It isn't. Look at Ps2; then also look at Gamecube and the original Xbox.

From a developer's standpoint yeah. But software developers aren't responsible for hardware in the PC space. That's why console can't support the PC's model yet. The loss leader model won't be satisfied by the PC model of not having to worry about it.

8th gen is basically midtier from the start and still selling on the loss leader model. I doubt console mafuacturering can be supported by the PC model.

Steam OS is a perfect example, if Sony or MS made gamingOSes rather than gaming consoles, then it would work but these wouldn't be convential consoels anyway

Because it's not THEIR console dominating!

Seriously though, the competition last gen produced some very impressive results. It certainly kept Sony in shape after their stumble at the start of the generation.

Of course they can, they can simply stop selling the consoles at a loss, which we are seeing this generation.

Competition is good but one console dominating isn't necessarily a bad thing. It would certainly make it easy for most people to choose a console.

I have alwyas belived one console dominating a generation made the generation better. When developers focus on making a game to a single hardware configeration we always see the best titles. It also helps drive sales of games due to the focus being on one product. With multiple front runners publishers put out muddled marketing trying to make everyone happy.

To be honest, I have always thought that if devs forced a single hardware configuration that they would build to, and any manufacture could build to it, it would create a massive boom in the industry. Unfourtunatly, gamers are to ignorant to realise that this would not be a monoply, but a massive influx of competition, without deluting the market with a million completly different devices. If one day this becomes a reality however, I expect gaming to truly move to a universally acclaimed medium, and result in the industry moving 1 billion hardware units, and massive titles reaching 100 million sales on a regular bases.

On the contrary, Nintendo is selling there console at a loss for basically the first time ever, and as for Sony and MS their consoles are at their smallest loss but considering shipping, storage, and R&D fees the console are still a loss intially.

We are already hearing complaints about how next gen isn't powerful enough, if these consoles sold for profit they would barely be improvements on last gen. With PC and Mobile gaming closing in on consoles from both sides, there is no wai consoles could survive like that. Not physical consoles any way. Somebody is going to have to pay for the hardware investment. 

You say its as easy as stopping the loss leader model, but that means more expensive consoles (the 600$ ps3 was sold at a 200$ loss, but at 800$ you could easily spend that money on a PC that will have more utility and power) or even weaker consoles, which mobile also threatens, cause its growing more powerful a lot faster than consoles can.

Because last generation where things were the closest we have ever had we saw major innovation in all areas.

Online.
Motion Controls.
Digital Distribution.
Return of Indie games.
New buisness models
etc.

When you have one dominant force, innovation slows down as status quo sets in as everyone on board is to scared to rock the boat for fear of losing dominance.

What did PS2 dominating get us? A $599 PS3.

Xbox got us a $800 PS3, that was pricecut to $599 on launch.