@OP:
Very bad, maybe fatal for S-E.
Bad for JRPG fans, particularly the western ones.
Bad for Sony in the short term, maybe good in the long term (freeing it from any remaining dependency on S-E).
Bad for MS that heavily relied on removing Sony FF exclusivity to become more appealing for JRPG lovers.
Good for Nintendo, as S-E could release a burst of Wii titles in an extreme attempt to save itself.