Is Sonys music division in bad shape too? that used to be gigantic...

Kotaku, one thing is certain, Sony is in third under complete and absolute desire.

It's no secret the recorded music industry as a whole has seen better days.

As for the PS3, releasing a full year after the competition (as a gaming platform that had the same third party titles) and for $200 more, that right there in a nutshell is what happened.

It's the third console curse. Everyone has to go through it...

N64 - Marked the first time Nintendo was not in 1st, lost many of its third party supporters.

Sega Saturn - Huge decline in sales from which Sega as a hardware company would never recover. Even the awesome Dreamcast could not save it.

Atari 7800 - Major flop which pretty much marked the end of Atari as a hardware company.

MS may be in trouble with its next console O_o

Well to be fair neither the N64 or PS3 were outright failures... far from it, they both sold a ton of units for their time.  Even if M$ does come in 3rd next gen it will only be by a slim margin the way PS3 is currently in 3rd now.  I don't see the 720 being an outright failure like the Saturn was for example.

Have been thinking the same thing, but strangely I still see MS as being best positioned to lead the market for the 8th gen. 

If the best online services can be tethered to a subsidized hardware platform under an improved XBL subscription service (that offers a more inclusive package than XBL Gold) like cell phones and their current $99 Xbox 360 experiment, and Kinect 2.0 develops into something that is more than a novelty/hobby kit item like they currently have in Kinect 1.0, in addition to providing what could be solid if not seamless integration with commonly used tablet PCs, there really isn't any reason why they shouldn't be able to improve their market position unless first party games become the determining factor for ultimate success.

I have my suspicions they won't, as much as I am about games first when it comes to consoles. 

Unless the "Windows 8" platform as a whole turns into a failure. Not saying i think this will happen, but it could be that 8's attempts at imitating tablets causes Microsoft to breed a platform that pleases no-one, and that contamination leeches into Durango, undermining it.

I still say PS3 will surpass the 360 and take second...

If the PS3 continues to go along as it is, I don't see how it isn't a possibility. Especially with Sony's growth in developing markets (small markets where the only consoles officially distributed are PS2/PSP/PS3.