Even if they got creamed again this generation, I don't think they plan to exit. The console may eventually morph into another piece of home electronics that is meant to handle the age of full distribution of digital content, from music and movies to games and more.
Microsoft sees the living room becoming the hub for this kind of content, as opposed to the traditional pc setup, so there's no way they'll give up since they plan to establish themselves as the forerunner for digitally distributed content.
I'm rooting for MS this generation. I like my 360 and what they've done... but I'm also rooting for Sony in a way. The living room market is going to need strong competitors in the coming years to make sure we, the consumer, don't get fucked over, so if MS has to fight tooth and nail the next 5-10 years, I'm more than ok with that.
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