From the game side I think Sony is great with pretty much all of my favorite non-Nintendo/PC games are on it, but that's more from having good third party support. Nintendo lost that when they decided to stick to proprietary cartridges with the N64 rather than moving towards CD's like they were originally planning to do with the Super NES add-on that was going to be manufactured by Sony. Unfortunately Nintendo decided to cancel the project just after Sony showed off a prototype at an Electronics Expo in the early '90's and then decided to partner up with Philips instead (
and we all know how that turned out).
Sega was also starting to show cracks with their Sega-CD failure and lukewarm Sega Saturn. A lot of popular third-party developers were pissed off with Nintendo's draconian policies in order to get the chips, one of whom was Square who really needed the storage space on CD's for their upcoming game,
Final Fantasy VII, aka the killer app for the Playstation. The final nail in the coffin for Sega was the dramatically hyped Playstation 2 (as well as Sega's own internal failings) killed one of their major competitors. Nintendo finally embraced CD storage, but with special proprietary disks and a loss of many of their popular 3rd party develops, most notably Rare Ltd. who made
Goldeneye 007 . Despite Microsoft's acquisition of Rare Ltd. the original Xbox was pretty much being held up by Master Chief while the Gamecube was getting by on the ever popular first party Nintendo titles as well as a few new entries like
Pikman. The Playstation 2 was also able to play DVD's which I think was a big reason it sold so many, because the format was just coming out at the time.
Here's the cliff notes for right now:
1) Sony had a lot of help with the game console design from their work with Nintendo
2) Nintendo stubbornly stuck to old business practices which drove away many third party developers (a problem that still plagues them today)
3) The failure of Sega to provide any real kind of competition gave them an easy opponent to knock out the console wars
4) A fledgling Microsoft's first attempt to pierce the console market
This all changed in 2005 though when Sony attempted to take a bite out of the handheld market with the PSP, a market that Nintendo dominated, and failed miserably. Then a year later their brand new shiny black chrome console was getting wiped on the floor by the Nintendo Wii and Microsoft learned a lot from the original Xbox's lackluster lifespan and became a viable competitor, especially in the online market (for better or for worse). Now with some actual competition this generation, I think Sony's hand has been shown and they're just not as great a video game company as everyone seems to think they are.
I'd like to stress that I'm focusing mostly on the business side and that it really is the games that matter, and at least Sony has that going for it, because it's not like they've got much else to sell their console on. I mean Nintendo's been selling their consoles on the fact that that's the only way you'll get to play the latest iteration of Mario, Zelda, Kirby, Star Fox, Metroid, etc.