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Machiavellian said:

I believe the difference is that MS is not taking a huge loss like Sony.  If anything MS is probably breaking even or with game sells, XBL and gamepads and other hardware probably is making a profit. 

Sony is taking a loss on the PS4, but it's a tiny one. One is either taking an almost non existent loss or breaking even depend on where you look. They're both supposedly making profit after purchase of LIVE/PS+ and a game.

The reason the One costs more to produce despite weaker hardware is due to the Kinect and the fact its wafer is nearly one and a half times the size of the PS4's due to the ESRAM gamble not paying off while Sony's DDR5 gamble did.