No competition.
Thats right, no competition. The Wii has effectively created its own market. Its not quite a handheld, yet its not quite a 'main system' either. You'll never see Metal Gear Solid, or GTA on the Wii. The 360 is not a threat to the PS3. Any 'threat' it ever did pose has came and gone and has proven to be nothing more than hot air. In order for the 360 to reasonably take on the PS3, it had to gain massive leads by the end of 2007. It had to steal vast amounts of Sonys massive PS2 reserve install base. Even then, on top of this, it needed the PS3 to suffer some spectacular stumbles, it needed HD-DVD to defeat Blu-Ray and it needed to satisfy all the customers it gained. Then, and only then - did Microsoft have even a 'chance' of derailing the PS3. It needed a lead of at least 15-20 Million.
What has happened, however, was that the 360 failed to poach any real amount of the PS2 install base. Indeed, throughout the critical period, the PS2 even outsold the 360. HD-DVD also failed, earlier than anyone would have expected as well. The 360 sold worse in 2007 than in 2006 despite having a better lineup for 2007. This was in all probability due to the last point - failure to satisfy what customers it did have. Not only was the machine unreliable, leaving them unhappy - it was unrealiable to the point of scaring people away. A 33% death rate is unheard of, and while the 360 may be getting away with it publicity-wise now, it should prove to be the 'Cause of death' tag for the machine. Meanwhile, that other pre-requisite for MS, that is, a stumbling PS3 - didn't come to pass either. Blu-Ray has been successful and the PS3 outsold the 360 in 2007, despite 2007 being the best year the 360 will ever have (Halo 3 won't happen again, for example). Meanwhile, 2007 was by all accounts probably the weakest year the PS3 will ever have, discounting 2006.
The highway competition-wise is Sonys from here on out. The gap is closing and will soon be a distant memory. Microsofts pre-emptive manouevre has failed. Microsoft can now do one of two things, both of which will not work due to the timing and history of the 360:
a) Keep the 360 alive for as long as the PS3 stays popular, this will be 2011 and/or beyond. By doing this, by then the PS3 will have found its stride, its power will have been unlocked, its PS2 fans will have returned by the dozens of millions and devs will be fighting for a spot on it. Blu-Ray will be next to essential for the latest GTA's etc. Next to this, the 360 will look like a corpse, nobody will want to try developing for a console with no BD-Rom and no HDD as standard, especially when its locked in third place.
b) Release the successor to the 360. This is another bad move, as I said - you just can't release console after console. Releasing another console is basic admission that your previous effort simply *Couldn't get the job done*. It is NOT a good thing, it is NOT a show of strength, it is merely proving that Microsoft were forced to go back to the drawing board in the war against the PS3. Sega released consoles too often, look what happened there. Only a minority of 10-20 Million will buy the console each time, whereas with the PS3, the numbers will just rise and rise. Developers will go to the most stable system.
And the future? As I have stated, the successor to the 360 will fail because of the same reason the 360 itself has failed - it will be released too soon, too often. That leaves Nintendo. Its no secret that the big N is making out like bandits. When the Wii has ran its course - and it will, I can see Nintendo throwing the capitalmade into a 'serious effort'. Or, a system to threaten the PS3. A true successor to the Gamecube, if you like. The masses of Wii owners will be loyal to Nintendo and give it a shot. Thats important, unlike Microsoft - its good to have a base to jump off. The 360 only had 24 Million Xbox users to call up, most of the current 360 install base is probably just from that crowd. Evidently its not enough. The PS3 has 80-90 Million PS2 users who have already made their minds up.
But this is years away, by then. The PS3 will have retaken the seat. Nintendo will have to pull something huge out of the bag strategically.