I think prodigy has an excellent point - MS has lost almost all exclusive titles going forward whereas Sony was a lot of great 1st and 2nd party developers. THAT will make a major difference going forward.

Will the 360 lose this generation? That was almost a forgone conclusion since Wii became the break-out hit it is. It was always only a matter of time before the PS3 started to pick-up (price drops, good games and blu-ray victory where needed first).

Will the 360 be the Gamecube and lose developer support becoming a 'dead' system? No. Neither HD console will ever have PS2's support, and therefore it'll always be in 3rd parties interest to maximize their base by being on both HD systems (or Wii exclusive).

The worst thing, is the image. With Xbox MS came from nowhere and stole 2nd place (a very very distant 2nd place but 2nd nevertheless) from Nintendo making themselves look like an up and comer. They continued this image by being out 1st with the 360 and then outselling the PS3 last year. However if they fall into 3rd, IE: LAST place, then that image of 'becoming something' changes to 'becoming nothing' in the public's perception. That's a horrible place to start the next gen from. Nintendo turned it around with true innovation (and considerable risk) with the Wii, but MS isn't that creative.

^ My estimates could be a bit too optimistic. We can only dream. I expect Wii to reach 42 million hardware total by the end of the year, 360 to reach 25 million hardware total and the PS3 will hopefully get to 27 million hardware total.

In regards to maintaining pace with its competitors the 360 is  falling behind.

I see a lot of trolling on the part of some Playstation fanboys which leads me to believe the 360 isn't in trouble.

@montreal

GC had 13% market share, XB had 15% market share, VGchartz data. The 360 is far from 'Gamecubing' and is well on course to beat XB lifetime sales by next year.

MS always had capable and successful competitors, its more of a case of people dismissing MS as a competitor. Based on the current hard numbers I dont see how they can think that.

The 360 will be third place this generation as far as world wide console sales. I'm 99% convinced that's the trend. However looking at how strong the software sales are for the system in America it's rediculous to say the system is in any kind of trouble.

The 360 was really supposed to sell more than it did last year with the releases of Halo 3, Bio Shock, and Mass Effect. Really an exclusive threesome that strong should have sold more systems. It really needed to build more momentum during PS3's weaker period if it was having any shot at beating that system in the long haul. Now the PS3 is coming on strong, and that before MGS 4, FFXIII, and GT5, and just wait until Blu Ray is the solidified winner of the format race. Still what will keep the 360 very successful is it attracts almost exclusively the super hardcore gamer that will buy a lot of games. It will likely have the highest attach rate of any system this generation.

How exactly is it supposed to do that? For the sake of simple math, let's assume the PS3 improves its sales drastically to a million units per month from now until the end of the Summer.

May 1: 12.5 million

June 1: 13.5 million

August 1: 14.5 million

September 1: 15.5 million

Assuming this large upswing, the PS3 will have to sell only 11.5 million units -- its current lifetime to date total mind you -- during the holiday season.

Yep, there's an outside chance of that happening. Not.

How do you define "in trouble?" If you define it as "microsoft will never reach the goal it set for the 360, and will likely finish way back in third place this generation" as "in trouble" then, yes, it's in trouble.

But if you define, "maybe they can have a couple of slightly profitable years near the end of the cycle, not counting the cost of repairs, showing that it's theoretically possible to eventually generate a profit from the Xbox business if they stop making show-stopping mistakes," as success, then it's a success.

Things is the PS3 has been outselling the 360 and steadily increasing the amount by which it outsells it WITHOUT any exclusive AAA out. That's when you realize how bad things are becoming for Microsoft....

2008, in more ways than others is going to be the turning point of this generation....

It is however not doing so bad that it is a failure but it is at risk of missing to capitalize on the second half of this gen on hardware ( when companies actually start to make a profit on the hardware, usually only the gen winner, maybe the top 2 company this gen) ,

360 is in trouble if they keep losing to the PS3 in America. They need to get a better grip on the US market, and have to stop shooting themselves in the foot (Hardware failures and supply issues).

Based on your generous to PS3 prediction: End of Year marketshare prediction : Wii 45%, Xbox360 30%, PS3 25%, I have worked out a scenario for that.

And that is 360 will reach 26m (+10m from last year) and PS3 will reach 22m (+13m from last year). Even if this happens and the gap is cut to 3.5m, how can you say MS didnt capitalise on HW? If 10m a year is still not capitalising on HW then I dont know what is.