working at retail, I can tell you that the majority of consumers don't actually care about exclusives at all.  Exclusives are merely fodder for the fanboy wars.  Most people only seem to care that the system plays games.  

I ate deadly nightshade and I only have a few hours left to live so I spend it hear writing logic in the hopes that the atheist gods will admit me into athiest heaven.

The truth is this: most people underestimate the cost on a per project basis, forget about the cost on an overall basis between projects which get canned at various stages of development or published products which get dropped after a certain level of development and they don't consider the cost of price protection on the hundreds of thousands of not millions of copies depending on the game in circulation if sales are poor. Nor is advertising factored into any percieved costs either.

Take game A:

Costs at 0 units shipped may be considerably lower than the costs at 1,000,000 units shipped. Many technical 3rd party tools have royalty costs which may scale as the total sales rise. A lot of games use these tools like for instance Havok, just look at the start screen of any game you play and you'll see the logo for the various technical tools. Also depending on the contract much of the talent whether it is internal developers or external contractors like actors may have renumeration packages which scale with overall sales.

Game A also has to pay for game B C D and E which never made it through production, 4/5 game concepts get canned within their development period.

People also almost never see the stated marketing budget which can total $10M for even a modest HD game release. If you're thinking also of games which get a heap of advertising you could easily double that again for a major AAA release, perhaps even triple.

Finally when they state they earnt $80M revenue over 2M unit sales they certainly don't state that they paid back $20M in price protection when the sales of the remaining 500,000 units dry up and the game gathers dust on the shop shelves.

Overall if no major publisher is making money it is unlikely that the first party HD publishers are making money either. Its simply wishful thinking to think otherwise given the fact that multiplatform publishers can see considerably higher unit sales.

Nintendo has the most exclusives right?

Most importantly they have the most of the exclusives which actually count for anything.

By the logic of the OP, that's because the HAVE to.  They can't rely on third parties to come in and make games that are gonna sell their console.  They have to make their blockbusters, themselves.

I don't see anything unbelievable about this 'editorial'.  Makes a lot of sense.  Much better than the whole "because they don't have any studios" argument, which is an extremely narrow point of view.

don't forget the gold membership charge every year. how much you want to bet they use that to pay for the kinect ads?

I like exclusives since they don't look like shit on my ps3, unlike a lot of multiplatform games.

360 is usually the lead platform, so 360 owners don't have that problem. They don't need a lot of exclusives if most of their games look decent.

Ps3 is usually the lead platform now because its easier to port a game to 360 from ps3 instead of vice versa. 360 versions of muliplats still tend to look better though.