The PS3 sold for a $240-$300 loss on every console at first and that doesn't even include the expensive R&D Sony did. Not only will the PS4 cost Sony a lot less behind the scenes in R&D but a $100 loss is nothing and can be easily off set by software and accessories. Those who buy consoles at launch tend to be the consumers who purchase the most software as they tend to be core consumers and will have the system the longest. Depending on what they buy I'd guess anywhere above 5 items/games will already be profit for Sony for that customer.

Look at the Vita, it seems most of the members here are in or around the double digits in software just after its first year in the market. You can look at the software ratio on VGC which is 2.5 but software is hard to track and according to Ubisoft Vita digital sales are above 15% on their titles.

Selling at a loss initially can really help Sony create a stronger demand for their hardware and increase their install base which will transfer to profits for them down the line. Eventually they will be able to cut costs and sell break even or better and can utilize price cuts when needed. Any damage from selling at a loss of only $100 will easily be offset, whereas it took the PS3 at least 2 years even to reach the break even point.

Impossible to say without knowing 720 specs, prices and release dates for both consoles. Also, some gameplay footage for launch games on both consoles would be crucial as well.

Sweets should be sweet.

Not really.
They need 8GB of memory. That is just how games will go. Also with it being so fast, it will help boost gpu performance.

Well, I understand that sales from software and accessories wouldn't be enough to offset all the loses, but it'll help in reducing the losses until manufacturing costs come down.

That's a good point. Now we just have to wait for the price to be announced at E3 or whenever they decide to do it.

As I said before though, the initial install base will not be enough to offset the losses. Say it costs $500 at launch (parts alone cost this not including r&d, shipping, adverts etc, so I thought it a good figure as an estimate.) To offset the loss per customer they'd have to spend another $100-150 and that's if it doesn't come bundled with a game already which would put the price up again slightly higher.

It now costs around the same as the ps3 at launch for everyone if they buy enough to make Sony break even at launch. (please read that carefully people, I'm not saying the ps4 will launch at $599.)

Close...but the estimated hardware costs are around $400 not $500. Maybe $500 after shipping and packaging so that's where I place the $100 loss if the PS4 is $400 at retail. A huge difference from the $800-$840 cost of the PS3 for Sony. Things like R&D and advertisment is not part of the cost breakdown. Those are seperate items than can be attributed to the project itself, the R&D being something they have been funding for years now.

The PS4 is highly pointing towards a $400 launch price, perhaps with a second sku at $500. The loss will be much smaller this time around on a per hardware basis and a R&D basis. Sony is setting itself up for a decent profit flow shortly after the launch instead of years afterwards with the PS3 just to make up for R&D.

All figures in USD.

APU (CPU/GPU) - 85-90
8GB GDDR5 - 110-140
OS Chip (supposedly ARM based) - 12-18
Video encode/decode chip - 8-12
Blu-ray drive - 18-25
Hard drive - 38-50
I/O - 9-12
Wireless chip + antenna - 4
HDMI+HDCP - 11-15
Other - 25-35

Accessories:

DS4 - 18-30
PS4 Eye -$12-20
Mono headset - 3
Cabling/misc - 3

Unknown/Alpha:

Internal PSU - 25-55
Cooling - 20-38
Assembly - 13 (Based on being made in China, for made in Japan, make that ~ $45)

Total estimated system cost (no shipping and packaging) - $450-490

I see. There is still a lot of possibility on what price Sony is getting for these parts, but I guess that goes either way and I'm not sure how these figures are determined. If they go with two SKU's, one at $400 and one at $500 they can reduce the loss on hardware while still keeping that $400 base price on the market. Honestly, it wasn't until the hardware reveal in full that I thought the PS4 would get a $400 model, it always seemed like it would be a $500 system. This is leaps and bounds a better situation than the PS3 for Sony, if only their company was fairing better right now at the same time.

it'll help out in the long run