People keep mentioning Sega without saying exactly what it is they did or Sony did that cause them to fail. To try and draw a false equivilance as to say Microsoft is doing what Sony did to Sega is a little disengenous...
The biggest thing Sony did that era in competition with Sega was build a cheaper console, have cheaper dev kits and give indepent devs the technology and disc space to make the games they want with less restrictions imposed by hardware manaufactures like Nintendo, Sega and Atari. They were able to get a port of Tekken to rival Virtual Fighter in the US, bought the creator of Lemmings and spent loads of money on marketing. They didnt go on a buying spree and start purchasing the biggest 3rd party devs that made the most money for their competitors to take them out of business.
Nintendo might have suffered the same fate if they didnt create Pokemon...