Well, Sony may have lost billions of dollars this gen like you say.  However, the sheer number of consoles sold indicates that at some level Sony has been successful this gen.  90 Million consoles sold would probably put PS3 in the Top 10 Consoles saleswise of all time.  And for the most part those sales have been based upon giving gamers experiences like they've never had before this gen whether that be in their amazing exclusives like Uncharted and Heavy Rain or in the third party games they shared with the 360. 

It's kind of a two edge sword.  They could go the low power route you suggest and really be no better off than if they were to keep the PS3 on the market and keep supporting it heavily for the next five years, but they would lose the new audience they created this gen as they went off to look for consoles that did deliver far superior games to their aging PS3s.

Or they could step up to the plate lose a bit of money though if they played their cards right they could mitigate that by not being as willing to take as much of a loss as usual ie. putting out hardware at the $500 price range that would be far superior to Wii U's tech while using tech that would be reasonably priced for them versus what they lost with PS3 and swing for a new generation of games that would be as impressive for their time as the PS3 was for its time thus keeping the new audience they created on PS3.

If you're going to try to predict what Sony is going to do with the next generation, you need to think in terms of business, not like a gamer.

Sony could manage to ship 2 billion consoles, if they made the system cheap enough. That wouldn't be a success, though. They're a business, success is defined by profits, not by consoles sold.

Also, how the hell do you think that Sony would manage to put out a $500 system that is far more powerful than the Wii U without being far more expensive to manufacture? The Wii U is currently being sold at a loss at $300. The PS3, as far as just about every rumour and insider tip has said, cost somewhere in the vicinity of $800-$900 to manufacture, and it produced graphics not far beyond what the Xbox 360 could make, despite it being significantly cheaper to manufacture (as far as rumours go). So if we suppose that Sony wanted to limit the loss per console to, say, $50 (which is still a significant loss, by the way), they'd need to make a console that might be 2-3x the power of the Wii U. Maybe 4x if they skimp on other things like the controllers, etc.

I just can't see the business logic behind going for a high-powered system.

They will buy it because the games were good beyond the graphic parts? are you telling me that 90 million fans only care about the graphical upgrade? If Sony puts the next Uncharted in their next PS4 even if it is not a great jump in power the fans will follow, because they like the narrative, the gameplay, the music and also pretty graphics even if those are only somewhat better than in their PS3.

If Last of Us is a succes and wins some fans, they will buy the PS4 if the next game of the saga comes out in it, not because the graphics are a billion times better, but because the games are new, interesting and fun.

The Playstation 3 has a sizeable audience that likes a certain type of game.  Do you see that audience sticking around for PS4 if it's not capable of delivering that type of game and some other console is?  I really don't see fans of Uncharted, The Last of Us, etc. being very interested in PS4 if its all Wii Sports clones and Party games.

they can sell at a small loss at $400 and $450 for 2 different SKUs.  They can do this and achieve 1080p 60fps with the necessary RAM for a very smooth interface and multitasking.  It will have been 7 years since PS3 was released and most of that cost was Blu-ray.  They don't have to spend over $100 of the system cost on a tablet with a bunch of peripherals on it so they can focus on internals and sell the system based on A. Improved graphics B. Better multitasking and UI C. PS+ which will most likely have some Gaikai integration with classics and D. Awesome library of AAA development studios and IPs.  That should be enough to get a lot of people on board considering they are going to sell 90 million PS3s starting at $600 with no system sellers in the first 2 years and starting significantly later than their main rival.

Are you saying that the PS2 didn't have games equivalent to those? Or that Sony wouldn't make games like Uncharted and The Last of Us for the PS4 if it wasn't high-power? Or that video game consoles are only capable of EITHER having high-quality adventure and shooting titles OR Wii Sports clones and Party games?

Because as far as I can see, one of those must be what you're saying. And all of them are nonsense.

The fact of the matter is, the vast majority of gamers on ALL platforms go where the games they want are. Games like Uncharted will still be on the system, and therefore any fan of Uncharted will get the PS4 whether it's more powerful than 10 Wii Us put together or it's less powerful than the Wii U with some new control feature.

As for third parties, it's worth noting that, if Sony goes the similar-to-Wii-U route, there'll be a lot of PS4/WiiU cross-platform titles. And if my prediction is right, and Sony goes WiiU-like (within 2x the power) while MS goes for high power, Sony will have the graphically better version of most multiplatforms, because fewer multiplatform titles will be ported all the way up to the Xbox Successor.

