You make it sound like that scenario is awful and what we got now is amazing... and i couldnt disagree more.
Yes, most probably technology wouldnt be where it is today, but there would be loads more developers and publishers. Perhaps old Sega would still be around and we would still be getting their great games. Think more shemue, skies of arcadia 2, western PSO2, etc.
It is also likely that games that are short bursts with great graphics would be more common and hopefully none o this microtransaction and DLC madness,
Yup, i would've prefered the world where Sony and Microsoft hadnt joined the race. I think in terms of gaming quality we would've been much better served.