I have compiled a listing of Sony, Nintendo, and Microsoft's gaming profits since the first quarter of 2004, and thought I'd list them here. All the information can be found at:

http://forum.pcvsconsole.com/viewthread.php?tid=11760&page=9

It's a lot of information, so let me just list the profits quarter by quarter, followed by a tally. Remember, I'm only listing the gaming divisions of each company (which is the entire company in Nintendo's case). All figures are listed in millions of dollars, not Yen.

Microsoft's fiscal year ends in June, so their FY 2006 has just ended. In real terms, however, the Microsoft figures track the same time frame as Sony's and Nintendo's do -- sales beginning July 1, 2004, and ending June 30, 2007.

Here are the last 3 years of data:

Q1 2003: -142
Q2 2004: 84
Q3 2004: -154
Q4 2004: -179
Q1 2004: -141
Q2 2005: -293
Q3 2005: -388
Q4 2005: -414
Q1 2006: -96
Q2 2006: -289
Q3 2006: -315
Q4 2006: -1199

Microsoft's fiscal year has just ended. Their earnings for the past three years have been -3,526,000,000, or appoximately 3.5 billion dollars in losses.

Sony's last three years:

Q2 2004: 0
Q3 2004: 433
Q4 2004: 14
Q1 2005: -54
Q2 2005: 73
Q3 2005: 575
Q4 2005: -525
Q1 2006: -233
Q2 2006: -369
Q3 2006: -455
Q4 2006: -914
Q1 2007: -300

Sony's earnings over the last three years in their gaming division have been -1,300,000,000 or 1.3 billion dollars in losses.

Nintendo's last three years:

Q2 2004: 214
Q3 2004: 204
Q4 2004: 183
Q1 2005: 128
Q2 2005: 199
Q3 2005: 471
Q4 2005: 53
Q1 2006: 135
Q2 2006: 329
Q3 2006: 651
Q4 2006: 359
Q1 2007: 668

Nintendo's earnings over the last three years in their gaming division have been 3,594,000,000 dollars, or approximately 3.6 billion dollars in profits.

Conclusions: Nintendo has done a profoundly better job at remaining profitable over the last three years than either Sony or Microsoft's gaming divisions. Microsoft has been fairly consistently losing hundreds of millions every quarter since they entered the market; it appears that Sony's profits were reasonably strong before the beginning of FY 2006. If we count only through 2005 for Sony, their net earnings would be a 370 million dollar profit; however, since then, in the last year and half, Sony has experienced a  2.3 billion dollar loss, and thus have essentially reached Xbox-level losses with consistency since that time (Microsoft's losses in the same time frame are 2.7 billion dollars, which would have been much lower if the 3 year warranty had not occured), Sony shows no immediate signs of a return to profitability. Microsoft is a bit more difficult to estimate, as their billion dollar write off for last quarter throws long term calculations for a loop. It's quite possible that Microsoft will post their first quarterly earnings in their gaming division next quarter.

Any comments?

First of all, Nintendo has done very very well for themselves and they deserve the recognition that they are getting.

Microsoft on the other hand, couldn't be doing worse. For a highly profitable company, they are doing pretty bad with their console-based gaming. I don't think that they will even put out another console after the 360 is over and done with (in 4-5 years).

Of course, this reduced amount of competition will add to the amount of profits that both nintendo and sony will bring in, but will probably end up helping Sony more, simply because the 360 vs the PS3 are more of a substitute and seek to go after gamers more similar than in a PS3 vs Wii comparison.

It's interesting you should say this, because as I've noted (I went back and added a few comments) Microsoft and Sony have lost a very similar amount of money over the last year and a half -- and Microsoft would be quite a bit ahead, if they had not been forced to eat a 1.1 billion dollar write off for the extended warranty. I think it's quite likely that Sony will post another loss next quarter, while Microsoft will either post a profoundly lower loss or an actual profit for the first time in two years for their gaming division.

In short, while Sony did appear to make reasonably healthy profits at one time, they've effectively fallen to Microsoft-level losses over the last 1.5 years, and with the poor PS3 sales and recent price cut, there isn't a great deal of evidence that those losses are going to go away soon.

Simple point: ignoring Microsoft's extended warranty for a moment (and I agree, that's not entirely fair -- but we're trying to look at normal operating losses from development, production, and sales of games and game hardware) Sony has lost more money than Microsoft every quarter for the last year, and I think that trend is likely to continue for at least another quarter, and likely more. 

What happened to sony in 05 that they started losing so much money? Researching for PS3 or was it PSP? It's hard to imagine that PS2 hurt anything but that -525 stands out in Q4 05

i would also wonder if Sony has ever made 668 million dollars in a quarter

Q4 05 looks really crappy for everyone. I wonder if that was caused by X360's release and the awkward situation of a lot of gamers not wanting to upgrade, but not wanting to buy old system games with the next gen on its way.

Next quarter should be interesting... is Halo 3 on that or does it only make Q4?

First notice that Q4 for Sony and Nintendo represent post-holiday sales, from January through March. This is easily the slowest sales period of the year, and you can see that every year, Sony and Nintendo make less money in this time than at any other point in the year. That's why that quarter in particular was so poor.

More generally, however, my guess as to what hurt their profitability so greatly is a combination of PS3 developmental costs and PSP loss-leading strategies. While the PSP may be making money on each console sold now (I think that's likely), it was definitely sold at a loss to begin with. In the early parts of the year, your spending on marketing, developing and research do not decrease significantly, but your income from sales declines sharply; therefore, your net earnings decrease sharply. For Nintendo, this means making less profits; for Sony, this means going from significant profits to significant losses. 

Halo 3 apparently launches September 25, just at the end of Quarter 1 2007 for Microsoft. The profits from Halo 3 will probably be equally shared between Q1 and Q2 2007.

I wonder if Nintendo could be the first to make a billion profit in one quarter? It seems like a real possibility for Q3 08.

1.  Microsoft has lost almost 3 times the earnings that Sony has, with respect to their games divisions over the entire period that you presented.  I would not think that the overall levels would be similar at all, unless you were comparing the most recent quarter for sony and microsoft. 

 2.  Sony's negative profits in its gaming division have gotten to a level of a third of the previous quarter, and look to be on an improving trend.  They might even turn a profit for the current quarter the way things have been improving. 

3.  Microsoft is doing somewhat worse than Sony right now, not only in terms of sales, but also in terms of just how much money they have to entice developers to produce more games for them.  Out of all of the exclusive games announced for either the 360 or PS3, the majority lately sound like they have been announced for the PS3 platform.  In other words, Sony is offering $$$ when it knows that microsoft is cash-poor, so that 2008 will be a good year for them. 

Now, it would be a mistake to take these comments as me saying that the 360 is about to be pushed out of the market, i'm not saying that at all.  I just think that the dominance of the 360 is coming to an end.