So here's another way for you to think about it. MS is almost certain to go high-power. Nintendo has gone fairly low-power (as the new gen goes). MS has much more money to spend on their systems than Sony does, and thus Sony is unlikely to be able to beat MS in power without going bankrupt. This leaves Sony with two obvious choices:

1. Go high-power and relatively exorbitant price, making it the "worse" version of MS's console.

2. Go low-power and relatively modest price, moderately more powerful than Wii U, and be the "better" version of Nintendo's console.

I know which way I'd go, if I were the CEO of SCE.

It'll never happen probably, but I wish Sony would strike some deal with Intel whereby they could produce the PS4 on a 22nm fabrication process. Otherwise, I fear Microsoft with its next-gen console will blow away the competition because of its superior spec, something it can afford to do as any early losses will impact little on its financial standing.

Sony is a conglomerate, and since I doubt the word means anything to you I will expain it to you. A conglomerate is a company that has divisions that actually do business in a lot of unrelated industries. On the whole Sony's divisions that are doing badly are losing more money then the divisions that are doing well. Basically the console divisions profits are being spent covering losses, and the losses are still greater then the gains. Which is why Sony has been forced to offer up stock option bonds, and has had to delve into its financial reserves to cover the difference. The companies cash reserves are finite, and the company is hardly credit worthy. So Sony is finding it harder to borrow. So no it doesn't mean anything, and it has nothing to do with it being Sony. I would apply this same logic to any other company in this exact same position.

I suppose you would argue that people who have cancer should just roll over and die too. A company in dire straights isn't a company without hope. Maybe the company won't survive this situation, but then again maybe it will. It is entirely possible that Sony could fester five years, and suddenly come out with another break out hit. That turns into a cash generating machine. That said I think you need to grow up, and act like the age your profile says you are. I don't know what kind of world you are living in, but sometimes in this life companies just like people have to do things to get by. If your family is starving, and you have to crawl around in pig shit all day long to feed them. Then that is what you do. You don't give up until there isn't a single chance left. The management, employees, and the stock holders of Sony need this company to carry on. Throwing a shit fit, and walking away from their responsibilities isn't a option. They will keep trying until they find a way or run out of chances, and that is just how it is.

Nintendo lost the console wars, but that isn't the same as getting the stuffing beat out of them. The difference being that Nintendo didn't lose money trying. They sold their hardware at a profit, sold a lot of their own first party software, and had the best selling portable gaming device. Nintendo actually did quite well for itself. It is a object lesson in going with the flow. Nintendo didn't need to dominate the market as a whole to be successful. They just needed to cater to a market of loyal consumers. Which was large enough to sustain the company in the industry. Sony would do well to learn some of these lessons from Nintendo. That is how Nintendo wasn't trounced, and this is how Sony was.

Others have shown you the graphs that show you how much Sony lost. The past generation is the text book definition of a Pyrrhic victory. Those losses probably don't even take into account the seven hundred million dollars in loans that Sony has to pay interest on that it took out to fund production of the PS3, or the overhaul of the online security that had to happen, because of the whole jailbreaking fiasco. That saw Sony getting hacked every other day for about two whole months straight. The answer to your question would seem to be self apparent. Were Sony to eat such losses again the company would likely go bankrupt, but you can relax. Sony wouldn't bankrupt the company to salvage a PS4 doing that poorly. No they would just abandon the product.

Propaganda isn't a substitute for facts. I hope you understand that if you continue on this route. All you are going to get for your effort is pulverized. Think what you want about this community, but we aren't slouches. We know a great deal about what we are talking about, and many of us have been on this site since the start of this past generation. We have a real good grasp of what happened, when it happened, and why it happened. Sony basically created a hostage situation that it couldn't walk away from. They couldn't allow the PS3 to die like it ought to have, because it would have destroyed their chip business, their new media format, their software studios, and their home console line. They were pot committed, and they were going to lose a lot of money no matter which way they went.

What makes you think the Playstation brand didnt lose value with the Ps3? It most certainly did.

I'm trying to look at this as objectively as I can, and all I see is doom if Sony goes the route that you think they should follow. This has absolutely nothing to do with anything Nintendo. This is all about Sony. Giving the competition 1-2 years head start will be the fall of PlayStation.