This gen has been pretty far from business as usual for Sony.  PS2 took a (300 million iirc) loss it's first year, then made such a huge profit it's 2nd that the previous year was completely wiped out and PS2 was in the black.   PS3's current total loss is at $5 Billion and climbing, and there's no sign of profitability in sight.

We'll still see progress, but I have my doubts the generational leap will be quite as far as we saw with this gen.  You're not going to see Sony put out a $500-600 PS4 that costs them $800-900 to manufacture.  And honestly, if Sony doesn't do it, Microsoft won't feel the need to either.

The other end of it is that graphics technology isn't progressing at the same rate it had been (now the investment's shifting to all-in-one solutions, parallelism, economical revisions, low energy, etc), and PC gaming (the traditional roadmap for "next gen" console progression) is stalled with the HD consoles due to budgets and an evaporating market.  The industry can't afford a generational budget increase on level with what we saw this gen and Sony at least probably can't afford to subsidize it again (albeit Microsoft could)... if not for Nintendo, we'd be looking at 1980 pre-crash levels of industry decline this generation as is.

Personally, I believe the people who think Natal are going to be a huge success, are the same people that conveniently forgot that Microsoft created windows xp and vista, before they came onto windows 7. When have microsoft ever gotten it right the first time?

Have  you conveniently forgotten that windows has 93% market share? Natal may or may not be a huge success but Microsoft will try. I think Natal (which hopefully won't be called Natal when it comes out) will be a success. How big? We shall see.

On the other hand next gen we will see a mild jump in graphics in Sony and Microsoft. Nintendo will make the jump to HD as well and it will probably be equal to this gen's HD console specs. Next gen will be a software focused gen so its a toss-up on who will win. Microsoft and Sony will definately target the casual audience as well as the hardcore so Nintendo will have a fight on their hands.

The End marketshare of the ps2 is  not even reached yet. It still sells 4 Million Consoles a year. PS2 is at the moment on 138 Mio the vgchartz data allow only 400 weeks but Ps2 is longer on the market. 

With those numbers everything looks a little different.

PS2 138 Mio

Xbox 24 Mio

GC 21.5 Mio

DC 10 Mio

Ps2s marketshare is now 71.31% But thats going to increase in the next couple of years. It just launched in Brazil and you can buy it there for 299 Dollar thats extremly cheap if you compare it to the other consoles which cost 3 times more.

PS2 is not dead yet the PS1 sold until 2006 thats the PS3 release year. The PS2 is even more succesful and will be longer on the market then PS1. 2012-2014 is possible. So i guess it will be able to reach 145 Mio or even more with a pricecut. And that would boost the marketshare to nearly 75%. 

I find it hard to believe that your 3rd console will screw you up
Examples:N64,Saturn and PS3
Next up Xbox 3 will come in 3rd place!

It could be that the Companys afte they won 2-times and dominated the market they believe they would win anyway. And they do hardware decisions which are not good. For N64 it was Cartridges the games where extremly expensive the Saturn had VCD and a extremly hard to programm five Chips system. And the PS3 had the Cell which was expensive and hard to develop for and Bluray which was expensive too

No, the OP is entirely correct. For the next gen, the 720/PS4 will both have Blu-ray drives so they will both have the same stuff and therefore most of the same advantages and disadvantages. The next wii will have less of an advantage because the other two will have had time to prepare for a console that can compete against it.

Also, a lot of the analysts have said that the next gen will be closer anyway, so i'm going with them.

Does marketshare automatically mean they have a great product? The day apple decides they dont want to also make money off the hardware is the day Microsoft loses 50% of that marketshare. The day you get a Dell or HP or Sony Vaio with Apple OS XI as an installation option kiss marketshare goodbye. Apple likes to make money off every single piece of product in their pipeline, that is why they make approximately 40% of every Iphone sold, with similar margins on their computer line. It is not because Microsoft has a great product why they have marketshare in the PC buisness, It is because Apple cares enough to have some form of quality control of Hardware

I hope so. Competition = more great games

Nobody should be under any illusions, any of the big 3 could be number one next gen.