In a market that had 3 major players at the time, I dont think M$ could have expected to come in and destroy the competition. Namely because the only thing they brought extra was graphics. I believe certainly that M$ after Xbox 1 know it will take maybe another generation to capatilise Sony. Nintendo this gen have surprised both Sony and M$, and in a way both those companies know they will not win this gen.
But now 360 is in profit and only 30-50,000 a week behind PS3 worldwide shows that it will take an entire generation for PS3 to catch them. Both have exclusives that will bump one console up alot at the time of game release e.g. MGS4 will bump PS3 sales to like 200,000 over 360 in it's release weeks and GOW2 will do the same for 360. But they surely know that next gen they have to think outside the box to compete with Nintendo.
Certainly your statement that M$ should not have entered is utter nonsense. Without M$ Halo would be stuck on MACS and have a fanbase of a couple of hundred thousand. Even for Halo alone I thank the gods they entered as it's one of my fave games of all time. Cos I would never have played it on a MAC. I played Halo 3 the other day from the start again and remembered the feeling I had seeing that fireball come to land with cortana's voice narrating. B=No other game gave me butterflies like that. Knowing I was about to finish the fight to one of my favourite stories in game or film.
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