Consoles in this day and age, seem to follow a "Console Cycle"... well atleast Sony did with the Playstation trilogy... The cylce sees the introduction of a new generation machine every 5 to 6 years, however the production life of each machine is around 10 years.
Take for example the (original) Playstation which was released in Dec 1994. This was followed in Mar 2000 by the PS2, however it remained in production till Mar 2006 when Sony finally stopped making the machines. Which meant that after six years, the Playstation 2 was being sold on it's own (not including the PSP). However this didn't last long since Sony released the PS3 in Nov 2006, where the PS2 and PS3 have since been sold together. The Playstation 2, is still doing quite well today even with the newer improved model on sale.
Now let's take Microsoft and it's two consoles - the XBOX and XBOX360 into consideration. Having released in Nov 2001, the XBOX was quick off the mark, however only four years later, it was replaced by the XBOX360 (a deliberate attempt of Microsoft to be the first to get the next-generation Market share). However, it wasn't replaced straight away, it stayed in production for a year extra before it saw the end in Nov 2006 after a ripe old age of just 5.
Now taking a look at the two cases above, if Microsoft had followed Sony's suite and simply made the (original) XBOX cheaper to produce (and thus can be sold at a lower price, for similar profits) then you could be certain that many people would still have bought it if the Playstation and Playstation 2 are anything to go by. If they had kept the XBOX in production for another 4-5 years, they could have managed to gain an even larger Gaming Market Share, as well as make more of a profit.... could this have been a BIG mistake on Microsoft's part?
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They may have taken a big chunk of the NextGen pie but you're completely disregarding the LastGen pie where profit is still being made by Sony.
That's there mistake.
Agreed, Sony support the last generation console even if they are in the next generation.
From reading this it just seems like fanboyism everywhere. Especially considering nobody is taking into account the Playstation has been around far longer than the Xbox.
Point is, the XBox was brilliant, but Microsoft majorly screwed up by thinking they would replace it completely with XBOX 360.