Its all about money. If MS continues to lose major money on their gaming division, I doubt there will be a 3rd MS console. MS shareholders are not going to let MS continue to throw away money to "buy-in" a spot in the console market. MS had to compete in the console market through a 'sell-at-loss' strategy because of several reasons.

If Sony loses major money on the PS3, its a big possibility there won't be a PS4. It's all about money.

There is absolutely no way the the Game cube made more money than the PS2. If in fact that was the case Nintendo would still be supporting the System. There is no Problem in selling Hardware at a loss for Large companies it is a Risk they are well able to Handle. Micro soft and sony have way too many other areas to make the money back ie. just the fact the PS3 has already jump started the Blu-Ray market. For Nintendo it is a near impossibility to sell a console at a loss. Other than Video games they have virtually no other way to gain profits. The only thing that will happen is possibly a longer generation from Sony and Microsoft. The other Possibility is to untrench Nintendo in the buget console model. In which I mean next generation Sony and Microsoft make less advanced consoles and still take a loss. I really think that Microsoft do not view Nintendo as a competitor and I do believe Nintendo itself stated the Wii was not to be a competitor to the PS3 or 360. so in the end I believe sony and Microsoft will leave nintendo to expand the Market and be happy getting the kids dollars when thier taste matures a bit.

No, the Gamecube did not make more money than the PS2. Nintendo likely made the bulk of their money that generation off of GBA, considering they were able to sell 20 million copies of Mario remakes, and 30 million Pokemon games. But the bottom line was, while Sony had the most successful system of all time sales-wise, Nintendo was making more money. This is why Sony made PSP and ramped-up internal software development throughout the generation: they were imitating Nintendo. And its unlikely Gamecube lost money. They probably didn't pay for many third party exclusives (since they didn't have many...), or spend a ton on continued advertising, once it was clear they were not competing for first place. And the hardware was only sold at a very slim loss (according to reports at the time), and then only during the initial launch. Bottom line: If Nintendo approached Gamecube development how Sony approached PS2, it would have been a near-disaster. If Sony approached PS2 development how Nintendo approached Gamecube, they would have been far more profitable, and probably never had that off-year of big losses during launch.

I think the real question about selling at a loss is what your doing because of it. In the PS3s case (uniquely), it's to try to save off the fact that without the loss, no one would buy a $800 PS3. No one. For Microsoft's case, it was a much lower loss, and was recouped VERY quickly (about 1 year to break even as far as I can tell). What's key about last-gen's price losses was the fact that it allowed rather good consoles in the PS2 and Xbox to maintain a very strong mainstream price vs. the GC. I think that's MS and Sony's huge error: they've put out systems with bells and whistles that are just too much for gamers. I love the 360, and I waited in line for it @ launch day, but I did it because I ended up selling an extra 360, so I wouldn't pay the astronomical price. IMO, if Sony, or MS would of launched their systems @ $300, we wouldn't be discussing the Wii's dominance. Period. The Wii would be doing very good, but I don't know if it'd do quite what it's doing in the US and Europe.