Grooski on 01 May 2009
Simple. Sony said they wanted to own the livingroom, precisely the space that media centre owned. Lost revenues on software would have been enormous. MS had no choice but to fight to keep the TV/games space their own.
That being said, it has cost MS far more than Sony since XB1 for the current 60-40 split today, far from the total destruction they wanted. The opportunity was there in 2007, but has sailed now into another gen at least. The Playstation brand is only diminished in the US, a sizeable win for MS but hardly the size of the victory needed. We'll see another gen of console war at least.
