I believe the thing to remeber is that gaming has moved away from just a hobby by the fickly Hardcore gamer. Instead any company not just MS has to have a more open focus on gaming period and how to atrack all types of gamer.
Install base does matter. It's easier for Daddy who wants to play Call of Duty 25 if he can convince the wife that next 400 dollar console allows her to play Dance Central 18 and the kids can play KinectAminals. The bigger your install base, the bigger it continue to grow especially with how each Console maker is trying to seperate themselves with their network offerings.
If you think Sony isn't going after the same market then you are fooling yourself. The core market just cannot support the investment console makers are putting into their devices especially if the other two will split that market.
