Gatekeepers

The big problem with game consoles is that there are too many of them. While I have heard many people say that there should only be one game console, this is not likely to ever happen, and people who keep touting this idea are obviously too young to remember 3D0. The 3D0 was a game console that would be licensed to other manufacturers. In other words, anybody who wanted to make the console could do so as long as they paid their licensing fees, sort of like Blu-ray. The problem is that the game console makers made their money off of licensing the rights to make games so were willing to take a per-unit loss on manufacturing their machines so the cost of the 3D0 machine was significantly higher then it's competitors. It failed in the marketplace.

The thing is that money isn't made off of the machines themselves, the money in the game console industry is made by being the gatekeeper. In order for me to make a game for the XBox 360, PS3, or Wii I have to pay a fee to Microsoft, Sony, or Nintendo. In other words, the company controlling the console acts like a gatekeeper. The same thing applies to many other industries. For instance, the Java vs Flash/Flex vs .net/Silverlight battle is about controlling the format used for the future of interactive web content. Thankfully, in this war there is no per unit licensing fees (otherwise Blazing Games would not exist) but is about the sale of tools for working with that format.

The point being that as long as there is a lot of money to be made by being the gatekeeper, companies are going to be willing to take a loss as the potential long term gains outweigh the short-term losses. Consumers make this problem worse because they don't care about standards so choose to purchase the gatekeeper's offerings.