(FORTUNE) - If Sony suffers any more missteps in bringing its PlayStation 3 video game console to market, its entire consumer electronics business strategy could be in jeopardy.

Now delayed until mid-November, the PS3 is more than just the next generation of game machine for the $26.6-billion-a-year video game industry that Sony dominates. It's also the centerpiece of Sony's (Research) plan to own the global standards for high-definition video and consumer-data storage and to create a common microprocessor platform that will enable Sony products to share music, video, and data seamlessly, thus becoming the master controller of the digital ecosystem.

But the Blu-ray Disc high-definition DVD player and the Cell microprocessor, the heart and brain of the PS3, are expensive to make, forcing Sony not just to delay the PS3 to the brink of the 2006 holiday season but also to price the basic and enhanced PS3 consoles at $499 and $599, respectively, much higher than any previous game machines and at least $200 above their next-generation rivals, Microsoft's (Research) Xbox 360 and Nintendo's Wii.

Analysts at Merrill Lynch calculate that the Cell microprocessor costs $230 to make, and the Blu-ray optical drive about $350. Along with a hard drive, memory chips, and other costs, Merrill Lynch says, Sony's bill of goods for each PS3 could be more than $715.

If those numbers are correct - Sony declines to comment - and if Sony hits its target of shipping four million PS3s by the end of the year, Sony could lose close to $1 billion this year on the hardware alone, adding to huge costs for PS3 development and marketing.

Despite the losses, Sony could win big by populating the world with millions of Blu-ray high-definition DVD players, tipping the advantage to Sony in the battle to establish Blu-ray as the global standard for next-generation DVD systems, over the rival HD-DVD format supported by Toshiba and Microsoft.

Microsoft executives are gleeful at Sony's delays and high pricing for the PS3. Bill Gates says his company will have sold ten million Xbox 360 systems by the time the PS3 and Nintendo's Wii reach store shelves.

Conceding that the PS3 is "very expensive," Ken Kutaragi, head of Sony's games business, told a Japanese Web site earlier this year that he expects "consumers to think to themselves, 'I will work more hours to buy one.' We want people to feel that they want it, irrespective of anything else."

He has also said the PS3 is "not a game machine." Rather, he says, it is a "machine with supercomputer calculation capabilities for home entertainment."

If Kutaragi-san's calculations are wrong, the big game could be over. If he's right, Sony could once again become the world's dominant consumer electronics giant.

As more technical details of Sony's upcoming PlayStation 3 leak out, it appears that the videogame console is going to be underpowered and difficult to program, according to the Inquirer, largely because of the way it handles memory. The main selling point of the PS3 is its Cell microprocessor, developed at a cost of billions of dollars by Sony, IBM, and Toshiba to deliver breathtakingly realistic graphics. But in reality, the PS3 may not be able to deliver the promised performance. PS3Portal noted earlier this year that adding support for video chat and other interactive features will take away some of the processing power available for rendering game graphics.

And if the graphics aren't up to par, will gamers be willing to pay a premium price of $500 or $600 for the PS3? This may well explain the recent departure of Sony's U.S. PR chief for the PlayStation. On the bright side, corporate synergy could at last pay off: Getting into the movie business has taught Sony nothing if not how to cope with expensive flops.

Then came the horrible news, RSX appears to be limited to setting up 275 Million triangles/second, anemic compared to the 500+ million in XBox360. When asked about this apparent thumping dished out by MS, the reply from one notable ISV relations boffin was a terse 'What a Piece of Junk'. Talk about a steak in the heart.

July 21, 2006 - If you didn't take the time to attend Sony's "PSP University" at the San Diego Comic-Con this morning, here is the only notable news you missed:

It turns out that the PSP will "definitely" work as a remote control for the PS3. According to the speaker, it will have additional functionality and interactivity with Sony's next-generation PlayStation 3, but more details weren't revealed. Other info and bullet points (which isn't much for anyone who has been keeping up) included...



The claim that Syphon Filter: Dark Mirror and Pursuit Force are "great games" and "great reasons to own a PSP."

Ads for PSP Greatest Hits Collection, which will be released on July 25.

Clips from upcoming titles like Ratchet and Clank: Size Matters, U.S. Navy S.E.A.L.S. Fireteam Bravo 2, and Gangs of London (all of which look pretty cool).

Trailers of movies coming to UMD format like Napoleon Dynamite and Office Space

PSP's firmware update next scheduled for next Thursday will offer RSS Video feed support for its web browser (it already supports RSS audio feed)

Thursday's firmware update will also have a demo of World Tour Soccer 2

There are no plans to improve text entry on the PSP and no plans for a first-party keyboard

Sony is in discussion with wireless providers to create more internet hotspots for your PSP to easily connect to the web

Video out is something Sony knows is important and is working on getting done

Sony Connect is working on a way to provide downloadable movies (similar to the music currently provided), but are held up trying to find a system to protect intellectual properties

North American gamers planning to purchase a 60GB PlayStation 3 will need to purchase a HDMI cable if they want to see those fancy graphics at their finest.

That's according to the specs page on the official US PS3 website, which notes: "HDMI cable not included. Additional equipment may be required to use the HDMI connector."

Sony has long promoted the 60GB PS3's HDMI output as a key feature of the machine. The 20GB model, however, doesn't feature HDMI - and nor does the Xbox 360, as it goes, despite occasional rumours of a hardware revision in the offing.

SCE UK declined to comment on whether the 60GB PS3 will also ship without a HDMI cable here. However, sources close to Sony speculate that Europe will follow the US example by not including a cable in the box, due to the fact that the majority of buyers won't yet own a HDMI-ready TV - and those that do will already have a HDMI lead anyway.

Instead, PS3 is highly likely to be sold with a composite cable and SCART adaptor - just like the PS2.