As for MS they have the "Games for Windows" brand which is essentially a software xbox live, so as long as developers have that on their game box MS still sees money. In fact they could easily have stayed OUT of the console business entirely and simply developed a gaming environment within all PCs similar to steam and or even what they're doing now with Win 8, saving themselves a lot of trouble, but the xbox exists for no other reason that Bill Gate's ego and his monopolistic mindset to crush every industry he didn't already control, he specifically wanted to take over console gaming and he couldn't do that from the PC, so he disguised a PC as a console.
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