I would doubt they get rid of any of their first party studios. I think that a lot of them are under performing and will have to come up with more than 1 game every 4 years. Most studios can do a game in 2 fairly easy. Just look at Gears 1/2.

First party studios are making money for Sony. Why would they close down the profitable parts of their games division?

They probably will close some studios or at least make studios smaller. SCE has more employees than Nintendo, to support two platforms with declining software sales (PS2/PSP) and a console which is nowhere near as big as Sony's previous ones (PS2/PS1).

Sony's Electronics division already had massive layoffs, 5-10% of their employees in fact (depending on whether the temp ones were counted under the total). I don't see many reasons to believe that the Games division will be immune to cost cutting. They're too big for the PS3.

There's a chance that Sony decides the games division is untouchable... I wouldn't bet on it though.

MOST. The majority of studios do come out with a game every two years, or less (as in Insomniac's case)

However, Polyphony Digital and Team ICO both take their own sweet time, but nobody cares, because their games are incredible.

Guerilla probably wanted to spend time on Killzone 2 so it wouldn't end up as bugged as the original.

So, Sony isn't going to rush PD or Team ICO, but Guerilla should speed themselves up.

Besides, Gears of War 2 wasn't exactly changed massively from the original, was it? Not that that's a bad thing.

the next transaction is sony buying media molecule.you'll see ;)

Are all the first party studios making money for them?

Well the first party studios are making money (apparently) so why would they cut down on there profitable division? Hmm business, some of you would run a company into the ground within seconds.

As a whole I'm sure they'll make money, if nothing else due to the heavy hitters like GT5 and God of War 3. But individually, I'd be surprised if no studio was losing money.

If and when LBP crosses 3 million LTD, absolutely.

And it's got a 90% chance of doing that.

Meanwhile, they should ensure Insomniac don't get any ideas about developing on other platforms.

I don't think that Sony will shut down any studios. They are still making a lot of good money since the costs of the ps3 has decreased. I think their studios will do pretty well in 2009, when sony makes a good profit off of the ps3.