They oversold their product and underproduced. Sony would have been better off taking a more modest approach, but it seems like they felt the need to try to justify the price at every opportunity.
When you're first to the market you get a little more leeway, but when you show up a year late with no stand out titles, then you're going to be criticized, especially when you're charging $100-200 more than your nearest competetor. Fanboys obviously ran out and bought it up with no reservations, but everyone else waiting to see what they had to offer looks at their launch and most of it has been seen and done before and for cheaper, so why buy the PS3?