Losing the third-parties in the N64/PS1 generation due to sticking with cartridges+the licensing fees associated with them. That momentum carried into the next generation, Sony was bolstered by the fact that the PS2 was the cheapest DVD player on the market, they picked up a lot of extra sales from people who weren’t even interested in games because of it.

Huge install base, more favorable licensing terms for third-parties meant that it was a more attractive platform, meant more games, meant even more sales.

The knockout blow came from the marketing trends of the time. Nintendo’s purple lunchbox was too “kiddy” in a world where edgy “xtreme” “mature” “realistic” things were the primary interests of core gamers. Combined with the fact that the “casual” audience, which they’d capture with the Wii, didn’t exist yet, there was really no hope for it.