The hardware business is not a profitable business. Don't believe us, just ask Sony.
When the original PS3 launched, Sony bled money on each PS3 sold. But the manufacturing process improved, and Sony was able to close the gap.
Just as that started to happened, the company is now launching a new hardware iteration. New hardware means new costs. When The Times asked Sony exec Kaz Hirai if Sony was losing money on the PS3 Slim, the exec said this:
If you're just talking about the hardware alone, the quick answer is yes. That makes good headlines, but I don't actually know that that's the true nature of the business that we're all in, whether it's PlayStation, Xbox or the Wii. I think the better indicator is to look at the business as a whole platform, to ask: are you profitable in terms of the hardware, software and peripherals. And the answer to that question is yes on a gross profit level since the last fiscal year.
So the small picture is that the PS3 Slim is not profitable, but the big picture is that PS hardware, games and peripherals are.
Oh, and thanks for the headline, Kaz!
Sony boss reveals plans for PlayStation [Times Online]