This gen throws some new ingredients into the mix. Specifically, the online. Microsoft is probably making a pretty penny off their Live subscriptions, and all 3 consoles are offering downloadable content. I'm going to go out on a limb and assume that Nintendo's Virtual Console is bringing in the most money (they don't even have to develop new games!), but all three systems will make money off of it.

There's a problem with this thinking though. This is not a limitless infinity kind of thing. Money in is not equaling money out as easily as it used to be. I mean here's the generations: Gen 1: PONG Gen 2: Space Invaders/Breakout/Combat/Asteroids/Pitfall I & II/Pac-Man/Defender/Galaga/Donkey Kong/Zaxxon/Robotron 2084 Gen 3: Super Mario Bros. series/Legend of Zelda series/Mega Man series/Contra/Castlevania/Ninja Gaiden/River City Ransom/Clash At Demonhead/Demon Sword Gen 4: Sonic the Hedgehog/Super Mario World & Yoshi's Island/Zelda: Link to the Past/Super Metroid/SNES Final Fantasies/Mega Man X/F-Zero/Starfox/Street Fighter II/Mortal Kombat/Raiden/Bonk/Smash TV/Comix Zone/Ecco the Dolphin/Golden Axe/Altered Beast/Out Of This World/Flashback/Fatal Fury/Samurai Showdown/Chrono Trigger Gen 5: Super Mario 64/Zelda: Ocarina of Time/PS1's Final Fantasies/Goldeneye 007/Perfect Dark/Metal Gear Solid/Cybermorph/Panzer Dragoon/Tomb Raider/Turok series/Sega's Virtua series/THQ-AKI's wrestling games/Gran Turismo/Crash Bandicoot/Grand Theft Auto/Tekken/Resident Evil/Oddworld/Super Smash Bros./Marvel Vs, Capcom/Bushido Blade/Time Crisis Gen 6: Shenmue/Jet Set Radio/Crazy Taxi/Space Channel 5/Soul Edge(Caliber)/Power Stone/Ready 2 Rumble Boxing/Parappa the Rapper/Time Splitters series/PS2 GTA's & clones/Devil May Cry/Tom Clancy's series/PS2's Metal Gear Solids/PS2's Final Fantasies/PS2's Gran Turismos/Jax and Dexter/SOCOM/Halo/Medal of Honor/Midnight Club/Ninja Gaiden Black/Super Smash Bros. Melee/Metroid Prime/Zelda: WindWaker/Resident Evil 4/God of War As each of the representatives from this list got lengthier so too did the production teams which in turn lengthened the green spent in order to create such a team. Games at one time were developed mainly by one person or a few people at best. Not even close anymore as you have to deal with voice actors, graphics proofreading/cleanup, movie cutscenes, marketing/advertising budgets, art direction... It takes so much nowadays to put into most games that it demands strong sales to get money back from effort/energy put in. However as much as the development teams have grown over the decades the range of buying public has more or less stayed just the same. So they're putting more work into getting the same audience. Ever-decreasing returns not reflecting the energy put in to make these works. We still look at 1 million sales as big when they used to do this way back when graphics were more primitive. Less work therefore less budget went into making the game and the returns paid off. If the sales rates matched the development team rates then sales should grow as high as the games are complex. But this is not happening very much. People don't believe it but developer teams are at the breaking point today. The tension point. Something's got to give before this industry loses its power AGAIN. Budgets are getting too big for still receiving the same sales. Sony & Microsoft have moneybags, sure, but those investors are gonna get tired of funding if that doesn't pay off eventually & those moneybags will go with it. Why do giants have to losslead anyway to make money in the business? That's because the business is hard to make money at. Those guys are like on steroids really. If they didn't have that corporate muscle they'd have dried up in this business long ago. And their business models are ultimately fatal to their game sectors and to the industry as a whole. Unlike in Animal Crossing, money DOESN'T grow on trees. Lossleading is a short term strategy to penetrate a field at best. It should NEVER be a way of life. They are not going to be able to pump money into propping up their divisions forever. they are going to have to do business the way it should be and always HAS been done: to MAKE money. To profit. What's the point of selling a kajillion consoles when you only made $1.85. Enough to maybe buy a 20 oz. bottle of soda & a small bag of chips, maybe a pack of flavored cheese crackers. Enough to buy a scratchoff & a roll of Sweettarts. What good is that? When another competitor takes off the 3rd party is not gonna wait for the other guy to catch up. They begin to crossover or wholly take their titles over to the stronger selling system because they are dependent on gamesales to stay intact as a business. If they can make gamesales with less production team costs and more returns, they are going to do it. Potential means a hill of beans. "What have you done for me lately?" as Janet says. Nice theoreticals and stuff to dream over for a wistful day but money talks and BS walks. If the PS3 or XBox 360 doesn't make money as a game system they may not be AROUND as a movie selling system in the future. XBox 1 lost too much money. Too much money. The investors are waiting for the XBox 360 to make up for that tremendous loss. Luckily Microsoft is a multifaceted business in which its game sector is just a part of a larger family. Their OS monopoly will keep them around for a good while longer unless everybody suddenly decides to buck on Vista going for someone else's OS. Sony has more to worry about. The company is more dependent on their game sector than Microsoft is. Unless Sony can reinvigorate their other sectors somehow they are gonna have to pull the PS3 up to speed and quick. The hare wins the race in the console game. All the tortoise can do is maximize its resources while being the underdog. He's not gonna win but he won't overexert himself either in the race. He'll maintain. That was Nintendo the past 11 years consolewise. Tortoise. John Lucas

XBox has been rumored to become profitable since 2004, but the financial reports have been telling a different story quarter after quarter. It's still on a roll dumping $1 billion every year or $6 billion total so far. I don't think that will change soon if competitive price cuts actually take place. If MS stay at $399 for a little longer they might actually have some non-red quarters in 2008. XBox Live (Gold) doesn't strike me as a particular money maker. It's like selling one extra game per year, and people who subscribe Live might actually buy one game less because they're out of their budget. Also running those game servers must be very costly. Not even the iTunes store is profitable, and it has 10 times bigger revenues than Live ($1.5B vs $100M-$200M).

@johnlucas So the tortoise is the dog? Brilliant analysis.

Purely discussing game divisions...Nintendo has and always will be the most profitable for one major reason. It is primarely all they have. Unlike Sony and MS who can leverage their other multi-million dollar profit divisions, Nintendo only has games. That is why they make the best 1st party games, if they don't they will not succeed as a company. All of Nintendo's consoles have been nicely profitable. Now, not only is their portable divisions pumping out the cash, but so is the console division. The next few years will show a hefty increase year after year for Nintendo's annual margins.

 Sony and MS could not be profitable as underdogs. The 360 is by far a better bet on overall profitablity after R&D than the xbox but it will need to sell 20m to do this. The PS3 will need to sell 40m at least to recoup, however, they don't really need the PS3 to sell as much. Bluray will bank off of the PS3, even if it does not 'win' this generation. Even if they only sell 25m PS3's, that's 25m Bluray owners buying movies and downloadable content from PSN.

So to answer the question, maybe. If you are Nintendo yes. If you are following the business model of MS or Sony who don't have the total 1st party lineup of Nintendo (I don't mean 1 or 2 great sellers, but 10) then no you must be 1st or a close second.