nintendo's built up because they are perceived to be more innovative, and although some of it feels like mindless cheering for the underdog, Nintendo seems to have been the only company to make a concerted effort to extend video gaming to casual gamers and to keep prices reasonable. They'll catch any segemnt of the market that wants to play but can't fork over hundreds more for the other two systems or has no interest in the hardcore gaming aspect.
Personally I suspect that the Wii will inspire far more interest than either the 360 or PS3 among large segments of the technology buying public and for that reason I expect this console to do very well. At the end of 2007 I expect to see parity in the market (in terms of number of consoles sold). This will clearly be step up for Microsoft, a rather large problem for Sony (which is unlikely to maintain profitability in their games division) and will make Nintendo the big winner from this round of console wars.