MS can either make $$$ or outsell PS3, NOT BOTH.

[Dodece]

The reality is that you can kill two birds with one stone, and we are really debating which came first the chicken or the egg. Are Microsoft's comments the reason or are they a justification. Why does Microsoft not want Sony to have the living room? Could be it threatened their existing business model, but it could also be Microsoft saw money to be made in this market, and wanted that money for itself. So it could be a justification after the fact or before.

Either way it is irrelevant, because Microsoft has a business model that ensures great profitability once they establish dominance. Microsoft is not looking to make profit on hardware. Hell it isn't even looking to make money on licensing. Though both would be a bonus. Microsoft is a software company. That is what they do, and that is what they know. Their console is a portal to their software. The most profitable ventures in the online space are subscription services. They may take a good bit of money to get rolling, but once they are the cash just pours in.

What Microsoft sees is the potential for a four hundred or five hundred percent return on investment. That is why Sony offered a free service. That was their cock block to Microsoft. Trying to force them to abandon the model, and thus deprive Microsoft of the profitability that brought them to the market. Sony unfortunately failed at this.

Microsoft doesn't have to ever be profitable on their hardware, and it will not cost them profitability. Sony on the other hand must eventually be profitable on their hardware. Licensing alone is not going to back fill initial losses, or the interest on debt incurred as part of the process. That is why Microsoft winning is almost a inevitable conclusion.

Just wait until Microsoft racks up thirty or forty million subscribers. Once they bring two billion in every year just on the service. Microsoft is somewhat limited by laws that prohibit unfair competition. In other words they cannot just dump three billion in to the market to purchase up all the software. That would be unfair to Sony. However if Microsoft can spend that cash from what the service plan brings in then it is not unfair competition. The money they would be spending would be the fruits of having a better business model. Which their competition has every opportunity to follow.

To boil this down if the console makes the money. Then it is permissible for the console to spend that money on itself. The result being that Sony cannot just muddle through. They need to find a way to bring in as much money as Microsoft. Yes they will have to play the same game as Microsoft. Deciding not to is just suicide, and frankly the sooner Sony comes to this realization the better. Time to start milking your customers Sony. In the end it is their only hope.