This is the XBOX 360's LAST chance to perform in Japan.

[Grampy]

When anything could be either a brilliant conspiracy or plain stupidity, always bet on stupidity because stupid people are infinitely more plentiful than brilliant ones.

All this talk about MS’s grand strategy to hurt Sony, or claim the media center market, or pave the way for the next generation is so much BS. You are talking about two companies whose video game strategy, such as it was, has gone so disastrously wrong that they don’t know how to fix it. They’re in too deep to get out but they can’t afford to keep going the way they are.

Microsoft has a lot of money, but they also have a plateful of problems that affect their core mission (anti-trust suits, a resurgent Apple, losing control of their own desktop, threats to Office). These are mission critical areas. Video gaming is a sideshow and one that was expected to make money. It might have, since it appeared that their first to market strategy was working; only in the rush they failed to test enough and shot themselves in the foot with a billion dollar bullet. With the failure to penetrate most foreign markets, and Nintendo’s incredible hat trick, this isn’t fun anymore. They’re not trying to assassinate Sony, they’re just trying to turn things around enough to even justify another generation. If things don’t improve they will be unlikely to return for a third round.

Sony is still in shock. They came into this generation fully expecting to own it the way they had the last. Most industry observers agreed, leading to such an arrogant overconfidence that they designed a console with the clear assumption that the market would pay any price to own the next Play Station. The burdened themselves with an overly expensive optical drive for reason that were not primarily game related. The result was a wonderful machine but one that was so expensive even Sony couldn’t defend the price and they went to market losing as much money on every console as Nintendo charged for theirs. This was such an absurd business model that we actually have an official statement that loses were less than anticipated because sales were not as high as expected ….say what?

So Sony was trapped in a disastrous death spiral of losing obscene amounts of money matched only by equally dismal loses of market share to a rival that no one considered a serious contender. In the end they just managed to turn enough of a corner to survive, but at the cost of wiping out all of the profits from the immensely successful PS2. Even now they are in the unenviable position of being under constant pressure to cut prices before they can even begin to see any real profit at the current price. It’s not about strategy with Sony this time, it’s about survival.

Like two punch-drunk prize fighters they are now mainly driven by the hope that they will outlast each other leaving a decently profitable market share no longer split between them.

And that’s about as high a strategy as they can afford to worry about right now.