In a cavernous hangar way out in the industrial wilds of Acton, west London, where the ground is strewn with junkyard shrapnel and the sky is October grey, a film crew hopes to condense PlayStation’s 20-year history into an advertisement. It’s a tall order. Not only is Sony’s series of increasingly powerful video game systems about to enter its fourth generation when the monolithic slab known as PlayStation 4 launches this week, this is also an empire that has transformed the cultural landscape.

PlayStation remains Sony’s most iconic brand. It’s proved more enduring than the Walkman, and is more culturally embedded than the Bravia. By the early 2000s it was the company’s key source of profit. Indeed, the Japanese electronics company’s current slogan "Make. Believe." appears to be founded on the essence of gaming. Outside of Sony, the console has had a disruptive influence. The video game designer Yoshiki Okamoto recently said: “PlayStation has completely changed the distribution, sales and image of video games.”

That transformative effect is borne out in the figures: approximately 350m PlayStations have been sold around the world since the first iteration launched in 1994 – equivalent to the total number of iPods that have been sold to date. There is, then, an awful lot of history to squeeze into 90 seconds.

Into a teenager's bedroom

But the plan – and it's a good one – is to simplify and personalise the story. No need to take viewers on a whistle-stop tour of Sony’s Tokyo headquarters, where some of the world’s leading tech mavens have, through their designs, steered the video game industry. Nor will the cameras peer into the thousands of development studios around the world, where PlayStation’s defining games have been produced, generating billions of dollars. Instead the film crew is headed into the eye of a cliche: a boy’s pungent bedroom, where the PlayStation has provided the focal point for millions of likeminded players.

The ad’s script shows two friends playing PlayStation across the years, as the London skyline seen through the bedroom window morphs into its current arrangement of cogs and spires. The boys’ hairstyles change, along with their girlfriends and the accompanying soundtrack, but the PlayStations remain, blinking and whirring in the corner. Sony believes that its consoles have been the life constant for at least two generations of young people around the world. It keenly hopes that will continue with PlayStation 4.

The inspiration came from Twitter. This year, one of the company’s so-called community managers devised the hashtag #PlayStationMemories. Twitter users were encouraged to share their memories of a life spent growing up with PlayStation. The response was tremendous, with tens of thousands of tweets reminiscing about the consoles and the place they’ve had in our lives.

The ad is what’s known in the industry as a “heritage piece”, designed to play on the viewer’s nostalgia for the product. For this particular scene the bedroom is dressed circa 1996: the newspaper of the day lies crumpled on the carpet; the actors wear historically accurate Levi's and pristine trainers. Dominoes even reprinted some of its pizza boxes from the era: realism has always been of paramount importance when it comes to the modern video game. Sony believes that heritage is the key differentiator between its PlayStation 4 and Microsoft’s Xbox One, the two rival “next-gen” video game systems that will battle for the valuable prime real estate beneath our television sets this Christmas and beyond.

But there is one part of the heritage Sony’s keeping well away from the cameras, the secret of its origin story. PlayStation, far from being the result of a Japanese master plan is, in fact, an empire built upon a grudge.

Humiliating turnabout

At the Consumer Electronics Show in June 1991, Sony unveiled its first video game console, a joint venture with the dominant video game maker of the time, Nintendo. The system was to be Nintendo’s route into the emerging world of multimedia entertainment. But the following day the Kyoto-based company announced it was terminating its deal with Sony in order to partner with rival manufacturer Philips. Few snubs in Japanese business have been played out so publically, and the turnabout humiliated Sony. The following month president Norio Ohga called a meeting to plan a lawsuit.

Ogha explained that financial recompense would not be enough to sate his appetite for revenge. He stood to his feet. “We will never withdraw from this business,” he declared to the room, which included among its occupants Ken Kutaragi, an ex-Nintendo contractor who was desperate to design a video game console. “Keep going,” he urged.

It’s a promise that Sony has stuck to with grim resolve ever since. The first PlayStation, designed by Kutaragi, helped define the 3D era of video games. All 100,000 PlayStation launch units sold out in Japan on their day of release. Over the course of console’s life innumerable game mechanics were established, countless technological boundaries overcome and a vast number of best-selling franchises launched. Sony sold 102m PlayStation 1s across the world, success that only grew with the launch of its successor, the plainly named PlayStation 2, which soon became the best-selling video game machine yet made.

Today, history is set to repeat. PlayStation 4 is, in a sense, a video game console built upon a vendetta. In recent years the company has slipped from its once-dominant position in the industry. Since its launch in 2006 PlayStation 3 sold around half the number of units as its predecessor. This year Sony reported the operating income of its PlayStation business was down by 94.1% year-on-year. From a financial perspective PlayStation 3 was a disappointment. But from an engineering point of view, it was nothing short of a disaster.

The PlayStation’s rise had coincided with a cultural shift in emphasis away from hardware engineering towards software, one best exemplified by Apple’s iPod music players. When Sony had developed the Walkman, the device was almost entirely hardware-based. But with the rise of digital music, pairing devices with intuitive software had become the key to success. Sony’s innovations focused on making products smaller and sleeker, with the software that fired them almost an afterthought. Despite the rise in PlayStation’s importance, the company had been slow to embrace the idea it was now a software developer.

The father of PlayStation

These rifts were made clear in the PlayStation 3’s development: the hardware team developed the machine in relative isolation, before handing a near complete product to the software guys. Sony’s US president, Jack Tretton, would later identify this as the key issue for PlayStation 3, a system hamstrung in its early days by the lack of collaboration within Sony. Kutaragi himself, now widely known as the "father of PlayStation" exacerbated the situation. The success of the PlayStation 2 had given the designer the position of renegade auteur.

In September 2006, just before the PlayStation 3’s launch Kutaragi spoke out against his company. “If I was asked whether Sony's quality of manufacturing has declined, I would have to say 'yes,'” he said. At a board meeting a few weeks later the designer told the assembled executives that he planned to slash the price of the console by 20% before launch in order to make it more competitive, increasing the amount of money lost on each console. Meanwhile the message coming back from developers was that the system’s architecture was difficult to develop for and came with inadequate tools.

It’s this last issue that PlayStation 4 has been designed to specifically rectify: righting a wrong that indisputably hurt its predecessor. Just as books sell eBook readers, films sell Blu-ray players and music sells iPods, video games sell consoles. “For PlayStation 4 we placed developer needs first and foremost in the equations,” Andrew House, the current president of Sony Computer Entertainment tells me. “That for me was what we had to do with this machine.”

On the eve of PlayStation 4’s launch, it's clear that Sony is confident in its product. It has prepared a console that is arguably more powerful than its competitors, easier to produce games for and, unexpectedly, $100 cheaper than the rival Xbox One. But the company wasn’t always this confident. Following the PlayStation 3’s disastrous launch, Ken Kutaragi was replaced as president of SCE. Five months later he retired. For Sony this presented a tremendous problem: who would design the next PlayStation now its father was absent?

• Part two tomorrow: the battle for hearts, minds and wallets