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Sweet. Western Dev's console of choice seems to be the western console (360). Such an alliance would either have to try to outshine western devs on the 360, being a huge boon for it as they develop more and better games for it. The other option is to try to marginalize the western console, and focus entirely on the Wii/PS3, a tactic which would doom their bottom line, and still not prevent the 360 from taking second place this generation... The primary effect would just be to bring back an era where there are lots of 3rd party exclusives (and with Microsoft's wallet and determination to win, they would acquire plenty more themselves)

All told, I don't think anyone would benefit.