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I think prodigy has an excellent point - MS has lost almost all exclusive titles going forward whereas Sony was a lot of great 1st and 2nd party developers. THAT will make a major difference going forward.

Will the 360 lose this generation? That was almost a forgone conclusion since Wii became the break-out hit it is. It was always only a matter of time before the PS3 started to pick-up (price drops, good games and blu-ray victory where needed first).

Will the 360 be the Gamecube and lose developer support becoming a 'dead' system? No. Neither HD console will ever have PS2's support, and therefore it'll always be in 3rd parties interest to maximize their base by being on both HD systems (or Wii exclusive).

The worst thing, is the image. With Xbox MS came from nowhere and stole 2nd place (a very very distant 2nd place but 2nd nevertheless) from Nintendo making themselves look like an up and comer. They continued this image by being out 1st with the 360 and then outselling the PS3 last year. However if they fall into 3rd, IE: LAST place, then that image of 'becoming something' changes to 'becoming nothing' in the public's perception. That's a horrible place to start the next gen from. Nintendo turned it around with true innovation (and considerable risk) with the Wii, but MS isn't that creative.