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This thread is too long to address all the different arguments so here's my two cents:

PS3 hardware & software, clearly will never earn a net profit. The already incurred loss is simply too great. PS3 would have to outsell PS2 and it's software would have to substantially outsells PS2's for this to happen. And after one year plus it's clear the PS3 will never reach PS2 sales.

Now if you include blu-ray then it really gets confusing since we really have no idea how much they make off that. Also you have to consider the sales of blu-ray players and even HD tvs that might sell because of blu-ray becoming the standard. All of which is impossible to quantify even for Sony.

Plus John Lucas is right, Sony put themselves into a hugely expensive fight with MS by deciding to aim the PS3 at the exact same market while ignoring Nintendo and the larger audience share. This fight will be a blood bath for them both. Both systems will see quarterly profits in time, but neither will earn a net profit this generation. MS might break even thanks to larger revenue streams, but it'll still be billions in the hole from the original xbox.

One thing I'm feel very confident about. You're seeing the end of the powerful, subsidized, loss leading console. If and when Sony & MS put their next gen system out, they'll ape Nintendo's highly profitable business model. Nintendo has never lost money, not even with the worse selling system. Why should Sony & MS continue to slowly bleed to death? Just so core gamers can be happy? I don't think so.