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bonkers555 said:
The only way I see M$ failing next gen is because of Valve. If Valve enter the console market it will effect M$ more then the other two console maker. M$ really need to buy out a big Japanese game company like Sega to help them pushing out Japanese style games to compete with the PS and Nintendo.

I certainly agree that if Valve is going to damage any company with its new console, it will be Microsoft.

@OP: Thanks for the list of reasons. I don't really agree with them though. A lot of what you mentioned as liabilities could also be called assets. Microsoft wisely decided to make its console a multimedia hub, a beacon in the living room that brings together games, movies, Netflix, sports, etc. Remember that more people use Xbox LIVE for its multimedia applications than its online gaming.

I tend to agree about Kinect being a double-edged sword, but we've yet to see what Kinect 2.0 will look like. I'm still hoping Kinect 2.0 will provide a renaissance for Rare.

The two biggest warning signs are lack of exclusive software -- something Microsoft seems to be genuinely concerned with fixing -- and overreliance on North America. But these are more of long-term problems; so Microsoft has time to fix them. And hopefully it will. If it doesn't it only has itself to blame.

Who knows what the future brings for Microsoft, but I would wager that it won't fall to third place during the eighth generation.