Doubt that, pretty sure most if not all Sony's first party games have made profit. With that said the ones which will definitely sell well ala GT5, GOW III and KZ2 have not even released yet so nope, cant see the first parties being a burden for Sony.

You get more return, most of the money made goes to the company unlike 3rd party where the console company only gets a small amount.

Return on sales go up but so do your costs. Like with ANYTHING a company outsources, it's cheaper to have a company that specializes in doing it do it rather than producing it yourself. MS obviously doesn't see a difference between 1st parties games they develop and 3rd parties games they fund or buy.

They could very well sell Rare back to Nintendo. All Rare MS games have been complete failure compared to the glorious SNES/N64 days.

I've been predicting such things for awhile. I don't know if its a move from MS to get out of the industry or simply publish, but its all happening very fast. I wouldn't be surprised if Rare or Lionhead is sold off.

They could be in a rebuilding stage, but to what I wouldn't know. None of these moves make sense for a company looking to establish itself well into an industry especially giving the sucess of the 360.

I think MS knows how to run a business.

Running a studio must be very expensive. Think about the studio working on Killzone2. There was no revenue for the last 4 years. Sony paid them for 48 months without any kind of payback.

So it might be more profitable to go to a small but talented studio like bethesda for example and tell them to develop a game for your console. Maybe define the genre a little bit and pay them 15 million USD for it. therefore it is exclusive and you own the ip. Bethesda will get more money if the game suceeds. Everybody will be happy.

Infinite Undiscovery is such a game. Made by Tri Ace / Square Enix but MS owns the IP.

I would love to see Nintendo buy RARE back but the relation between the two pretty much went to hell after Starfox's Adventure.

I'd love a Battletoads/Killer Instinct right about now.

Also, RARE has been an asset to MS for making avatars and Viva Pinata sales.  

 But then why don't MS go that route if it's really profitable?

And unlike a comparison to Nintendo, MS and Sony are very comparable in their gaming business - same size of console sales, same ambitions and target audience.

I think you're just hoping Sony's big budget titles are making money. But MS is one of the smartest software guys on the planet - if they saw there's money in having their own studios they would invest in it, not downsize.
 

their entertainment devision. This includes more than the xbox brand and first party studios.