Both Nintendo and SONY (and I guess to a certain degree now, Microsoft too) make more money from the games. Each company pays a licensing fee to the respective console manufacturer, plus a cut of each game sold goes to the console manufacturer.
That's why consoles are usually sold as loss-leaders to begin with because it is anticpated that the hardware manufacturer will make the money back from game sales.
I think SEGA did the right thing by ditching console manufacturing - now they can do what the do best, and that's making games.
It's not the consoles that make Nintendo so famous or successful, it's the games - it just so happened that their games only ever got released on Nintendo hardware (well, expect for some really sucky Mario game on the Phillips CD-I).
Rather than being bothered if Ninty stopped making consoles - I'd be obscenely bothered if they stopped making games instead!
- S
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