If you believe Sony's Howard Stringer the competition with Microsoft is all that counts since he claims the Wii is "more of an expensive niche game device," and not a competitor for the PS3. He pointed out that the PS3 is "still the best way to buy a Blu-ray player.''
And he's certainly correct that it leads that market, but it seems foolish to believe he isn't disappoiinted about coming in second in the console market, especially considering that the video game market is growing while home video remains stagnant.
Besides that the Blu-ray market is still fairly new. In order to achieve the success Sony is betting on there will have to be low priced players dominating the market that the PS3 won't be able to compete with.