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Akvod said:

I thought Michael Pachter had a pretty simple and compelling argument. You mainly make money off of consoles by:

1) Royalties/Licensing fees from third party games.

2) Selling your consoles at a profit

You forgot 3) Selling your own games.

Not joking: at the rate Nintendo games often sell, the royalties they save by being first party have to be pretty monstrous.