Taking the $400 cost of production estimate per console as near actual cost of production still equals a loss per console to Sony as delivered to the consumer since retail outlets aren't buying them for $400, it costs money to ship/distribute to warehouses and then retailers.
What most people are overlooking is that Sony just cut about $250 off the cost of production (lower cost of parts, fewer parts, streamlined production) over a one year time span. By over $400 if the report is correct. With the price drops, a large percentage of those price savings were passed directly to the consumer. Not because Sony loves its customers, but because they want to move more product and increase market penetration. Not that anyone cares; it just means you can get a PS3 for $400 instead of $600 to them.
With the high amount of custom parts included in the PS3 (such as the blu-ray diode and CBE), it costs more initially to manufacture, and less over time as those custom parts become cheaper to manufacture and are produced and purchased in greater volumes. As quality control improves (not as shipped, but as they roll off the assembly lines to pass clearance by QC), costs are reduced further. Sony's been doing this for the last ten years, I don't know why anyone finds this so hard to believe.
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