so you dont feel that in 2010 with a price cut for wii, and by then a 100 dollar drop for the ps3, they will be able to push the gen up for one more sales record, it remains to be seen how the 360 will do in 2010 (5 years of growth would be insane )

the financial health though can dictate price cuts vs value added bundles, greater subsidising of hardware, and more spending on first party software, i like to pay close attention, so we can make better guess at future moves.... 

I know its pretty futile to completely guess, but i will feel pretty vindicated if no next gen xbox comes out before 2012 like i have held since 2007 

Barring fundamental changes in their main businesses, Nintendo and Microsoft are always going to be profitable though. Sony used to always profit as well, but the company is losing to competitors in alot of core businesses and has been hurt by the economy.

Microsoft gaming business still has very little impact on it's overall financial results too and with the early positive reception for Windows 7, I expect Microsoft to remain hugely profitable for the near future ( right now Microsoft makes as much money in a quarter than Nintendo makes in the whole year ( just a reminder for those impressed by Nintendo earnings :p)...).

The major difference between Microsoft and Sony with regards to gaming is that Microsoft has passed the point where it is willing to divert the huge profits from its main divisions to the Entertainment Division (which is Zune, Xbox and some other smaller projects), while Sony is willing to sacrifice far more of its corporate holdings, profit, potential for profit, really its entire strategical outlook for the Playstation (now "Networked Services" division as of Apr 2009) line because PS1 and PS2 produced a bit over a quarter of Sony's profits from 1995 to 2005.

My issue with these proposed come backs of Sony as a gaming brand center on the fact that the company largely relied on huge outside support due to favorable publishing economics to build the PS1 and PS2 into juggernauts. If you look at the Game Boy or the Game Boy Advance, Nintendo has shown it can be profitable, and sell tens of millions of systems without much third party support due to the strong cache of internal brands. Sony doesn't to have the ability to consistently deliver content internally to push hardware.  I don't think your ever going to see Nintendo or Microsoft screw over developers enough for Sony to build a huge cache of third party exclusives.

I think as a rule of thumb, a system probably needs 60-80% of major third party content to offset the power of Nintendo's content, plus whatever third party exclusives it gets. If it dips below that level, or the 60-80% is "shared", the largest piece of the pie is going to go to Nintendo. 

Right now if you look at software sales for the three systems you probably have (estimated through June 2009)

Wii - 390m...215m third party  (45% first Party)

360 - 275m...190m third party  (30% first party)

PS3 - 190m...133m third party  (35% first party)

If those estimates are remotely close, you have 40% of all third party content sold on Wii, with probably 85% of the remaining 60% shared between PS3/360. "OK" third party exclusive support + Nintendo content is a major advantage over Sony/Microsoft support + "great" non-exclusive support.

Hell, Wii already has had more third party titles on it sell 3m+ copies then NES did, and NES had a 62m base - over 20% higher than where Wii is now. If Wii stopped selling completely even at 75 million, I would expect 350-400m third party games to be sold on it - and thats enough to prevent full third party support swinging to either Microsoft or Sony in the near term. At the moment it is looking like Wii will get to over 100 million in 24 to 36 months, so there should be more like 500m + third party games sold on Wii. If the attach rate gets to 10 by that time, I think Wii could end selling as many as 700m or 800m third party games.

I think Microsoft is in a really good position right now and how much they decide to invest in gaming in the future is probably going to depend partially on the success of Windows 7 and how well they manage to contain Google out of the PC.
The better those strategic areas of their business do, the more money they will be ready to throw at the Xbox and at games development again (and the less well those do, the less willing they will be to throw cash at the Xbox).

Nintendo is in a good position too but he's facing another challenge.
The main issue they have in my view is two folds :
- They have to watch rising competition from the iPhone for their handhelds business.( but their strong franchises should allow them to retain a strong market position)
- They have to be carefull about not moving their console base to their handheld base. ( it's happened in Japan, and you could make a case it's starting to happen outside of Japan these last few months( DS sales up, Wii sales down)).

Ideally they want their users to have both console and handhelds, not handheld only and the fact that they are slowly making everyone of their franchise available on handhelds is making some users only purchase handhelds.

Handhelds have the others advantages that they are a lot more friendly for casual users. ( one of the issue with consoles for the new casual gamers they are bringing is console need a tv ( which means the rest of the family can't watch it if you use the console), handhelds don't have that issue and are far more convenient for casuals.

I think Sony can manage to salvage the PS brand for the console market if they don't make the same mistakes next gen ( pricing mainly).
I do think the PSP is facing a huge risk of disappearing in the next years.
Most of the non gaming capabilities of the PSP are available on the iPhone which is a lot more popular, piracy is killing the gaming software on the PSP and Sony really doesn't have strong franchises on the PSP...

but is not just profit that concerns microsoft, it perception in the overall market. for the first time in a long time MS is being labeled as a sell stock based on the failure of getting corporations to switch to Vista, The continued blunders in the web search/ad trade , the lack of penetration with its mobile devices, and perceived poor development of mobile OS support. If this starts to effect stock seriously (it has not yet) it could hinder MS development in the gaming area, you point out in your next post you feel MS is no longer willing to sacrifice for the entertainment arm, but the entertainment are will continue to have huge and exasperatingly huge losses. Most of these losses will be tied up in the pushes to advance mobile OS which though growing in overall phone base, is not  the dominant formate MS needs it to be. the surfaces initiative which if you watch its evolution its clear they have dumped ridiculous amount of money into it with no real return yet, though they are working to integrate it into windows 7. the windows store budget will come out of here too and thats going to be a sinkhole for a bit.

basically MS needs windows 7 launch to exceed expectations, to keep share holders happy if that is done they can continue to drop tones of money into the entertainment division without investors demanding cuts or demanding to know whats going on line item there. cause they will be using this division again to hide the true cost of all of their projects not relating to core business. heck we could have the 360 and its line making record profit and never know about it .... though i do feel MS would brag about that 

MSFT need to pull the Xbox division into a separate subdivision since it's making $$$.

Any news from the Redmond giant yet?

Out already apparently