I don't think things are just smooth sailing from here on out. Sales for music games are down this year. They are no longer getting many sales from the higher-priced peripheral bundles, which even with a surprisingly low margin, are probably higher margin than the standalone games.
And they don't have the market to themselves. They are competing with Guitar Hero, and GH is winning, which is going to automatically mean a lower margin business. They are in the old lower costs vs. higher differentiation problem. As in, they can either make cut rate instruments and ditch the master tracks, and sell for cheap, or they can go out and buy the biggest content possible like The Beatles to stand out from GH at the same price. They may make some money still, depending on where annual sales level out, but the point where I would expect this to be a high margin business is when they had the only full band game on the market, with just 50 some odd songs, for almost $200. Not when they have 80 songs, or 40 ultra-expensive songs like the Beatles, for $60.
"[Our former customers] are unable to find software which they WANT to play."
"The way to solve this problem lies in how to communicate what kind of games [they CAN play]."
Satoru Iwata, Nintendo President. Only slightly paraphrased.
