I think their continued focus on this core demographic is just handing this generation to Nintendo.
For a start they must be looking at diminishing returns from this demographic vs those who've already got a 360.
Then there's the fact that right now Wii is just walking away with the family/casual demographic and MS is doing nothing effective to even try and compete. A few casual games isn't going to cut it IMHO - they need a sustained campaign targeting other demographics that their core one.
I'm beginning to think MS has already internally conceded defeat in terms of console sales to Nintendo and perhaps even that they will end up behind PS3 WW and are instead focusing on just entrenching around their core US demographic as the launch platform for their next console - not that there's anything wrong with that. It's already clear they've done much better with 360 than Xbox and should be in a better position when its all change around 2012 or so.
Try to be reasonable... its easier than you think...
