I'm fully willing to believe the Xbox/PS5 is sold at a loss today, the margins are so thin that tiny changes in component prices could have enormous implications on how much money each hardware unit delivers. Neither of these consoles are iPhones, they don't have profit margins of 40% (or probably any double-digit percentage, for that matter). Transitioning from esoteric hardware has pretty much nothing to do with it, anyways: the N64, Gamecube and Wii all used non-standard architectures while being ludicrously profitable. The only truly significant advantage to using x86 in a home console is how easy it is to port/develop titles for it, not a single current-gen console uses commodity hardware besides the Nintendo Switch (since the Tegra board is commercially attainable).
Nintendo definitely has a different business strategy than Sony or Microsoft.
Anyway—the cost of esoteric / more custom hardware got higher, that’s why the console manufacturers moved away from it. It would make sense to shove a lot of custom hardware in your 3D video game console in the mid-1990s, because there is simply no other way to do good real-time 3D, and you have SGI who’s willing to sell you chip designs.
As time went on, the approach of shoving big custom ASICs in your console starts to look worse and worse. Most of the CPU vendors that previously sold you all sorts of architectures like 68K, MIPS, POWER, Cell, etc. stop trying to compete with x86 hegemony. Meanwhile, you’re making life more difficult for console developers, because these custom designs are just so different from everything else on the market.
So you get the PS3, which is expensive to manufacture, and requires a lot of specialized work to program the SPEs (painful for developers). That’s two generations after the N64, and the world has changed.
I would also be less likely to call the Gamecube/Wii architecture exotic, at least compared to the PS3.
> I'm fully willing to believe the Xbox/PS5 is sold at a loss today,
Given that sony themselves have said they're turning a profit, this sounds like a personal exercise in making yourself believe a counterfactual. Some people are into that though, like the flat earth stuff, or the people who think finland exists. See what you can talk yourself into believing, even when the facts are right there ;)
Anyway, your personal belief or disbelief or willingness to believe or disbelieve is kinda irrelevant here, given that sony has said it themselves.
> Transitioning from esoteric hardware has pretty much nothing to do with it, anyways
Yeah actually commodity hardware does have a big role in bringing down costs. Semi-custom APUs are commodity hardware compared to the standards of esoteric Cell/POWER stuff, and actually some variants are available off-the-shelf as well (see Ryzen 4700S which is a PS5 APu with its gpu disabled).
The fact that some custom systems were sold at a profit in the past is kinda irrelevant. The era of "commodity x86 APU with a wide gpu and GDDR memory" is qualitatively different from the era of cell, power, MIPS (PS2), and worst of all sega saturn. Nobody does the "our console is actually eight different processors in a trenchcoat segmented in three busses that you have to juggle in realtime to keep everything fed" anymore like the sega saturn or cell. And no that's not an exaggeration Saturn had eight different processors that all needed to be juggled... two cpus, a sound controller, a sound processor, two video display processors, a coprocessor dedicated to managing loads off the cd-rom, and a system controller, all with different capabilities and bus access. Same for cell with its weird-ass processing element model with a ring and no access to system memory, etc. Those are far far different from the way x86 chips (even semi-custom APUs with different buses etc) are designed and the cognitive load was huge for developers.
Microsoft was ahead of the curve in the sense xbox was a semi-custom intel processor and an nvidia gpu, and xbox 360 was a semi-custom power processor and an ATI GPU, but Sony kept at it far too long. They bet everything on cell, the original idea was that cell could also be a gpu on the same chip but it performed so badly they had to add a commodity GPU at the last minute to try and fix it, but that left them with a cpu with a super-weird programming model and completely undocumented opaque hardware that was a nightmare even to bring up a hello world application on. Then they went "never again" and went commodity x86 SOC with everything integrated, alongside microsoft. That brought costs down a ton and fully aligned them with what was happening in the PC space.
The overall trend was clearly from the arcade/sega saturn era of highly custom, arcane architectures with lots of individual weird chips towards "CPU+GPU" arrangements and then finally just integrated APUs. And that's also the exact same time when they stopped selling things at a loss - the move towards integrated, semi-custom commodity architectures was a major part of that. Xbox One and PS4 and their refresh consoles and pro versions both moved into hardware profitability very quickly.
Also, both of your examples of profitable custom hardware were nintendo and they have always been notorious for going really cheap on their hardware. The few times they haven't, they've gotten burned.
