i was leaving that for someone else to mention.

The PS3 was sold at that much of a loss because Sony assumed that no matter what they did, the PS3 would win. The loss was thought to be reasonable, not due to the amount of money Sony would get from PS3 games, but from licencing Blu Ray to all computer manufacturers until digital distribution takes over.

Sony does not have a new disc format to push with the PS4, so they will not be willing to take on such a loss.

Wait, what? If they make money from day one, it will either be very expensive or its power will be underwhelming. And what was that with nvidia-gpu and ms owning gpu? The Cell was the pricy thing in PS3, along with the odd aka bluray. And then you say they lose 25 to 30 dollars? Weird.

They are definitely planning to push 4k but I think with that chances are even less than Bluray or 3d to push a new technology.

Sony lost a little more with PS3 (250-ish at launch). This is more comparable to PS2's situation, which had a very cheap price, small R&D costs and similar loss. 

You make a really strong point about blu-ray though. Now that I think about it PS2's loss was probably partly justified by being able to push DVD sales. Same thing with PS1 and CD if that took a loss.

@everyone: Again, this isn't what I think Sony should go far (as I say in the last in OP), I'm just putting it out there. Conclusion I've come to is Sony could only do this if they had some money to burn through, so they'd take a hit the first year or 2 but I'm sure overall it'd be very profitable. They don't have that money so they can't. $399 + small loss it is.

Well, in reply to your last comment: 

People, not just the future bet-loser marcus, keep forgetting that this would be half the PS3's price at launch and won't have any crazy r&d costs associated with it. That said... I don't think it will work anyway (see post above).

agreed in all fronts that don't have a line through them. it's very much possible Sony could announce a Vita price cut today, or at GDC, but i think they'd want to wait and save that for Americas biggest event in that being E3.

I dunno... they're going to have millions of people watching. The whole industry's eyes on them. If I were Sony and I had big announcements for my failing platform on hold, I'd set aside 1/4 of the show for it. What I fear is that if not tomorrow then E3 seems most likely, which means I lose the bet ;(

If Sony were crazy enough to release the PS4 for $300 and it cost $500 to manufacture, then what would be the result?

Probably a massive rush to buy PS4s at launch, followed rapidly by Sony going bankrupt or the management being fired. Sony isn't in a strong financial position as it is, and the PS3 is one of the few things that are keeping them from completely going bankrupt. They can't afford the massive early losses that such a pricing would inflict on them, anymore. The PS3 took something like 4 years to start to be making an annual profit - to my knowledge, it's still in the red for the entire generation. The Vita struggling so much will only add to the strain.

Sony needs to play it conservative. They can't go massively powerful, and they can't go with a massive loss-leader strategy. They might be able to get away with a modest loss per console - of the order of $20, if they're feeling lucky - but anything more, and they're just not going to be able to sustain it.

Microsoft might be able to take such a strategy, as MS is in quite a strong financial position. Nintendo could do it if they were of a mind to, but they'd never actually do it. Sony just isn't going to, because they just aren't in the position to do it.

Well seeing how Sony might being going to a premium service that cost more, why not sell it for $300 and then have a 2 year contract to buy the premium service, like with what M$ is doing with the 360 selling it for $99 and a 2 year xbl deal. I dont know many that wouldnt jump on that deal.