@Dno
You cannot seriously expect the previous console to cover a loss leading model yet again. The old console is running on fumes, and with a price drop of the newer console its sales would drop much quicker, and if Microsoft also offers a price reduction of its own then you can kiss last generations console goodbye. Most consumers will pony up fifty more dollars for a system seven years younger. Your talking up a large gamble.
The same holds true of their portable gaming device. Nobody can say how profitable it is exactly, but given the propensity of Sony to loss lead it probably isn't bringing a hundred dollars in net profit home with every sale. The licensing fees for it haven't exactly been gang buster either. To much piracy.
A new model isn't necessarily a upfront improvement in manufacturing costs. That improvement comes later once volume can be developed. The first million units probably cost more then the last million units of the previous model.
Loss leading and leveraging are bad financial practice. They are too heavy with risk, and based upon only the most ideal results. What happens if the PS2 falls through entirely. What happens if Microsoft responds with a price reduction of their own. What happens if the PSP suffers from new piracy issues. There are so many things that can go wrong, and cause Sony to eat more billion dollar losses.
Simply put its entirely reckless, and even though that hasn't ever stopped Sony before. This idea being put into practice yet again could result in an unmitigated disaster. Sony needs to keep its line as long as possible. Every dollar earned is a step in the right direction towards long term success.
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