Actually MS has already seen the light. MS is not trying to cater to any particular group but instead trying to build a platform to bring content to all the different groups.
People are right that a company cannot split their focus between the casual market and the core so the smart company builds a platform and let it partners do it for them. This is the reason MS does not have a lot of studios and they are investing in their media capabilities and family type of games and devices.
The hardcore will go to the system with the specs and their will be enough games from developers on all levels to keep the core interested.
Its a different strategy from Nintendo and Sony and I believe it has a better chance of success because of new devices like the Ipad and other gaming devices that will split the market.
The reason MS cannot just concentrate on the core is because Sony and Nintendo will do so as well, thus splitting the pie between the three console makers. As a console maker you must have a broader view or the market will pass you by.
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