it's going to go up immensely for nintendo in the next few years.

True, but they are doing this at the risk of wrecking the PS brand. Assuming that Sony made money during the whole life of the PS2(I'm fairly sure it did), the PS brand has proven to be profitable. Blu Ray has potential, but we still don't know just how far it will go.

Even if Blu Ray becomes the standard for movies, what if this success is at the cost of the PS brand and possibly Sony's name in video games.

Will Blu Ray be more profitable than the PS brand, and make the possible loss of it worth the risk? Maybe; Maybe not. Sony has taken this risk with the PS3, and only time will tell if they can succeed with this strategy.

It was simply an escalation of the previous generation. Also, both wanted to get an early lead on the other competitor to try to win the market. If you win, then you lose early and make it up later. But if you lose, you lose early and later.

And imagine if Sony had priced the PS3 at breakeven- it's simply not possible. Putting BR in there automatically means an expensive console sold at a loss. It would have been interesting to see what might have happened if Microsoft targeted a $300 launch price- what kind of console would they have? But Microsoft has always marketed the XBox on power, so they had to do their best to match the PS3 (drive format aside.)

What they didn't anticipate (and really no one did), was that Nintendo would release a cheaper AND profitable console that would start dramatically outselling the both of them COMBINED.

I throughly enjoy how Nintendo is seemingly playing the the cockroach in this nuclear war going on. Everyone is loosing money, everyone thinks "oh I might win soon!" but they are really just hurting other companies instead of helping their own.

Then there's immortal Nintendo. Totally self sufficient (Gamecube proved this). No matter how much fallout falls down from the nuclear war going on right next door, in the end Nintendo looks around, dusts itself off, and keeps doing what it has done for the past two decades.

It's interesting but it is hard to measure the true profit success of the companies outside of Nintendo.

There's no question that Nintendo is doing an outstanding job of reeling in the profits but you have to remember that the other two companies are significantly larger than just their video game division.

For instance, for Sony, if the PS3 causes blu-ray to win... their increased profits will far outweigh the losses in the last few quarters. For Microsoft, if they keep sony from controlling the living room and can find a way to expand Live Anywhere, then the Xbox line will have paid off... far more than the costs they've incurred.

Well I don't know what profits and losses were on a quarterly basis over the numbers over the last 10 years are (all in millions $):

MS' figures I believe are of the entire division of which the Xbox is something like 70-90% of revenue and an indeterminate share of the losses since MS likes to hide it that way. 

So yeah, everything that Bodhesatva has said I support.  For whatever reason, Sony (and a lot of 3rd parties) have decided to play MS with out the deep pockets.  We'll see how well that works for them.  Also, way to run the discussion Bodhesatva .

Nintendo is clearly going to set the new record for 2008.

Holy crapamole, The differential between Nintendo and MS is over $12.3 billion since MS has been in the gaming business.

As for Bluray, the potential profits from it do not outweigh the massive losses much less the lost profit from the PS3.  Sony averaged about $660 million a year.  Since PS3 development started in earnest in 2005 Sony has lost $1.7 billion when they would on average made over $2 billion.  They show no sign of returning to a profit anytime soon so returning to average profit is a ways away.  Fishey Joe is the resident VGChartz expert on Bluray revenue so he can explain much better why Bluray is not the panacea some think.

Same with Liver anywhere, is it going to make up the $6+ billion lost on video games plus the lost ROI?  Assuming a 7% potential ROI MS needs to make up almost $8 billion today.  Live anywhere and video games would have to earn a profit of over $500 million a year just to stop falling behind.  The only time any video game companies have done that was Nintendo with a far better business model and 2 systems and Sony with unheard of system sales.  I don't think MS has any hope of that happening anytime soon. 

I know both have negative benefits but we really don't know what the value of them are.  As it turned out Kutaragi did pretty bang up job of keeping Sony from controlling the living room without Microsoft's help and even should they have tried it's unlikely they would have succeeded (seeing as no one has).  Bluray may very well flop even if it does kill HD-DVD.  At best they lowered the risk to each company but we also don't know by how much.  Not knowing either the value or the risk it is kind of hard to analyze their negative benefit.