A month ago, Activision boss Bobby Kotick said that without a PS3 price cut to boost the system, they might have to stop making games for the platform. It's a controversial statement, but at this point anything anyone says about the PS3 is controversial. If you mention, offhandedly, that you wish the power cord was six inches longer, it will most likely ignite a caustic flamewar where you will be branded a "hater" and an "xbot".
To me, the interesting thing isn't that Kotick was thinking it, it's that he choose to say it out loud. People in Kotick's position don't get where they are by talking without thinking. He deliberately chose to fire a shot across Sony's bow, and I don't think he did it because he wanted to launch ten thousand flamewars across the internet. (Although he did do that.) Trolling is a popular internet pastime, but I doubt Bobby Kotick was trying to stir things up just for laughs.
On the business side, his position makes a lot of sense, and he's certainly not the first person to notice that the PS3 has the smallest user base and yet the highest development costs. As I've pointed out, graphics cost money. The PS3's focus on graphics means that any game taking advantage of the hardware is going to be more expensive than the same game (in gameplay terms) on another platform. The unorthodox architecture of the PS3 adds additional costs onto this. There is a learning curve for developers, along with the cost of developing additional tools. Code written on the PS3 is less portable to other platforms, and code written for other platforms will require an overhaul or re-design to be useful on the PS3. This means there is a soft barrier between the PS3 and all other platforms, and to penetrate that barrier requires money.
At the risk of digging up an old flame war while talking about the new one: Back in February, Sony went on the record saying that the PS3 was hard to develop for, on purpose. The explanation to go with this assertion was a bit of a non-sequitur, and basically came down to 'we made it hard so that it would take a long time to learn to use it well, which would give the platform a long life.' That doesn't make a lot of sense. While they've made some serious mistakes, the guys at Sony are not idiots. If they're doing something that sounds dumb it probably means we aren't seeing the whole picture. My own take on things is that they made development hard in a cunning and cutthroat attempt to crush the competition.
Imagine if the PS3 was leading the pack and dominating the market instead of the Wii. The PS3 would then be the prime target for developers. Porting from the outlandish hardware down to the other platforms would be a painful expense, and the resulting games would look a lot worse than the original PS3 version. A lot of companies wouldn't even bother doing that extra effort to pick up a few extra sales from the second and third string systems. A dominating PS3 would choke out its rivals. It wouldn't be the incompatible system, they would be. This would drive even more people to the platform as they sought to get their hands on all those PS3 exclusives. This might sound far fetched now, but I'll bet it looked like dynamite on the dry-erase board back in 2004. Its predecessor, the PS2, was the king of the previous generation and is (in my humble opinion) the best console ever in terms of price point and library size.