Guys, a second party exclusive is an IP that is owned and paid for by the publisher but developed by an independent studio, like Ratchet & Clank or LittleBigPlanet. Sony owns both IPs, and paid for the development of both, but they were developed by independent studios like Insomniac and Media Molecule.
Neither Gears of War or Mass Effect are 2nd party titles, as neither franchise is owned by MS. Similarly, NGII is not a second party title, despite being published by MS. PGR4, however, is a second party title.
A second party developer is a developer that is tied exclusively to one console manufacturer, like Insomniac, Sucker Punch, and now Media Molecule. They only develop second party exclusives. Unlike Level 5, which develops it's own titles in addition to second party titles for Sony.
As for my preference between Sony and Microsoft, it's easily Sony.
Here's a list of notable first party titles they've released this gen:
Formula One CE
GTHD & GT5P
Hot Shots Golf 5
MLB 07/08 The Show
MotorStorm 1/2 (though technically MS1 was second party)
NBA 07/08/09
Siren: Blood Curse
Uncharted
Warhawk
And here's some cool second party stuff:
Folklore
Heavenly Sword
LittleBigPlanet
Ratchet & Clank Future Tools of Destruction & Quest for Booty
Resistance 1/2
Socom: Confrontation
Sony has only outdone my expectations this gen. When the ps3 launched, I never expected something as awesome as LittleBigPlanet to pop up, nor did I expect Killzone 2 to actually turn out well.
Microsoft has only weakened their first party in my eyes this gen. Ensemble Studios is (or was) one of my favorite developers, probably fifth overall, and now they're defunct. MIcrosoft also closed down FASA Studios, the guys behind MechCommander 1/2.
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