somehow people keep making analogies to the launch of the 360. but the scenarios are very different this time. The reasons why Microsoft rushed to launch the 360 were many.
For one thing, sales of the Xbox1 system, while excellent, never reach critical mass. The profit from the sale of software wasn't enough to overcome the fact that they were losing money on every single console, with no hope of cutting costs through improved efficiencies because all the technology was off-the-shelf and owned by Intel, Nvidia, etc. Intel and Nvidia were sitting in a pretty position. It was not in their interests at all to cut Microsoft a break on the parts. In fact, Intel had to keep making that modified PIII-800MHz Coppermine processor just for the Xbox when PC's had moved onto GHz+ processors.
The more Xbox1's that were sold, the more money was lost. They were basically paying customers $150+ every time a person bought an Xbox1. While Sony could cut costs through die shrinks, SoC's, etc. because they owned the technology, Microsoft was still stuck paying full price for everything. And when Sony kept reducing the price of the PS2 and still maintain profit, Microsoft had to follow and lose even more money per console. Sales of the Xbox1, while not at PS2 levels, were great but more sales meant more losses. They had to get Xbox1 removed from the market, and the only way to do that was to release the 360 as fast as possible.
Also, since Xbox1 was never in a dominant position, the Xbox kept getting PS2 ports. So games didn't take advantage of the broadband support, didn't take advantage of a centralized network, didn't take advantage of the extra horsepower, didn't take advantage of the hard drive, etc. And the ports were released very late because they were done by smaller teams or because really, you port to new platforms because you've already maximized sales on the core platforms and need new revenue streams. Microsoft was never in a position to dictate any terms to any game developers.
So they had to beat Sony to the next generation at all cost.
But this generation is different. Microsoft was able to be successful and command significant attention from all developers. They're making money and can actually have a say in the direction for the industry. They can actually dictate terms to the game companies. Companies that would've never given much attention to the Xbox1 had to pay attention because of the significant marketshare of the 360.
And the success of the 360 was leveraged by many game companies who often made the 360 the multiplatform device of choice because the same programming environment meant it was easy to port to the PC whereas in the last generation, the main team worked on the PS2 version while a secondary team had the job of porting PS2 assets.
Microsoft tried to push online gaming in the Xbox1 generation but most people owned PS2 and online gaming was not big on the PS2. This generation, gamers appreciated the social network on the Xbox and Xbox has by far the biggest numbers of online gamers in terms of gamers and hours played.
Also, Microsoft owned the technology this generation. They had IBM and ATI design the CPU and GPU, but they owned the IP. They also leveraged technology they had through acquisitions such as WebTV. So every improved efficiency meant that the cost to produce the consoles got cheaper and cheaper. Every die shrink, every consolidation meant that they actually started to make more and more money off the sale of the console itself.
All Microsoft needs to do is now fight in terms of content. Because let's face it. It's content that supports these ecosystems. It's why people who are in the Apple universe don't leave. It's why Microsoft keeps adding content and new features to the dashboard so that people are less likely to leave.
Microsoft is praying that Sony goes slow too. If anyone has the pressure to move faster, it's Sony. Of course, neither Microsoft nor Sony can dawdle too long because leaving Nintendo out there to grab new customers is never a good thing. But really, unless Nintendo truly beefs up their online network or offers technology that is a true leap over the 360 and PS3, it won't gain much traction and will remain an interim solution like the Dreamcast. And Nintendo does not lose money on the sale of game systems. In their long illustrious history, the only game system ever to lose money per sale is the 3DS and they had to drop its price into the loss territory because market momentum for that was low, and they had to ignite it or else the device would be forgotten as smartphones progressed. They need to make money on the hardware. Period.
So to say that Microsoft has to be a year ahead of Sony is wrong logic because the conditions are different. Microsoft only has to match Sony in terms of a system launch time now. And then beat them in terms of a content war.
The name of the game is profit. It's not about winning at all cost. It's not marketshare at all cost. If it was about marketshare and winning, they'd sell the 360 for $1. What is the point of winning marketshare if you go bankrupt?
Not to say that Microsoft can't lose heavily in the next generation. I'm sure Sony will look at the game/system updating process, at the party chat process, etc. and improve PSN so that it's more feature equivalent to Xbox Live (right now, PSN is only equivalent in terms of feature bullet points rather than true functionality). And Nintendo will definitely have to acknowledge that gaming has moved on to the online world and that they need to have a real online network. Microsoft can shoot themselves in the foot if they impose conditions that the gaming public won't accept (blocking used games, screen integrated into controller, etc.).
But as long as Microsoft doesn't rest on its laurels and gamers are too intertwined with the Xbox ecosystem, they're in good shape.