PS3 Backward Compatibility Reduced due to Cost Reductions? Friday, February 23 2007
Sounds like that might be the case, according to computerandvideogames.com. Appears that PS1 games will still work, but Sony is back-pedaling on supporting all PS2 games for the European release of the PS3:
"Rather than concentrate on PS2 backwards compatibility, in the future, company resources will be increasingly focused on developing new games and entertainment features exclusively for PS3, truly taking advantage of this exciting technology."
Remember the PS3 price cut I predicted back in January? This is likely a step on that path. I believe the PS3 enabled backward compatibility by basically including PS2 silicon in the box. That hardware has likely been removed to reduce costs, and the PS3 is now moving toward software-emulated backward compatibility. Notice the new focus on firmware upgrades for enabling backcompat?
"PS one titles remain backwards compatible and we will continue to assess the compatibility of PS2 titles right up until launch. We will continue to offer firmware upgrades to increase the number of titles that are compatible, but rather than concentrate on PS2 backwards compatibility, in the future, company resources will be increasingly focused on developing new games and entertainment features exclusively for PS3, truly taking advantage of this exciting technology.
All of which means the backcompat story is likely to be very similar between the PS3 and the 360 going forward. I'm looking forward to seeing the teardown reports of the European PS3s and seeing what else has changed.

I'm no longer surprised by anything that comes out of the Sony camp.
I can't even believe that moving to a software solution would negate THAT MUCH of the cost from the PS3; I'd figure it's a drop in the bucket compared to the rest of the components in the system.