If anyone blinks first it is going to be Sony, they are similar to the original Xbox. They have the best hardware and some of the best looking games, but at the same time that is also their weakness (as was with the original xbox) as they can't compete in a price war because then they would be bleeding more money, this holiday season is probably going to be their last stand for a return to profitability which I think if they can do if they stick to their strategy. The good news for Sony is they have loyal fans.
I think this generation will prove to be the longest generation so far. Nintendo has no reason to release a new console anytime soon, even if their sales were half they would still be leading.
I don't think that MS has met their goals, but at the same time I do not think that they are disappointed with how they have performed either and plan on taking the 360 another several years for high profitability. I think MS is going to try to wait for the competition before jumping in next generation.
I think Holiday 2012 will be the soonest we see anything from any of the three.
