I think both consoles will have sold well by February because right now the main buyers are the 'hardcore' gamers and there are obviously loyal fans of both companies. I don't doubt that PS4 will win this generation by any means but I do think people are counting out XO too early. 

I think what it comes down to is that there is allot more that comes into play when talking about launch price than simply profit per unit.

But from what we're hearing, they aren't profiting on the console at $400. They hope to profit from sales of software, accessories, and PS+ subscriptions.

I feel the great launch demand X1 is having shows the PS4 could have done really well at $500 as well. Sony might regret leaving all that money on the table in fear of competing with MS.

No. Not one bit.  

Pricing = Victory in the early days of the race.   It's really that simple.  The fact that their system is more powerful to boot?   Huge win for them.  400$ puts them exactly where they want to be.  If I had to wager,  I would say that they will jump out to a sizeable early head start over Microsoft.   From that point,  they simply control the war as long as they keep making quality games.  

Headstart + 100$ cheaper price + more powerful hardware + a stronger first party of potential games.  

This means that Sony not only will win the fans hearts from day one because of the cheap entry point,  more power hardware and the track record of great games but they will win the fans long term in a two pronged strategy.  1.)  Keep supporting the PS3 fantastically -- This will keep the Sony community strong and make a jump into PS4 easier to consider for any future consumer.  2.)   Always have a jump start in terms of pricing wars.  (Which feeds right into #1 and makes it easier for the market to buy their product).  3.)  By having a headstart, more sales and a strong market position it's far easier for them to secure exclusive content, rights, games, etc.    Which ofcourse just leads to more sales for their console.

Nope, the console is cheaper because it's not bundled with an HD camera. when MS releases their kennect free shipment for probably 400. then sony would have to explain why their console is $100 more. the prices are as they should be in my view point. MS knows all the launch systems will sell so they won't announce the kinnect free version, that would cause more cancelations than anything.

I agree. I reckon MS will end up having to make the tough choice of letting Sony get further and further ahead, or drop the price and annoy the early adopters that paid in full. And price drop would either mean heavy losses or getting rid of Kinect.

Oh. Shit. Sony isn't profiting from their hardware?  Not good.  I'm sure they'll sell more but losing money for years on PS3 and not charging for PSN as well as the debacle that is the Vita--I thought Sony would try to profit as soon as possible.

Sony not profiting is not true, nobody knows for sure. "from what we hear'' is not a valid source. This is from E3 time;

Pachter: Sony “Almost Certainly” Making a Profit on $399 PS4

http://www.playstationlifestyle.net/2013/06/11/pachter-sony-almost-certainly-making-a-profit-on-399-ps4/

Nope, part of the main reason it's being hyped so much is because it's under $450 and outputs the power that it does. If it was 500 bucks like the Xbone, yes it would have sold out at launch just like the overpriced PS3 did, but the sales wouldn't have held up.

The current pricing puts the PS4 on the same track as the PS2 and that's what Sony needs. I have no idea why you'd think they'd regret all the positive pub they've been receiving at this point (which they wouldn't have received if it was 500 bucks), but whatever...

They wanted to be different, they have not marketed their camera features much and have not made it a focus. their whole marketing strategy would have to have been done differently to bundle their camera with the systems. So it would of ended up like sony and MS were selling the same thing. can the PS camera compete with kinect? that remains to be seen but I doubt it and I think sony doubts it as well. focusing on the machine itself was the right move for them.