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WereKitten said:
^I can't say I have been witness to such shrinkage, but that's because here in Italy the PS3 sells slightly more hardware and software than the 360. That said, I am sure that reducing its shelf space to two thirds of the other two consoles makes sense in America for many retailers, as I said it's selling about 65% of the 360's software.

It's the whole "it's last in the console war thus we'll forfeit a sure 20% of our home console profit to make space for the NextBox" idea that I have troubles finding appropriate for a rational retailer.

You are right that they make most of their profits from software, but at the same time, retailers just do not have enough shelf space to justify keeping old consoles even if their software sales might temporarily rise due to the other competitors being released.  I'm sure retailers would love to do what you suggest and support so many different consoles, but having 4 consoles and 2 hand helds is difficult enough as it is.  With the release of 2-3 new consoles they would not be able to support all of them.  This is because retailers will want to push the new consoles.  New consoles sold ensures future software sales, while old last gen consoles sold means less future software sold since developers will also be shifting focus to the new consoles.

They will make the same profits because the new consoles will be selling out like hot-cakes and any loss in sales of the old consoles/software will be made up for by the new ones.

If anything the scenario may repeat itself with the NextBox being out first for a year and then the Wii 2 and PS4.  But regardless of how it pans out, if the PS3 is in last after the PS4 is released it will be discontinued.  It all depends on what the situation is at that point, but as I said, if it ends up this way then the PS3 will surely be first discontinued at retail (for the US).