Does it look like to YOU that game sales are going to suddenly increase for both PS3 and X360?

 OK. PS3. $200 dollars lost per unit sold for manufacturing cost and say another $50 paying off console development and $20 for marketing.

So that means there has to be a profit of at least $270 from games alone to break even.

 Games are very expensive to develop and the developer, publisher and manufacturer all take a cut of the profit.

Even for an optimistic attach rate of 7 games per PS3, Sony must make $39 from each game out of the selling price of $60.

And that is in no way realistic.

 QED.

 if sony, like nintendo were only a video gaming company they wouldn't have made a console that they loose $200 on each one.

 They would not of included a blu-ray player so the ps3 would have been cheaper and making them profit. its only because there are also in the movie business that there is blu ray player in the ps3.

They aren't the only company based on simple economics. Microsoft and Sony are in the video game markets for reasons far bigger than just videogames, therefor just using "they are losing money" as an excuse is dumb.

For Sony, they've almost always made a profit until they decided to push more online functions and Blu-Ray technology. As I've said, and will say again, Sony is pushing a machine to push Blu-Ray, therefore the actual benefit of the PS3 to Sony (as a corporation) isn't entirely in gaming. Therefore, their true profits off of videogames isn't entirely disclosed in mere P&L statements for the PS3, nor console losses. So what if the PS3 looses $200? The PS2 lost $120 per system @ launch (give or take), and ended up making Sony billions of dollars.

For Microsoft, they are taking the route of pushing alot of DLC, addons, content upgrades, and such. Consoles aren't their bread and butter, which is why they lose so much. However, their bread and butter are from vista/office sales, and software. Secondarily, they make lots off of servers, to which MS is using their servers for XBL content. For all we know, profits for the H&E division are less because sales of MS Points and XBL Gold subscripts. aren't included.

Nintendo is the only game company because thats all they are. For them, if Nintendo ever lost money, they'd go bankrupt. Sony and MS have the advantage of being able to lose money, and being able to recoup it.

You can extrapolate "oh, if Sony/MS were just videogame companies, they'd be bankrupt" thats just faulty logic. Your assuming that if both companies just made videogame systems, they'd pursue the same stratagies, but they wouldn't. They wouldn't have the massive bits of cash to invest in things that Nintendo can't even invest in. Theres a reason the Wii uses rehashed GC technology - it's cheap. Theres a reason Nintendo can't invest in a fully functioning online network - it costs money Nintendo is unwilling to pony up for quickly, as its alot of money. This is a plus and minus.

For consumers though, the Sony/MS is better in the fact that we gain where they lose. We get systems that are far more powerful for the dollar than the Wii. Which might mean, or not mean anything to various gamers (to me it does though).

Ultimately, your trying to make a hypothetical point thats totally invalid. MS and Sony aren't video game companies. Thats why they sell systems, and what they do works for them.

Great post and very thorough.

It's not lost on me that I am getting both a Blu Ray player and the new PS console for the price of 600 dollars combined early in the console's life, I consider it a good deal. Not saying they couldn't have gone with a non Blu Ray version but to me this is a great deal and hitting two birds with one stone really...

I'm of a similar mind with you on this, but not quite as strongly.

The Wii has definitely won this gen in pretty much any meaningful sense. The huge momentum and shifted developer support have ensured the most consoles sold, which in turn guarantees a vast majority of third party titles, especially exclusives. Some are still doubting those, but even they agree Nintendo is going to be making the biggest profits this time 'round.

Sony has a high chance of dropping out simply due to their extremely unhealthy business model that relies on gaining the largest market share, making profit on game licensing fees and continuing console sales after production costs plummet. The PS3 has a solid chance of doing way better than either Gamecube or original Xbox, but it also has a chance of not getting even that far. There is still time to recover, but I think it'll be pretty clear what happens after the holiday shopping frenzy.

Was going to say something about the Xbox, but have to run. I think they've also got a rather unhealthy business model, but are much closer to making profit, and are probably outselling the Playstation this gen. Sales are hitting a wall, but price drops and killer aps are definitely going to aid it a lot. Again, I believe we'll be able to say how well it does around New Year.

wow...you made a thread as controversial as this as your first post!?...that takes guts.

This generation rules the nation with version hahahahahahahahaha

i just wanted to say that for some reason...lol

For Sony, they made huge amounts of money from the PS2, which as stated above, started selling at a loss. The inclusion of the blu-ray player is not only for their PS business, it also boosts their movie business as the blu-rays sold benefit them. the PS3 and the blu-ray disc also probably benefit the TV part, as they add more HD content avaliable for use on the HDTVs. The PS3 also wins them the format war, which will give them money from the royalties

Sony made 2B overall on the PS2 and they have lost more than that already on the PS3.

But they have other reasons for pushing the PS3, and MS has other reasons for pushing the 360.

Nintendo does it to sell software.

MS has tons of money to lose, but Sony doesn't have as much. They cant afford to lose a couple billion every year like MS can.

The console war will be decided this December. If Wii dominates the combined competition 2:1 or better then it is over. If 360 or PS3 can step up and outsell the Wii then we might have a good race to see.