Xbox 360 isn't going to fail any time soon...and I don't even like Xbox very much.
The fact is, Microsoft has gotten a bit lazy and comfortable since it saw how badly Sony is screwing up. I think this is partially the games division protecting itself - it could be way ahead of PS3 if it had done a decent price cut earlier this year, but if it killed of Sony without ever making a profit, how would the division justify its existance to investors and executives?
Right now, they can say, "Oh, watch out for the Sony Set-Top Boogeyman!" If they achieve profitability they can say, "Oh, finally, a profitable MS product that isn't PC software!", but if they kill Sony off and never make any money in the process?
*CHOP*
On the other hand, Sony's two whole weeks of success don't mean anything in the big picture. When Nintendo dropped the price of GameCube to $100 it sold like crazy, but we all know how that turned out. I think a price cut, plus Microsoft's holiday lineup is enough to keep 360 well ahead of PS3. In the long run I think 360 will have trouble ever becoming a humongous hit, but the company has a noteworthy lead on Sony and I'm sure if Sony started making serious progress, Microsoft would become a LOT more aggressive.
