Well in the UK which is in Europe the xbox 360 has been way cheaper than the ps3 for a long time, and the ps3 has still managed to have good hardware sales. So in my opinon any gamer thats into hardcore graphics is going to still purchase the ps3. the 360 and wii are around the same price and people have still gone for the wii over the 360. So really this had led me to believe that if someone is looking for family fun then they are just going to go for the wii but people like me will still pay the extra cash for a ps3, because if so many people could afford the cash for a wii then they can already afford a 360, people have just chosen not to.

Deep pockets they may have, but money doesn't make a good product. Case in point, the Zune. Microsoft hyped that thing up to be an iPod killer, yet even now it struggles to compete with the iPod's second, third and fourth largest competitors. You can throw as much money into a product as you want but it won't make it successful. And by the way, I have owned every console this generation, so I am not a "fanboy" just because I happen to prefer Sony's gaming line-up. Is that the common trend online these-days, to accuse someone of linear-mindedness for proclaiming their liking of a product and the critical musings of another?

The Zune's sales might not be spectacular, but the device itself is outstanding.

@Starcraft I personally prefer the Creative :x

@OP It means Sony will have to bake pies, lots of them >_>; I dunno, nothing? they can both cut the price :x

I loath the Creatives. I got a Zen and it broke, twice. IT was also very fiddly and hard to navigate.

How much have they lost on the PS3? A fair bit. Two billion or so probably, nothing out of the ordinary for a hi-tech machine at launch. The real question is, how much will they make? Indeed, Sony are already turning a profit on the PS3, something they managed to do twice as fast as Microsoft did on the technically "inferior" 360. Microsoft have lost several billion on both the Xbox and Xbox 360 combined. The 360 more so with billions being reserved for the RRoD issue alone. They have only just started making money, albeit not a great deal. Only just, after several years in the business. Every Sony console has been a phenomenal financial success so far, and if the PS3 is already in the black after just over a year on the shelf, that's incredibly impressive considering how much technology is packed under its hood. Sony can afford to take a hit, unlike Nintendo. It doesn't rely solely on console sales, but as that is perhaps its biggest and most lucrative sector, you can be assured they will do everything in their power to make sure it stays that way.

PS: Xbox fanboys, that word in quotations above isn't being used in the derogatory sense to cause offense, but in a way to emphasize that the 360 isn't as technically powerful nor as feature packed as the PS3 to illustrate the manufacturing price difference. Just thought I'd point that out before all the "how can you say it's inferior" comments start pouring in. 

Not according to the reviews and the many who have traded them in for iPhones, iPods, Sansas and Creatives, but that's a different thread 

The fundamental premise of your post fails.  Sony are not profiting off the Playstation 3.  Their last quarterly report showed them making money off their game division due to PSP and PS2 sales, but losing money on the PS3.

As for the inferior comment, Sony are yet to prove by any reasonable standard that Blu-Ray is neccessary for gaming, and are yet to show that the PS3's processor can do anything distinctly better than the 360's, and it's miles away from showing a graphical leap vast enough to justify the increased price on its own.

In Europe I think a $100 cut would be necessary to keep the 360 truly competitive.

Otherwise PS3 will easily take Europe from them.

Price drop? I'd love one so I can pick up 360 for Lost Odyssey. Sometimes I don't understand why one price drop of a console should "affect" another console. It's not like people can't own both. If they wanted it, they would have bought it already.

(side note: The world has changed. You can't buy anything you like anymore without being called a fanboy/fangirl from one group or another. You get a 360 or a wii, you get called fanboy/fangirl by the Sony group. You buy a wii, you get called a fanboy/fangirl/kiddy by the Sony and Microsoft group. You buy a PS3, you get called a fanboy/fangirl again.)