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"In the sony vs microsoft console war all you need to imagine is marketshare.

Marketshare in 2005 - 70% sony - 15% microsoft

Marketshare in 2008 - 30% microsoft - 22% sony

Analysts can pretend they see the future all they want, but this is reality."

Ahh market share, many people seem to get it confused. Unfortunately I doubt that all 100 million+ PS2 owners just up and threw their console away the second the 360 hit the market. Certainly the Playstation 3 is in third but the fact that they are outselling the cheaper 360 in a world economy like the one we got (read horrible) speaks volumes. And I thought that Nintendo was getting seniors and parents to buy their system so its technically not taking market share away from Sony or Microsoft. Which begs the question where are the 100+ million gamers at? People can't possibly be holding onto their PS2 because hi-def graphics is all gamers care about thats why no one is buying a DS or Wii. PS2 had disk read errors certainly so their 120 million includes repurchases... and what about RRODs? The 3 year warranty wasn't handed down from on high on day one before many people bought their 3rd/5th 360s which is telling about the "actual size" of the  360 user base.

Sony is going to win because they are following Nintendos playbook, make 1st party games, sell systems. Even when they are losing money on the PS3 they finance Media Molecule (Little Big Planet) buy Guerilla Games, buy that company that made MotoStorm and finance David Jaffe's - new company Eat Sleep Play. Oh and he's a good friend of Ted Price CEO of Isomaniac. Sony can't possibly be trying to turn Jaffe into another 2nd party like Iso... no way makes far too much sense. 

With more 1st party studios then the competition combined, and they continue to purchase more >hi Level 5< Sony's in no trouble. Because in the end thats its all about the games and when your biggest sellers are single genres (party games/FPS) then you got something to worry about. Thats my take.