The PS3 is in 3rd place because it was (and still is) more expensive than the Wii & Xbox 360 and it was released a year after it's direct competition (Xbox 360). This has trapped it in a vicious cycle where people won't buy it because of cost & smaller library and developers won't create games (especially exclusives) because of the smaller user population. In order to succeed, the PS4 must be cost competitive with the Xbox 720 and be released for the same Christmas season (and be available - no shortages).
Therefore, anything which adds cost or development time (HW & SW) must be dropped.
The first thing to go is backwards compatibility (including software emulation). This means Sony can start with a clean slate from a hardware & controller perspective, which is far more valuable than any hypothetical sales they may get by supporting old games.
There should also be two models:
$300 - $200 with a DVD drive and a 1GB SSD
$500 - $400 with a Blu-Ray drive and a 100+GB HD
Yep, drop the Blu-Ray as a standard feature. Again, one of the problems with the PS3 is the cost of the system, partly due to the Blu-Ray drive. And although some people (myself included) may have bought a PS3 because it was less expensive than a Blu-Ray player, this is no longer the case. Sony also no longer needs to use the Playstation to push the Blu-Ray format. And although the cost of Blu-Ray has gone down, going with DVD will reduce costs even further.
Heck, to further reduce costs, don't include DVD movie playback in the budget model (like the Wii). This will reduce licensing costs. The Blu-Ray model could also include the capability of playing back other video codecs (which the budget model wouldn't include again to reduce licensing costs).
And, as seen with the Xbox 360, there's money to be made in upgrades and add-ons. (Especially with proprietary connectors instead of standard SATA.)
But other than the drives, the two models should be identical with the same ports as the PS3. (Although maybe put in a Memory Stick slot instead of one of the USB ports, and give the USB port power even when the system is off.) Also stick with the internal PSU instead of a brick.
In my next entry, I'll cover the controller before diving into the CPU & GPU guts.
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