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This is a gamble that could pay off or backfire on them ...

If Nintendo and Microsoft fail to develop something that appeals to consumers Sony is in the position to determine what they did wrong and capitalize; but (at the same time) it gives Nintendo and Microsoft the opportunity to carve off whatever portion of the gaming market they want, and Sony could be left with the scraps.

The worst case possible for Sony is if Nintendo produced something as/more popular than the Wii, and Microsoft was able to build off of their current success, leaving Sony a year (or more) behind with only a niche market.