Also,remember that the point of this article is not profits, it's about Margins. Microsoft makes a MUCH higher margin with Windows (10% vs 72%). Investors want Microsoft to get out of these entertainment industries and focus more on Windows, which has better margins.

I think we're coming at this differently or I'm missing something.  The only element of your previous post I disagreed with is that Sony and MS are euqally locked into a HW arms race around supporting steadily increasing graphical prowess.  Everything else is pretty much how I view their motives and investment in the videogame industry.

For me the PS1 / PS2 Sony never felt like they were hardcore.  The bulk of the install base was fairly casual, so I guess I also disagree that Sony only focuses on the hardcore in a similar manner to MS; the evidence to me is they wanted to continue to expand the appeal of gaming as much as Nintendo (look at dance mats, Eyetoys, Singstar, etc) and maintain their presence as a mass market product - their problem is they fell way behind Nintendo this generation in how to do so.

First, let me start that this is no such thing as "casuals," and "hardcore." They are just buzz workds and have no meaning. "Casual," just refers to a "lesser," gamer. "Hardcore," is anything someone likes. People call old NES games like Super Mario Brothers "hardcore," even though they are more casual (you can warp and beat it in about an hour).

The PS1/PS2 are not casual, or, more so, they strayed further from the traditiona; roots of videogames made during the Atari, NES and SNES days. Games quickly became more about cinamatic quality. Naturally, the PS2 generation had the lowest household penatration of any generation since the NES (in the US). Sony's success is more linked with being the first console to be successful in all regions (NES never took off in Europe due to troubles in the US), and population growth and mutliple console ownership. Reggie speaks about all this and more here.

What I meantion of the hardware arms race is due to their actions and disruption. There has been a large focus on making the hardware powerful and to have a lot of multimedia features. This is why we have two big systems that cost an arm and a leg and overshot the market (which is what allowed Nintendo to begin disrupting the industry). Remember all the hubub about the Cell processor. Also, Sony and Microsoft will continue to try and one up each other's console. The incumbents, according to disruption, make their products better and better in the old market. They will continue to have an arms race and make the best console. Meanwhile, Nintendo makes motion control games and goars them.

Of course, this is all only targeted to our disagreements. Otherwise, I guess we see eye to eye.

The point was about casual and hardcore gamers, not games. Referring to people and their activities the terms casual and hardcore are actually quite well defined. A casual movie-goer is someone who goes to the cinema according to trends, pressures and personal inclinations but has no particular investment in the activity when compared to other aspects of his/her life. A hardcore skater is someone for whom the activity has surged to a central role, thus a lot of time, attention, money and effort goes in it. So much that they develops a high fidelity to the activity, which is why they also tend to constitute a hardcore market in the business sense.

What Reasonable said, which I agree with, is that PS1/PS2 expanded gaming to people who never gamed before, save the mandatory one-off activity with a younger nephew, son or geeky friend. The typical children playing NES and Atari games were actually hardcore gamers, as all children are devoted to their games and PC gamers were a more varied marked, with adults playing flight and war simulators, but they were generally tagged with the stigma of geekdom. With PS1 I remember seeing for the first time adults buying a console to play football games with adult friends. And a surge of the family oriented genre.

Interesting.  I pretty much agree then.  I do have a different perspective on a couple of elements as noted but it seems they are due to geography and perception.  In Europe, at least from my individual perspective plus general brand identity I'm aware of, the view of Sony's past consoles is different to US.

I don't this perception has changed that much, apart from UK, which does seem to be turning into a mini US from a videogame market perspective.

I remain pretty sure that here Sony could ease themselves out of the arms race attitude if they wanted too -UK and a smaller minority aside I don't think the focus is on escalating features to another level to that extent, as the Wii shows.

However, I can see that the US perspective may well be very different, and that in that region Sony and MS have put themselves firmly in the must make it faster, bigger, stronger arena while Nintendo have put themselves in the 'here's something of a new take that you'll like' arena - the disruptor to existing standards.

Yeah drop the Xbox then we would only have Sony Games... Nintendo makes what 1 good game for year ?? oh great great...

OK, I did know you were from Europe. The PS1 was one of the first systems to do well in Europe, so that may be why.

Microsoft is in a tricky position from what i've heard. There could be a full-on revolt against Ballmer.

dont do it MS!  HAving Ninty as Sony's nemesis won't be nearly as fun as MS is now.

To be fair, I'm a MS stockholder, and I would hate for Microsoft to leave the videogame industry.

However, when I look at stock valuation and the possible drag that MS gaming division has had on profitability which in turn can directly impact growth within a company, especially with the fickleness of investors, it is quite understandable.

The investment culture is very simple.  Make me money.  Don't care about games, don't care about graphs, where's my MONEY!!!