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Sony not dominating for a 3rd generation in a row is a good thing. Sony dropping out of the console market would be bad for everyone. Healthy competition is good for consumers.

MS would have no incentive to drop prices or add features.
MS could squeeze 3rd parties with higher royalties, since there is no competition for HD games.
MS would next target PC gaming for elimination. They do not get game or Live royalties.
MS would coerce 3rd parties into not making Wii game. Sorry EA, choose either us or Nintendo to release Madden 2010.

If you think none of that will happen, just look at every other product MS launches.

Look at what Sony did when they had too much power. They launched a $600 system and expected people to flock to it. With no competition, you would be stuck paying that. Luckily, MS and Nintendo were there to make Sony pay for their arrogance and give consumers choices.