Sony's losses on PS3: $3 billion and counting

Console gaming may be the future for consumers, but in the business world things are looking grim. The latest sign that things aren't going swimmingly: Sony has now lost an accumulated $3 billion on the PlayStation 3.

$2.16 billion lost in 2007. A mere $1.16 billion lost in 2008. Why? Because it costs a fortune to make these things and Sony continues to sell them below cost. (And, unfortunately for it, Sony is facing immense pressure is to keep pushing prices down in order to grab more market share.

Lest you Xbox fans think of gloating, rest assured that Microsoft is in the same boat. During the original Xbox launch, Microsoft lost about $4 billion on the console over 4 grueling years, never recovering those losses. Things are even worse with the Xbox 360. In its most recent fiscal year alone the company lost $1.9 billion on the console.

What will be done to stem these losses? Well, nothing. In fact, this is business as usual in the console business, and it's why smaller competitors have long since been run out of the market. For all the talk of hundreds of millions of dollars spent on writing big games like Grand Theft Auto IV, software development is relatively cheap in the grand scheme of things. Building consoles (and making sure they work right *cough* Microsoft *cough*) is a dazzlingly expensive endeavor. Since consumers won't pay four figures just so they can play Donkey Kong, selling hardware at a loss is really the only option for companies that want to keep fighting in this market.

Then again, there's one company that proves that piling on the losses isn't the only way to do business in the gaming world: Nintendo, based on strong sales of both the Wii and the DS, reported record sales in fiscal 2008, with earnings of a whopping $2.6 billion, up 48 percent since 2007. With $10.5 billion in cash, you can hear Mario laughing all the way to the bank.