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It would be the smartest thing possible for Microsoft to take their 1st party to PC. They could make a ton of money. They don't even have to worry about piracy, simply make the games require Xbox Live service to play (they don't really have much in the way of SP games anyway).

Soooo much money awaits them should they choose that path. The XBO will never hit a large enough critical mass in install base to be very profitable, particularly with the crazy way they do business.