To elaborate further, it should be noted that the losses on Microsoft's entertainment division will never cripple Microsoft as a company. If you want to look at those (admittedly huge) losses in the perspective of the whole company, you can start by noticing that just in the past quarter, they made $4 billion in profit, which is enough to cover all their first Xbox's expenses.

On the other hand, Sony has strong competition in most (or all?) of the markets they're in, and their finances are nowhere near as strong as Microsoft's.

In terms of consoles specifically, they have really strong competition right now. It looks like Nintendo and Microsoft are crushing them as if they were acting as a team (for all practical purposes from Sony's perspective). Sony has said that they don't expect hardware to be profitable until fiscal 2009, and that it's possible to be profitable in hardware+software during fiscal 2008. That's not encouraging at all, and means that we'll continue to see big losses for the time being.

To further compound the problem, Sony currently has about $10 billion in debt and $3 billion in the bank, while Microsoft has precisely $0 in debt and $21 billion in the bank. You can check all those values at finance.yahoo.com if you want to.

This is why I think that there's a relevant chance that Sony won't launch a PS4, if things keep going the way they are.

Doom and gloom? Yes. Justified? Absolutely. It would be good if Sony's games division survived to be part of MS's and Nintendo's competition in the next generation, but things are looking really bad right now.

The press is only going to get much, much harder on Sony in the comming months ...

In the next couple of weeks we should start seeing every major website, magazine and newspaper have articles on what is "Hot" this holiday season. The XBox 360 will probably do reasonably well being that it has the best library of games out of the three consoles right now, the Wii will (obviously) dominate a lot of these articles as the "Must Have" gaming present, and the PS3 will likely be assaulted for being too expensive, removing backwards compatibility and having few compelling games.

In the middle of this, NPD will release the October sales numbers which will have the PS3 being outsold 4 to 1 by the Wii and XBox 360 (and having the PSP, PS2 and Nintendo DS far above it). This will result in another wave of articles in the gaming press which ask whether the PS3 was a mistake.

In December we will get the "Year in Review" articles in both the gaming and mainstream press which will likely have the gaming story of the year as the massive sales of the Wii/DS, the return of Nintendo to power, Halo 3, or the failure of the PS3.

After Christmas the analysis of the holiday shopping season will begin and the PS3 will not have sold particularly well. Third party publishers will be forced to lower their year end sales forcasts and many will blame this on the unexpected success of the Wii and the unexpected failure of the PS3. Even Sony will be forced to admit that they will not meet their sales estimate for the fiscal year. This will result in another wave of articles in the gaming press which ask whether the PS3 was a mistake.

Month after month this will continue, and the constant doom-and-gloom will prevent many people from buying a PS3.

"Month after month this will continue, and the constant doom-and-gloom will prevent many people from buying a PS3."

HappySquirriel,you think the percentage of potential videogame systems buyers who are either encouraged or put off by what articles say,is very high?

Folks could care less about articles - trust me, I know this - but they will care when retailers, who aren't making a lot of money, stop carrying the device and accessories. Look at MP3 players. iPods aren't reliable - and very fragile, but the public has rallied behind them - and guess what? Retailers know they are hot and will carry tons of accessories? Why? Because they know if they buy it, it will sell. There are much, much better MP3 players out there that can play music so much better than iPods, but ... no one is interested in them. And good luck finding accessories. If they have them, it's a paltry offering.

The turnaround time between buying it and reselling it for profit is horrible for the PS3. If they can't sell the PS3 and accessories, that's a loss. Enough loss and the retailer will look for greener pastures.

For the PS3, folks are mainly buying it for the name, even if it's a shell of its former self. Just like Atari. Folks buy Atari products not because they are awesome, but because they know the name Atari means old skool software. Forget that the old Atari died in the 80s ... name recognition goes a lot further than quality. 

Oh, it's just the US mainstream business press being the US mainstream business press. These people wouldn't know a current account deficit if it bit them on the butt. In reality, Sony's hardware division is already feasting on the spoils of HDTV and Blu-Ray, and that's an avalanche which has left the mountaintop. The PS2 keeps trucking along, so that's another cash cow. The only soft spot for PS3 sales was the US, mostly because the triple AAA titles weren't coming until November anyway.

The wildcard in all this is, of course, the US economic slowdown. The mortgage bubble collapsed, folks are losing their homes and not buying home furnishings. Normally, sales of entertainment equipment is very resilient in recessions - people give up other things before giving up their mass media. We'll just have to see what happens...