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Arkaign on 25 September 2014
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There is a TON of upfront costs related to launching a flagship console that would bore everyone to tears to list out here.

However, I believe that PS4 should cover those costs in 12-16 months from its launch date and enter a point of nearly raw profits from there,

Think of it like this : it cost you 10,000$ to start a business, and you begin selling widgits for $1/ea that cost you .90c/ea. You start selling them like bananas, but for the first X number of weeks/months/whatever your 10c/ea profit goes towards covering your initial and ongoing costs.

Sony has a huge number of pros this time around :

(1)- Simplified design with cheap sourcing of standard industry parts.
(2)- Bitcoin fever died out, dropping GDDR5 prices by .. a lot. A LOT. I just bought a 2GB PCIe GDDR5 GPU for a video editing system for $29AR. That would have been unthinkable not long ago. DDR3 memory will rise precipitously soon as DDR4 becomes a desktop memory standard. (just as it always has, DDR2 got expensive when DDR3 became mainstream, DDR1 got expensive when DDR2 became mainstream, etc/infinity)
(3)- Strong PS3 performance in many regions meant that transitioning to PS4 was possible without major new investments in marketing/infrastructure.
(4)- PS+ was built up from pretty humble beginnings into a world class service in advance of PS4's launch. Remember how people used to rave about XBL being the only real game in town? Those people are laughed at now if they try to say something like that, because we know better.
(5)- Strong/stable demand keeps the channel flowing. There are few things more costly than to overestimate or underestimate demand for your product, as catastrophic costs and missed opportunities can result. I think I'll make a thread about this actually.
(6)- Leading the industry makes everything feel downhill in costs. Publishers knock your door down to get their titles on your system, making exclusivity more costly to competitors, and cheaper for you.
(7)- Class-leading performance guarantees that the worst case scenario for multiplats would be parity, but in most cases there are minor to major advantages to players purchasing a game on your system vs. the competition. This will get MORE important over time, as many of the most avid gamers who buy the most games ALWAYS end up with most or all of the systems. But these hardcore multi-console owning players will be playing on YOUR console most of the time with few exceptions.
(8)- The early lead that PS4 has carved out presents a substantial market inertia in the world of twitter/facebook/gaming groups/friends/family information sharing.

Anyway, yes, PS4 is going to be crushingly profitable, and this will compound over time. It will absolutely dwarf PS2 in profitability overall.