Kyros said: "how do Sony and Microsoft avoid having their products become interchangable from the consumer vantage point?"
I think the question is, why should they avoid this? At the moment the combined 360/PS3 userbase makes most third-party PS360 multiplatforms a better choice for developers than the Wii/Ps2 multiplats. Alone they could struggle but together they are a pretty formidable opponent to the casual gaming juggernaut.
Personally I think this is a great thing. As a PS3 owner I have access to most great titles that are on the 360 and vice versa. I like BluRay and the far more sophisticated looks of the PS3. Other people want the better online capabilities of the 360. Adn both can play almost all of the best third-party games of this generation.
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I think you've missed my point, Kyros. I agree, this is a great thing from the position of gamers: it means they get to play nearly all the games, no matter which platform they choose.
It's also a good thing for developers: they can make one game that works for both platforms simultaneously without a great deal of additional investment.
It's a terrible thing for Sony and Microsoft, though: it means that only half the profit/revenue goes to each. Take this to an extreme, to understand the point. Imagine if every single person who played video games had a separate video game system made by a separate publisher unique to them. However, all the games developers made can/would work across each platform. This is great for developers, because their games will work for everyone. It's great for individual players, because they get to play all the games no matter which individual unit they choose. It's cataclysmically, ridiculously awful for the gaming machine producers, though. Researching, developing and producing a console just to sell it to 1 person? And have only that 1 person buy your games/give you game royalties?
That's the situation Sony/Microsoft are in, but in a much less severe manner. Because there isn't much to distinguish the 360 from the PS3 in terms of game selection, marketing or demographic focus, it basically ends up with this situation:
1) Consumers can choose whichever console they want
2) Developers can develop 1 game for both platforms because the interests/tastes of both platforms is very similar
3) Microsoft and Sony have to split the revenue and profit from royalties basically down the middle
Number 1 and number 2 are good, number 3 definitely isn't.