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Microsoft put huge amounts of money into the Xbox. That's another very important point, besides Live, DVD player and Halo. Microsoft basically bought its way into the market with billions of dollars of losses.

In direct competition, the bigger company wins most of the time because it has more resources. That's why making the NX like the other consoles would kill Nintendo. When the Xbox didn't sell well after launch, Microsoft quickly dropped the price and put more money into it. When the Gamecube didn't sell, Nintendo decided to sit things out to avoid losses.