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MS will come in second behind Nintendo at the end of the Console War for several reasons.

1. They have strategic placement over Sony for the remainder of this generation in terms of pricing.

Example: Sony decides to drop the PS3 price by $50. MS can automatically drop its console price by more then that seeing that a) console costs less, b) they have been on the market longer.

2. They are currently the primary console for multiplatform development (for the most part). It is cheaper for devs to make a game for the 360 and port it to the PS3. If you factor in all the other costs (manufacturing, distrubution, marketing etc.) for smaller devs it is just too expensive. Consider the mergers that have taken place so far this gen, the main attribute is so smaller firms can stay competitive and have resources allowing them to continue to create great games.

http://www.ps3power.com/ps3-dev-expensive.htm

3. MS has a concrete base of current games (new IP's)

MS basically has one aged franchise being Halo. I feel that this was recognized a long time ago which is why MS began to allocate more resources elsewhere to help grow the 360 franchise. This is why 360 owners have been exposed to games like BioShock, Gears of War and Mass Effect.

Sony seems to be sitting on games that have long past there time in my opinion. Will MGS4 be a great game? Of course it will, but at some point in the very near future they will need to begin pooring more money into new IP development which MS has already started to do.

I suppose this is debateable but I havent been to impressed with any new IP except for Uncharted.

4. They have only sold ~7 million consoles more then PS3

I dont think gamers realize how long it will take the PS3 to catch up to the 360 in terms of sales. They will have to outsell MS on a weekly basis by a large amount for a substancial period of time. Seeing that the sales have been close over the past couple months of PS3 outselling the 360, I dont forsee them really ever catching up.