I don't agree Misterd, MS is in this to make money. They already have market share.

Xbox 1 was already had some of the features, 360 has many more at a price MS considers fair for a Home Media Center Household hub. The problem is people don't want one of those things.

Also 360 isn't marketed as a media hub, it has those features, but there aren't ads saying this. It isn't a DVR, a key feature that a media hub should have. It is costing them not just billions, but billions more than expected.

They want it to be a media hub where millions of people will go and download MS content for MSpoints, but people aren't doing it.

Notice they tell us 6 million people have registered for Live, but don't tell us how many pay for Live Gold. Or how many paid downloads there have been. The reason? Because those numbers are disappointing. Or TV shows, or HD-DVD drives, etc. etc. etc. PSN has been just as unsuccessful, though I personally have downloaded more games than I ever thought I would because of the lack of "real" games.

It is a failure, not as big of a failure as PS3. But MS can afford to quit, they make their money off of OS, Search Engines, Online Services and Office. They won't keep it going past Holiday '09 if it isn't making money by Holiday '08. (They would use '09 as a way to catch up, investing very little and hope to make back some of their losses.)

Sony can't quit because the company has been structured around the success of the Playstation brand, Movies are the only profitable area left for them. Electronics are losing money for them. PS is losing money for them. Their attempts at entering PC's have been only marginally successful, while the Walkman has been killed by the Ipod. A lengthy life span for PS3 is their only option to bring the company as a whole back into the black.

(Edit: How is 360 doing well?  It has been in a steady decline since the holidays. It is costing MS 1.5-2 billion a year to keep it afloat.  The 360 has great games, but so did Sega Genesis, Neo Geo, and Sega Dreamcast)

Digg my story up

...how about no?

Well, you have to remember that MS probably has a very long term goal for Xbox, Xbox Live and whatever else they have planned. Consumers and stock holders will of course usually only see current earnings, current sales etc.  

If MS "gives up" and washes their hands of Xbox and Live then that means they just threw billions of dollars away for nothing. It is possible, and who knows if it does it would surprise me, but I dont think Microsoft works this way. 

Xbox Live provides a good start for them to get into everyones living room. It is leagues ahead of anything we could have imagined years ago,so they probably have some very long term plans for its evolution. They have already started with movies and tv downloads, but this aspect is still in its infancy. It will not reap any benefits or make an impact right away, its just part of an overall long term strategy.

Yes, they are in this to make money, even if it means they wont be in the green until 5 or 10 years from now.

Not all companies have the deep pockets to be able to get away with this kind of strategy though.  

X-box is not going anywhere niether is the Playstation brand if and when any company needs to leave Video game consoles alone it will ....sadly be Nintendo. This was definitly put on hold with the sucsess of the Wii but Nintendo can Never afford to sell a machine for less than cost. They do not have the other areas to recoup revenue from. Sony and Microsoft can both use their machines in order to raise awareness on more of thier own products that are not Video game related.

With all that being said M$ is hurting bad with the announcement of $ lost in 360 warranty stuff and now being outsold by a system that is still $100 more. Still 2 billion dollars is next to nothing for these huge companies. Eventualy Microsoft will pull a profit from the X-box (probably not this gen) but as they grow titles they will turn profits

The holidays are the high point in sales so of course there would be a decline. The 360 outsold both the Wii & PS3 for Holiday 06' so how has it fared so bad. With the line up it has it is on pace to outsell at least the PS3 this holiday again. I think it will be close to the Wii numbers for the simple fact Nintendo hasn't been able to keep up with demand all year so I don't see them doing it for the holidays.

EDIT 

The day nintendo stops making home consoles is the day they quit video games is the day they go out of business.

With current stock pushing 50 dollars a share stateside, I don't think this is ever going to happen.

No, I believe that sony or microsoft will cut their game devision before Nintendo goes out of business. And if PS3 continues to flop as badly as it has, and PS4 flops as well (which I can see sony doing), I think they will quit the business, just as they dumped betamax. MS I believe is in for the long haul, since they are supposedly putting much more focus on Gaming in windows, and Gaming in the 360.

In any case, I think all 3 company's are in this for at least 1 more generation.

EDIT:  Keep up demand?  Nintendo is the ONLY company to keep up demand.  Unless you mean keep up supplies to MEET demand, then yes, i'll agree the only thing keeping nintendo from sweeping the sales charts this holiday is there inability to make enough units for people to buy.

The ps3 out sold it worldwide, even though the price cut was just in america, ps3 out sold 360 in all the major areas, except for canada. Microsoft wouldnt even dare to cut the prices on the 360, that would kill there game studios.

MS said themselves they were in this market because they felt endangered by Sony grabbing the online gaming market with the next iteration of the Playstation (yes ,the PS3 ) wich was a market they tought should be theirs as there was a ton o money to make .Just thinking having 100 million people paying the Live fees must have sent thrives trought their corporate spines .

They will spend as much money as they thing neccesary to "buy " this industry .

Problem is that Sony and Nintendo arent exactly something light to take on .Nintendo with its current price-friendly ,casual and marketing centered strategy is putting themselves way ahead .And Sony may not be doing great but it is still outselling the 360 both in Europe and Japan and threatening to do the same in the US after the price drop .Even if they are even in the US any push in sales for the japanese and european market will accelerate Sony overtaking Microsoft again .In Christimas they may well sell very good both in the US ,but the PS3 will put one million of difference in Europe and mayve even more in Japan .

This time ,the X360 in the long term will be a clear third .

Any of the companies making decisions on whether they will continue to battle for this market is still a few years away; probably 2009 at the earliest as they decide whether they can justify releasing another console onto the market in 2010 or 2011.

Ultimately, I think the market conditions that convinced Microsoft to produce the original XBox are quite a bit different than the current market conditions so they may or may not see value in producing another console.