An obscene excess of cash has allowed Microsoft to wreak havoc in an otherwise well balanced oligopy. By creating artificial competition within the group (HD vs HD) where a free market would not have had competition, the quality ("earnings") of each party is negatively affected.
IN other words, from an economics point of view, I pretty much agree with OP.
Not only did they lost 4B of their own money, the are also somewhat responsible (in the macroecononomic model) for much of Sony's loss. And they will continue to be responsible for HD games being released that don't take full advantage of either platform.
Imagine if one day Microsoft decided to start making automobiles. They would be poorly made, subject to stalling, parts falling off etc. But the they would only be $1000USD brand new. People would put up with the crappy quality for such a cheap price. Microsoft would lose billions and billions attempting to build market share. And next years model would also lose billions but have a higher market share so be considered a 'success'). But what happened to the rest of the automobile industry...ford, opel, holden, peugout etc ALL lose billions as well. Quality goes down across the board, accessories makers switch to the MSFT brand, etc...
Trying to convince me the Wii is a real adult game machine 'if you play it right' is like trying to convince me Tofu tastes great 'if you just cook it right'
