They're going to need more than 5 quarters to call it a success. The console business is very fluid and dynamic due to the gigantic reset button of new hardware platforms every 5-7 years. The 360 hasn't been a run away success -- in fact it may turn out to be the weakest selling console of the big three when all is said and done due to Sony's big advantage in worldwide sales. The 360 has been very successful in the US, not as successful as the Wii, but as you said profitable at least. The big question for Microsoft is what happens in the next generation of hardware. They will be presumably taking another round of losses when they launch the successor to the 360 over the next couple of years. I'm not quite sure where they payoff is here for Microsoft. They need a big smashing success to get ahead of the game or they will be on the treadmill of the console industry indefinitely. Big loss, some profit, big loss, some profit...
It's probably going to be more than 5-7 years this time around. Neither Sony nor Microsoft want to go through another round of big losses any time soon. I have no inside knowledge of our next console plans, but I can tell you that it certainly feels like Natal is that next "console" for us as far as investments go. Sony has publicly said that they intend the PS3 to last a full decade or more.
Furthermore, graphical capabilities have just gotten to a point where the game developers are begging the hardware producers to stop for a while. They simply can't afford the art costs to do anything higher definition than they already are. Sure, the devs would like some extra CPU cycles. And the designers would love a faster medium to remove loading restrictions. And the list of wants and asks will never be satisfied. But making AAA games cost boatloads of money. Every new console is a new burden on developers and they have spoken, loudly.
