The PlayStation 2 was announced in 1999 and while it would not be released until 2000, the announcement was enough to slow the momentum for the Sega Dreamcast's North American launch, despite the Dreamcast having a head start over that generation. Directly after its release, it was difficult to find PS2 units on retailer shelves due to manufacturing delays. Another option was purchasing the console online through auction websites such as eBay, where people paid over one thousand dollars for a PS2. The PS2 initially sold well partly on the basis of the strength of the PlayStation brand and the console's backward compatibility, selling over 980,000 units in Japan by March 5, 2000, one day after launch. This allowed the PS2 to tap the large install base established by the PlayStation — another major selling point over the competition. Later, Sony added new development kits for game developers and more PS2 units for consumers.
Although Sega announced the discontinuation of the Dreamcast in March 2001, the PS2 would face competition from newer rivals; Microsoft's Xbox and the Nintendo GameCube. Many analysts predicted a close three-way matchup between the three consoles; the Xbox having the most powerful hardware, while the GameCube was least expensive console and Nintendo changed its policy to encourage third-party developers, and while the PlayStation 2 theoretically had the weakest specs of the three, it had a head start due to its installed base plus strong developer commitment. While the PlayStation 2's initial games lineup was considered mediocre, this changed during the 2001 holiday season with the release of several blockbuster games that maintained the PS2's sales momentum and held off its newer rivals. Sony also countered the Xbox by temporarily securing PlayStation 2 exclusives for highly anticipated games such as the Grand Theft Auto series and Metal Gear Solid 2: Sons of Liberty.
Sony, unlike Sega with its Dreamcast, originally placed little emphasis on online gaming during its first few years, although that changed upon the launch of the online-capable Xbox. Coinciding with the release of Xbox Live, Sony released the PlayStation Network Adapter in late 2002, with several online first–party titles released alongside it, such as SOCOM: U.S. Navy SEALs to demonstrate its active support for Internet play. Sony also advertised heavily, and its online model had the support of Electronic Arts (EA); EA did not offer online Xbox titles until 2004. Although Sony and Nintendo both started out late, and although both followed a decentralized model of online gaming where the responsibility is up to the developer to provide the servers, Sony's moves made online gaming a major selling point of the PS2.
In September 2004, in time for the launch of Grand Theft Auto: San Andreas, Sony revealed a new, slimmer PS2 (see Hardware revisions). In preparation for the launch of the new models (SCPH-70000-90000), Sony stopped making the older models (SCPH-30000-50000) to let the distribution channel empty its stock of the units. After an apparent manufacturing issue—Sony reportedly underestimated demand—caused some initial slowdown in producing the new unit caused in part by shortages between the time the old units were cleared out and the new units were ready. The issue was compounded in Britain when a Russian oil tanker became stuck in the Suez Canal, blocking a ship from China carrying PS2s bound for the UK. During one week in November, British sales totalled 6,000 units — compared to 70,000 units a few weeks prior. There were shortages in more than 1700 stores in North America on the day before Christmas.