A breakdown of gaming profits for the last 3 years.

[Bodhesatva]

johnsobas said:
What happened to sony in 05 that they started losing so much money? Researching for PS3 or was it PSP? It's hard to imagine that PS2 hurt anything but that -525 stands out in Q4 05

First notice that Q4 for Sony and Nintendo represent post-holiday sales, from January through March. This is easily the slowest sales period of the year, and you can see that every year, Sony and Nintendo make less money in this time than at any other point in the year. That's why that quarter in particular was so poor.

More generally, however, my guess as to what hurt their profitability so greatly is a combination of PS3 developmental costs and PSP loss-leading strategies. While the PSP may be making money on each console sold now (I think that's likely), it was definitely sold at a loss to begin with. In the early parts of the year, your spending on marketing, developing and research do not decrease significantly, but your income from sales declines sharply; therefore, your net earnings decrease sharply. For Nintendo, this means making less profits; for Sony, this means going from significant profits to significant losses.