Don't discount Nintendo quite so easily.
Anything is possible, but it's an uphill battle if the Wii U wants to come out on top in sales. Technologically, it's barely a step up on the PS3 and 360, so most publishers will probably skip it like they did the Wii this gen. The Wii U's only hope then is to attract casual gamers the same way the Wii did, but they've been trying that and the tablet controller just doesn't seem to appeal to people the same way the motion controllers did. People that want tablets appear to be buying actual tablets.
I don't think the console will die like the Dreamcast, once there's a price cut and Nintendo release more of their own first-party games then they'll build up a respectable niche. Maybe they'll go on to dominate the market, but that doesn't look likely at the moment.
the developers make the damn games for these consoles and more than likely pushed Microsoft (and probably Sony) for this kind of setup.
That was the only way I could make sense of MS's decision, but someone on reddit dug up an interview with a Sony rep
from February where he clearly stated that the PS4 doesn't require an internet connection "at all". If that's true, and if Sony hasn't changed that policy in the last three months, then the PS4 can't possibly have the same level of DRM as the XBO. Limited activations and tying games to accounts would be almost impossible to enforce without an internet connection.
Maybe something happened in the last few months for Sony to change that policy, but I think Sony's policy may be to allow publishers to decide if they want to block used games, but Sony wont enforce that across every game. That way the publishers that want this DRM get what they want, but Sony gets to deflect the criticism onto the publishers that choose to use it.
Alternatively, this DRM really was MS's brainchild and is part of their plan to make money off the used game market. This rumour
, supposedly from retail sources, claims that MS is imposing terms on retailers that want to resell XBO games and that MS and the publishers will get the lion's share of the profit. Maybe MS saw another avenue to make money, got the publishers on board by offering them money too, and failed to anticipate the scale of the backlash?