I think the biggest threat could be lack of differentiation and a potential price war. Neither MS nor Sony really made money this Gen - certainly not the types of returns you'd throw billions into at any rate. If the market has indeed shrunk and if both offer very similar consoles they could be splitting a smaller pie in a more price sensitive time.
This gen a lot of people bought both consoles. If they are even closer together spec wise and feature wise fewer people will do that if the price is high.
If one of them decides it's a good idea to undercut the other and the other responds they may both lose money. That might also increase the number of people that buy both but buy fewer games and/or decide not to subscribe to their web services exacerbating losses. If you are using the razor blade strategy to sell consoles you better make sure that you sell enough software/services to justify the sale. In that scenario both sides would then be left trying to moneyhat exclusive titles and content which may backfire if a title is a bust. Taking on that additional risk wouldn't be ideal.
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