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I don't think it would screw with HD gaming all that much. If the PS3 were discontinued (highly unlikely IMO), what will happen to Sony's games? There will be people that will take advantage of the old PS brand, as it's still pretty strong. Someone will have to capitalize on the demand... whether its Microsoft or something else.

Either way, the 360 should get a decent boost, and the gen will continue. The Wii "destroying" the 360 shouldn't matter all that much, it won't be that much worse than the current PS360 vs Wii situation.