"What does that have to do with what he said?
Yes, they lose money with every shipped console, but what does that have to do with retailers paying them for the consoles? It's not that complex.
Retailers pay Sony for consoles, Sony ships consoles. Sell-through is irrelevant as they don't get their money from us, but from retailers. Yes, they lose money on every console sold, but that doesn't mean they don't get paid for shipping their consoles to retailers."
But problem is that it isn't that simple. If you produce more consoles than retailers can sell, then retailers won't buy new consoles before they have sell those consoles which are in warehouse. What can you do? You have big money deals with subcontractors and you have factories full of workers who want they salaries, so you can't just sit down and wait that retailers will start buying your consoles again. You got to produce even more consoles although old ones haven't been bought yet. Then you need to rent warehouses for all those consoles, which you can't sell for retailers and that is going to cost A LOT of money (company which I work with was forced to do same and trust me, after that our bonuses haven't been even close what they used to be).
If you are lucky, market starts buying more of your product and you can sell all those consoles, but if you are unlucky, you will go same way as Motorola. Down to the toilet.
Microsoft did make same mistake with Xbox 360, when they pushed those 10 million consoles to markets too fast in first full year of XBox 360. They were forced to ramp down production of Xbox 360 almost half a year and wait that retailers have sell consoles from their storage. If you ramp down you production, it's very hard to get it up and running again. Thats why there were shortages of XBox 360 during next Christmas and all the way next years April.
This Christmas will show what will happen to Sony. If they sell really well, then they have no worries in the world, but if economics caught them they pants down, next spring will be all hell for them.
