It's certainly possible. People who think it's a foregone conclusion that Microsoft will increase market share next gen are fooling themselves. We never know what the next generation will bring. The 360 had a head start of a full year but still finished with by far the lowest sales rate as well as the lowest installed base, so I see no reason to assume 720 domination.
If Kinect 2.0 really is included with the 720 then it sounds like something of a gamble. North America will eat it up, I'm sure, but it's hard to imagine such a system being a world-wide hit. The tech will be impressive, I have no doubt, but huge living rooms aren't the standard everywhere. Also, if Microsoft goes fully speed ahead on the casual front, there is the potential to alienate a part of the core market.
The Gold subscription model to access video features might need a revision, as well, if they really want the 720 to be a multi-media box that appeals to levels of consumers. If not, they could lose a lot of people, not just to Sony and Nintendo, but to Apple and Google.
It will be interesting to watch. Microsoft is no more a stranger to hardware flops than Sony or Nintendo.
