@Smashchu2
You're quoting me, answering someone else, not answering to anything I wrote.

I did answer you. Your claim is that software will make the division profitable, but the finnacial statement said that with software the division was still losing money.

As for the death spiral and MS vs Sony? MS have done what they could with their money. They bought additional contents and exclusives, they launched early and went for a cheaper machine. They marketed heavily. They supported HD-DVD. The result? Sony was hurt. How could they not, coming from a generation of total dominance and having MS against them?

But many franchises that were PS2 exclusives are now multiplatforms, and still they sell more relatively on PS3 than on 360, when not in absolute terms. And the PS3 came into the game late and still is overtracking the 360, selling substantially in line with it during economic times that are about the worst imaginable for its pricing model, and still has equal stance in the eyes of the developers.

A lot of problems here

1. This always annoys me. It's MS has, not MS have. Microsoft is a single company. Just because multiple people work at Microsoft does not make it plural. Microsoft is a name, like John and Ashely. It is singular.
2. The PS3 is not taking over the 360. The gap is too wide now and the current tends don't show a shift happening. The prediction is that it will take Sony 3 years to over take the 360 selling 51k more. It will take 5 years at 31k. The latter is more likely.
3. The Wii came late too and is stomping both of them. 
4. I'm too lazy to look up all the games, but I can tell you the 360 sells a lot more software. Most big multiplatform games do better on the 360. GTA4 is on example. 
5. At the bolded line: it only has an equal stance in developers eyes because they an port. The 360 is still more profitable to publishers since it has a larger install base. The exception is in JRPGs since the system doesn't sell in Japan.

So if it hasn't happened yet, when is the death by hand of MS going to happen exactly? The marketshare progression of the last 3 years doesn't exactly show a vanishing Sony.

Truthfully, since Nintendo is disrupting the industry, both systems will die off or become small niches. MS is importaint becuase Sony overshot the market, allowing Microsoft to be a viable competator.

The industry is not decided on marketshares. Marketshare battles show a deadly red ocean where the companies will destory each other. They will fight for a shrinking user base. This is good for Microsoft as it ends Sony. It's bad for Sony as they are trying to make money. The problem is Sony's entire strategy is unsustainable. This is what ism killing the division. Sony overshooting the market allowed Nintendo to disrupt the industry. It allowed Microsoft to be a competator. It isn't a mystery that the system is between a rock and a hard place.

I suspect Sony will start talking about a new system at E309. It maybe shown at E32010. I suspect it in 2011, if there is another one.

JGarret: I see your point, but Squill actually wrote what I was going to point out, I only read that Smashchu was saying PS3 will hit a sharp decline in the coming year or so.

I personally do not know how long the PS3 will "last" but I damn sure know it ain't gonna be 10 yrs. The only question that I have is again, has the PS3 peaked?

@Smashchu: Werekitten is a hot Italian Stallion. You can forgive him for not knowing every nuance of the English language as he can forgive you for your poor understanding of his language.

Allow me to give you a well informed response that debunks everything you said.

NO

Leaving the subtle nuances of the English language aside, and the love Squilliam keeps showing me that is starting to worry my girlfriend, let me answer a few points.

- you didn't answer me, or you didn't understand what I wrote. I never claimed that PS3 software sales would make the whole division profitable. I claimed that nowadays each PS3 sold brings profit to Sony when hardware and software are accounted for. The same was not true years ago, and yet it's enough to tag the decision to cut its life in 2010 or 2011 as financially idiotic. You could as much say that they should cut the PSP.

In the same way the PS2 and the PSP bring profit, but the whole game division shows passive. My whole post to MrHappySquirrel was exactly about the fact that the game division net profit is not made simply of PSP profit +PS2 profit +PS3 profit

- the gap between 360 and PS3 is immaterial, nor did I ever say that it's going to vanish or even mention it. The marketshare ratio is obviously shifting in favour of the PS3, as the current trend is towards a 6:5 ratio.

- software sales:

GTA IV: PS3 5.62M, 360 7.06M ->higher tie ratio on PS3, even with the boost the 360 got from the exclusivity of DLC and with the fact that when it came out the install base ratio was even more favourable to the 360.

Does it look like the gamers are abandoning the franchise on the PS3 because it's no longer exclusive? Not really. Does it look like the developers can shrug off the PS3 market as negligible? Not really.

Meanwhile, what other recent big multiplatform game can you bring as an example? In 2009 we had RE5 and SFIV. Both sold better on the PS3.

And overall software sales per week of ownership show PS3>360 (slightly).

- the 360 is more profitable to developers. Maybe so for most of them. But when the sales of multiplatforms are like 5:4 (GTA IV case) who comes first is not important. Porting expenses between the two HD consoles and PC amount to about 10-20% of the total. As such, as long as the sales are not 5:1, developing for the PS3 will almost always be a given. As for third party exclusives, they are a dying breed because they make little financial sense unless explicitely payed for by MS or Sony.

Where does this leave us? Well, with the fact that in the foreseeable future the PS3 is likely to have all big multiplatform games, and more exclusive ones (more first party studios, the Japan market will probably bring more exclusive JRPGs).

So where exactly is the trouble with the developers?

- last but not least: Nintendo is disrupting the industry? Maybe so, because it opened a whole new market. But has the industry been disrupted to the detriment of 360 or PS3? Uhm, not really. It looks more like an expansive disruption than a shift one. Maybe it will appear differently if the 360 and PS3 start trying and failing to go after the same expanded/causal market, but for the moment there's no proof really.

Oh OK. It's just that I see a lot of people use plural instead of singular, and it annoys me. I didn't realize he is not a native English speaker. My bad Werekitten.

I should reply more, but I'm tired. So, tomorrow.

The problem with looking at the Wii as a competitor is that it's not really one. Sure in the gaming market the Wii is the leader, but in the home entertainment market you have a battle going on. Microsoft and Sony are both trying to position their systems as the center of home entertainment... and while both are having some success I'm guess that we all know who is pulling ahead of the game now.

If you look at them as "Home Entertainment" rather than "Videogame Systems" wouldn't they both still be losing to DVD by a very wide margin?

DVD isn't really the home entertainment ... the device that plays it is... so both can play DVDs.  Sony is going Blu Ray and Microsoft is going On Demand... or Streaming... whatever suits the users.  I think that the more one console leads the other... in this case Microsoft... you could see a shift to their standard.  I mean you've got around 30 million Xbox 360's in the world.  That's not a lot, but if they can get that up to 50 million and their next system takes everything with it then you have a potential user base in the 100 million range.  If Microsoft goes this route they may never stop the development of the Xbox 360.  Perhaps it'll come in another form... like the PSP Go where it has no drive to play games, but you can download games and movies or stream the movies to your system.  I can imagine the suits at Microsoft foaming at the mouth... hell I can see the suits in the movie industry foaming at the mouth... A proprietary device they can release their content on that has insane encryption protecting it.  You'll have the packet grabbers and what nots, but the future looks like digital delivery all the way.  I just don't see how the Movie and Music industry will survive without it.

Except that I'm not that convinced that the majority of people who own an XBox 360 or PS3 use it as a DVD player/Blu-Ray player, or to play (legal) streaming content ...