This year, you will see insecurity being expressed by more and more 360 supporters. No doubt about it. The PS3 has basically won Japan. It's winning weekly sales in Europe, and should surpass the 360 there in life-time install base by summer or fall. In America, the value of the PS3 is being appreciated more and more. Its games are getting better as developers master the PS3's power. Its reliability is being talked about. Blu-ray is pretty much the next-gen format. And the HD DVD fanboys (basically accepting defeat) aren't trying to malign the PS3 like last year. You see, last year, the PS3 had to fight the 360 supporters AND the HD DVD supporters. Not this year and going forward. In forums like Gamespot and other sites, negativity towards the PS3 has been much down relative the last year. So, this year, with major exclusives coming, the PS3 is looking very good indeed.
Smart thinking for Microsoft would be to accept third place world Wide, fight for 2nd place in America, and leave this generation with some profits. If lemmings here hope that Microsoft will be 2nd place world wide, you'll be disappointed. The most likely scenario, to me, is that even in America, the 360 will be last. In fact, it's without a doubt.
Microsoft will chose profits over its place in the system war. They were willing to lose money to get their name in the game last gen. With the first XBOX, they lost more than 4 billion dollars (?), and with the 360 they still haven't made money overall. Last year, they made a few hundred millions, but this doesn't make up for the more than 1 billion dollars set aside for the Red Ring of Death. Also, don't forget the money they lost for selling the consoles at a loss the last two years. The XBOX brand is already well known now. So, they must care more about profitability than selling the most consoles, and using this profitability for the next round of system wars.
GOING FORWARD:
In 2008, I can see Microsoft dropping the 360 by 50 bucks with a bundled game or two. Microsoft won't do more than that. To drop $100 or more this year, would cost Microsof too much money. They wont do it. Also,the prices of the 360 and the PS3 will pretty much go down in tandem, if one goes down, the other must respond, with the PS3 continuing to cost $50 to $100 more. So, because of Blu-ray, the overall value of the PS3 will always be better than the 360. Not only that, while Microsoft was busy trying to design a more reliable console and to make the Vista operating system an excellent choice for gaming, Sony's been investing heavily in exclusive games. So going forward, expect exclusive first party games to be a lot better on the PS3. With Blu-ray becoming the next-gen movie format, expect movie enthusiasts to dip into gaming as well, buying games on the PS3.
Microsoft will not make LIVE free. The thing with LIVE is that it's a cash cow for Microsoft, though it scares the casuals like the plaque. Developers have already assumed that the 360 is a hardcore's console and have invested their money accordingly. Making LIVE free to attract casuals doesn't make sense. Because even when LIVE is free, there aren't enough games that attract the casuals--developers haven't planned for it. So Microsoft will continue to charge for LIVE and scare away the casuals in the process. Casuals and Wii owners looking to buy/upgrade their video game sytems and DVD players, will flock to the PS3-- because the PS3, not the 360, makes the best use of the HD TV; only the PS3 can do HD gaming AND HD movies.
This generation will last longer than previous generations. Developers will want to recoup their investments in this generation first before getting to the next one. Developing for the PS4 or XBOX 720 would cost too much to make the games look significantly better than those on the PS3 or the 360. Games like Ratchet and Clank already look similar to a PIXAR movie. Games on the PS4 or the 720 will need to basically match a PIXAR movie. The budget for such a game will scare away even the big publishers. So, Microsoft and Sony have no choice but to wait for developers to recoup their investments and make some easy money. By then, the price difference between the 360 and PS3 will matter less and less, and the value of the PS3 only increases relative to the 360. Also, the longer this generation lasts, the superior power of the PS3 will be more and more realized. In addition, the longer this generation lasts, the more likely current PS2 owners will upgrade to the PS3.
Finally, Microsoft will choose to make some profits this generation and accept 3rd place everywhere, Japan, Europe, and America. It then tries to be the first to bring out their XBOX 720 on 2010 or later, not before, for reasons discussed above. Sony, may bring the PS4 out at the same time or a year later. Regardless, Sony will continue to sell and support the PS3, just like the PS2, especially since the PS3 will continue to retain it's value as a Blu-ray player. Unlike Sony, Microsoft (and developers) will not be as proactive in supporting the 360 after its 720 is out, because the 360 doesn't have the world wide install base of the PS3. So, even after the 360 stops selling in the US, the PS3 will. Thus, there is no doubt that the PS3 will beat the 360 here in the US, let alone Japan and Europe.
UPDATE:
For those of you who think the 360 will beat the PS3 in America, try to determine which one will still be in the shops while the other is discontinued. Elsewhere and here in America, it's the PS3 that will be in the shops and the 360 that will be discontinued. That's because there'll be more demand for the PS3; the Blu-ray player makes it a very cheap way to get into HD movies. Also, more software will be made for the PS3 because of its higher world wide install base. In short, more demand=longer life span.
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