There were about 800 games produced for the PS3 [1]. Each dev kit costs about $10,000, nearly all of them used multiple devkits. Then they get paid by the unit

There were about 800 games produced for the PS3 [1]. Each dev kit costs about $10,000, nearly all of them used multiple devkits. Then they get paid by the unit for each game that gets sold. "The exact licensing fee varies based on the manufacturer, as well as any deals they may give a publisher, but it can generally be anywhere from $3 to $10 per unit." [2] The console itself is almost always a loss leader. BUT it doesn't stay as a loss leader for the lifetime of the console. the PS3 stopped having a negative margin between 2 and 3 years after it was released (which was also slower than average) [3] This was likely due to the Cell processor which was never really popular anywhere but in the PS3. The PS4 uses far more standardized pieces and should become profitable much more quickly. There is also a ton of money to be made on delivering content, advertising and indie game markets as well as the subscriptions used to take advantage of these online services. They also make money on peripherals and controllers. Of course it's very risky nonetheless as sega demonstrated. But there are also less tangible benefits. By including the blueray player in the PS3 they may have won the HD format war. That alone might make it all worth it. [4] [1]http://en.wikipedia.org/wiki/List_of_PlayStation_3_games http://en.wikipedia.org/wiki/List_of_PlayStation_3_games [2]http://www.ign.com/articles/2006/05/06/the-economics-of-game-publishing http://www.ign.com/articles/2006/05/06/the-economics-of-game... [3]http://www.pcworld.com/article/196214/article.html http://www.pcworld.com/article/196214/article.html [4]http://en.wikipedia.org/wiki/High_definition_optical_disc_format_war#Deciding_factors http://en.wikipedia.org/wiki/High_definition_optical_disc_fo...