You have to factor in storage space for the cards, materials, shipping, and the machines that make them. None of these are going to cost a trivial amount of money, although over enough cards it would be. The cards don't mystically appear in the box. You have to use employees, machinery, and warehouse space that could be used elsewhere, or not at all and that factors into the cost of the card itself for Sony. This is not a typical situation where they can pass the cost onto the consumer. Each card is worth a set amount that will not vary. Any and all costs represent money lost.

Sony works together a lot better than it did in the past.  In fact, off the top of my head I can give two examples of products that require a large amount of cooperation between the various divisions. 

1.  Blu-ray requires cooperation between Sony's entertainment divsion as well as whichever produces the discs, as well as the part of the company that does intellectual property, as well as sony electronics that makes the blu-ray players. Sony isn't just a products company it's also an intellectual property company that's why they keep trying to push out formats so that they can control and make $$$ of the format. 

2.  The 3-d initiative.  This requires that sony's entertainment division works with the movies division as well as the disc production division as well as the electronics because sony also has 3-d movie projectors/ 3-d cameras for move shooting, etc as well as intellectual property in this, as well as smaller software companies that sony has bought that just do work for 3-d movies.

So, if all we are talking about is paying another division for the right to sell a movie or music video, then that should be no big deal compared to the coordination just outlined because you do realize that both Bd and the 3-d formats would have to be designed so that other divisions would be able to take advantage of them as well which implies a big deal of coordination.   

I think the Store will be in pure profit, I think home is starting to touch profitability, I couldn't tell you if the profit made is balancing out the development and server costs, however I suspect they are probably only covering about 60-70% of their expendature when sales are high and about 20% when sales are low.

"Just because they include an online service doesn't mean they had to make it free"

Very true, but once again, the competitive element that having the online adds is invaluable and the fact that it is free makes it even more of a selling point, If I had to guess, I would say that if they had not made PSN free, the 360 would be around 10-12 million units ahed by now.

I think that the PSN is actually more important than the PS3 at this point because is has to last longer, keeping it free will be very important in years to come and MS may be forced to turn XBL free in order to compete next gen, just a guess however.

given that sony doesnt use bandwidth while you are searching for people to play with unless its one of their own published games, and that psn titles are pure profit AND developers pay for it.... id say yes.

They sell a lot of PSN games and DLC-s. They should make good chunk of profit from it. Bandwith, server farms and storage space are not expensive this days and gaming itslef do not generate mutch of it.

All I know is they've made at least $50 off of me.

I'd think Sony selling these cards to retailers wouldnt be any different to selling something else. The store purchases say 100 for $15 dollars a piece and Sony get $1500 for the cards and then whe nsold by the retailer for $20 they make their money. Correct me if I'm wrong though im just assuming.

OMG first ppl ask if KLZN2 made a profit (Doy it did).  And now PSN?!?!?!

1) SONY charges all companies that put demos on PSN for each time they are downloaded to pay for the bandwidth

2) Home generates large sums of money when ppl pay for things that take an hour or less to program and have NO production costs

3) Home gets money for advertising

4) All of those games (PS1 especially) and movies have no production or transportation costs and yet we pay full price most of the time for conveniance.

So to sum up ofcourse it makes a profit...Why don't people just think once!  Next I'll hear "Did Uncharted 2 make a profit?  It cost a lot to make idk..."

Actually they are highly profitable. I read somewhere that only 4/5 Xbox Live cards sold are ever redeemed. They get the money either way so the equation chages to $16 * 5 = $80 = $80 redeemed times 0.3 = $24 profit.

I figure I'd chime in to help people understand what goes into building a network like XBL or PSN.  I cannot say that I have worked on a project the assumed scale of PSN, but I do work for a networking company and have been apart of building out some rather large networks.  Whoever said that having servers on the internet is cheap is not looking at the full picture.

Everything related to hosting costs money.  Setting up large CDN (content delivery networks) is a phenominal up front cost.  That being said, its most likely Sony leverages other CDN's to help offload some of the burden.  Microsoft uses Akamai all the time for their download services (PC related stuff for sure, not sure about XBL).  CDN's basically host your files from multiple farms across the globe.  Downloding something in China from US may not be the service experience you are expecting, so its important to make sure service satisfaction is equal across your major targets.  Servers, networking equipment, bandwidth and storage are going to be the major key expenses in building a network. Storage, and making that storage global is most likely their biggest hurdle.   If I remember correctly, XBL puts a limit on some file sizes, where Sony does not.  Because they charge their clients to host demos/files, it helps offset bandwidth and storage costs.

Services in the technology space is all the new rage.  Everyone wants to sell something that keeps selling (revenue streams) rather than buying a product once and having to release new products to incure more sales.  There are some great advantages for selling a service vs. a product, but there are also some major things to keep in mind.  As things become more service based, reliability and experience are key.  So to host a few websites, you can get away with a few servers and some bandwidth, but to host a network, you need a minimum of two of everything.  Have a service that tracks players locations?  Maybe it takes  20 servers to track all your clients,but you better get 40 and to make sure if one stack fails, the other can still handle the load.  The network switches that those servers connect into?  Better have two incase of switch failure.  The routers that help route traffic?  Better have 2 in case of router failure. Modules, cables, switches,routers, fans, power supplies all have to be redundant.  When I submit a kit list that totals 250 thousand to a client and they flip out, its because they didnt realise you have to double everything.  Once you have that built out, say in North America, better build that same footprint in Europe and one in Asia too.

After the up front costs to build a network, you have the MRC's.  Montly recurring costs that datacenters charge you.  Power, cooling, bandwidth, and support services you contract all cost, every month.  They themsleves are providing a service.  New technologies make thing easier like VMware and virtualization, but that comes at a cost too. Say those 40 servers, maybe you can virtualize them with 8 big beefy servers, but the cost to license the Virtualization technology costs some money.  Add in the storage networks that get introduced because reduced your hard disk count when you downsized all your hardware, and you're right back where you started.  At least hopefully your montly's are lower than they could be.

Fact is, nobody really knows.  I havent seen anything disclosed anything that I have read, but it would be interesting.  Setting up PSN is costly for sure, but a lot of that is the upfront cost to build.  Once you have revenue coming in, and some infrastructure already laid out you concentrate on selling shit.  I think it makes sense to charge your clients to upload demos and utilize the network.  You are selling your service to help them hire a service to advertise and reach out to their targets.  I suppose at some point everything becomes funny money because you're paying one guy to provide you a service in which you turn around and are selling to another guy.

Anyway, just a perspective...