What's the worst that could happen then? Sony would have to work harder to compete? Proper PS1/2/3 BC? Sony put more effort into their first party output in the PS3 days.
1. I think it's a mistake to assume that Sony is going to add more features to compete with Microsoft if the competition ramps up. Sony removed A LOT of the bespoke features
including backwards compatibility from PS3 to keep the price down and compete with MS.
2. I think it's an even bigger mistake to believe that Sony only competed with Microsoft on software because they were behind. The biggest and best PS3 games were by longtime first party studios, some of whom began work on their PS3 magnum opii before the competition heated up, like Polyphony and Guerilla working on GT and Killzone since the PS2. Santa Monica and Naughty Dog would've made Uncharted 2 and GoW3 whether Sony was winning or losing. The only viable argument I see here is that their studios tried harder because the company was losing and, even then, I think that's quite difficult to believe.
3. On the third party front, if Sony had dominated, you would have had flagship titles like Metal Gear and Final Fantasy just get to work making their next PS3/PS4 game instead of the shift to multiplatform development, which we saw take up a lot of time and money for franchises that were previously iconic when they only developed for Sony.
4. I recognize this is a personal and petty but I think a lot of people have forgotten what gaming was like during the 360/Wii/PS3 days. Microsoft's executives, the Xbox fans who followed their leadership,
and the mainstream American journalists who went along with this all took on the most toxic rhetoric I've ever seen in my decades of gaming. The PS3 was clearly a superior machine and I honestly felt it had better and more unique library, but this destructive alliance between the fans, execs, and media, kept saying what a piece of shit it was with no games and any games it did have sucked. Metal Gear Solid 4, Killzone 2, and God of War III all got above 90 on metacritic and had huge followings but the discussion all over forums and by American journalists was about how they were such shitty and outdated games that sucked. This same alliance genuinely advocated, I shit you not and people forget this, that Netflix, Kinect, and the media capabilities really did make Xbox the better console and why Sony would never catch up. This narrative was literally everywhere and people only really turned against it because there was absolutely nothing running on the console at the reveal and they couldn't even give the details of their own DRM solution. Even after this disaster, many in the press and the few diehards who were left kept telling us Microsoft was going to have all the games, their warchest meant they were going to beat Sony on performance and price, Sony was still stuck in the past, and GDDR5 wasn't going to have any benefits for gaming. They really said all these things and that hurts the larger community.
Again, I acknowledge this is very personal and petty, but Microsoft deserved to lose last gen. They probably deserve to lose this gen, too, because I shudder to think what the media and forum narratives are going to be once their fans feel comfortable again gloating and spreading disinformation. I don't want to go back to that environment because it was really mean-spirited and nasty, and it's a lot more fun now when we can all just laugh at Microsoft's missteps. I don't want that to change, and I accept that it's probably not a good thing that I feel this way.