Don't get me wrong, Marketshare is important as well but it still all comes down to profits for a business.  We as fans just looks at numbers to boast about something.  This isn't like when PS2 dominated it's competition, everybody is relatively close in how much they have sold.  It was easy to tell that PS2 made the most money lol

Japan is irrelevant. MS totally makes up for that whole market by what they gain in the US just by being the only American company in the market. NA and EU are the markets that really matter for home consoles.

Stuff they have to worry about - turning X-box into a Jack-of-all-trades, that does nothing really well. It can be hard to be the choice of the core audience, have Kinect packed in with every console for casuals, be a media hub, have a reasonable price and not lose hundreds of $ for every unit for years to come. MS is trying to conquer the whole house with Windows 8 on your PC, tablet, phone and next X-box will surely be integrated as well. Many people may not want to go so far and let MS monopolise their whole house - I sure don't wanna go down that road.

Also, they lost Bungie. Halo 4 was ok, but it will hurt them nonetheless. If Epic goes multiplatform with their franchises MS will be left with next to nothing and Sony might get them with superior software lineup if they do all the multiplatform and media-hub stuff right. If Vita is any indication, PS4 can be a great piece of tech.

Also - new colour of the ring of death.

Focus.

I agree, marketshare only helps if its almost a monopoly (NES, PS2, etc). In the current situation, with similar shares, it doesn't matter.

Ambivalence

Yeah, that's what I was trying to say :)  

Sony: HD twin market is bigger and more identifiable than Nintendo, also less prone to competition from smaller format gadgets. In a 3 player market, you don't want to occupy the same niche as the category killer. No one can compete with Nintendo at Nintendo's game. But Nintendo has proven again and again to be very timid to produce different products to capture different markets. If car makers all try to sell just one model and it must make 911 drivers happy and Hyundai drivers happy, ..well no one can.

Sony is MSFT's biggest enemy and ally wrapped into one. As long as they both are content with 1+1 > 2, they will be the biggest market for 3rd parties. But if Sony turns this into a paper-scissor-rock scenario, if somehow the HDTwins are no longer as easy to go multiplatform on due to Nintendo like quirks, then Sony and MSFT's coopetition days will be numbered. MSFT has proven time and again to be king of mediocrity and lack of innovation. Kinect seems great but if they over implement it like how Nintendo betrayed regular controllers, they themselves risk restratifying the market into a Paper Scissor Rock game. But since MSFT is financially solid, it is more likely that Sony becomes the player forced into a gamble.

If Sony release within the same time frame as Microsoft or if Sony release before even, there will be some problems.

I think it has been a modest victory for Microsoft this generation. Sony have definitely taken a hit because of their delayed release. I think a release at the same time as Microsoft will be problematic.

Thinking entertainment-services will be the most important thing
As a result downplaying exclusive games
3rd console

- price
- lack of Japanese support
- lack of exclusives compared to the competitors