You were speaking sarcastically, of course, but if you're Sony then yes, the ends may have justified the means. Recall that even before Sony entered the video game market, they intended the Playstation to be a hook to lure consumers into Sony's vision of a multimedia center, wherein Sony could make money hand over fist by supplying all of your entertainment needs. The games were simply the bait. If Sony's multi-billion dollar investment into the PS3 helps it reach this goal, I don't think they'll mind much.

Of course, the problem they face is that they might have chosen the wrong trojan horse when they went with Blu-Ray. If this article is to be believed, Blu-Ray's victory over HD-DVD's hasn't led to enough profits for the movie studios to be pleased with the format. If VGChartz and other game tracking places are correct, the PS3 isn't selling software at the rate Sony expected it to. In other words, Sony may have won itself a Pyhrric victory.

Alternatively, their fortunes could turn around, Blu-Ray could begin to be widely adopted, and Sony's gamble will have worked. I'm skeptical that this will happen, but then reading the consumer market has never been my forte. Let's have this conversation again in about two years, and see how the situation developed.

The profits made on each disc sold go to the Blu-Ray disc association, a small amount of which then goes to Sony.  However, in addition to paying their share of the bribes and R&D cost, Sony was forced to disproportionately sacrifice their business interests by gimping the PS3's chances.  The PS3 fanboys keep reminding us how well the PS3 would have done if it had launched a year earlier at $399, and without Blu-Ray, it would have.

Also, there is no evidence that Sony has cut production in half at all, there was a speculatory article by Isupply that was widely discredited.  As you yourself just acknowledged, another hardware analyst stated that with no more price drops, Sony could break even on hardware by August.  Microsoft's scope to cut price would also be substantially higher than Sony's.

The Xbox 360 is outselling itself year over year, and the PS3 is outselling it at a rate that would have it catch up in three years (two years if you assume extra sales over holidays).  As for the Wii, it is absolutely PAWNING the PS3.  Sony sold 120 million PS2's (and are still selling).  But as all games the PS3 gets will be multiplatform with the 360, and most of the third party support will go to the Wii, the PS3 will have a shorter life-cycle than the PS2, and sell perhaps less than half what the PS2 did.  That my friend, is sacrificed gaming dominance. 

To my knowledge, Sony entered the gaming market to dominate the gaming market.  It wasn't until they developed Blu-Ray that they decided to trojan horse it into the PS3, and even then they were behind Microsoft's 8-ball on downloads.

I can't see Blu-Ray getting anywhere near DVD's market share, let alone it's lifetime sales.  Downloads are going to come in steadily over the next ten years and DVD is putting up a hell of a fight.

And as I said in my response to Bmaker, Sony's gaming dominance is long gone. 

Yeah i figured. They've got to get cheaper after too however as the rest of the Blu-ray consortium won't take to being undercut by the PS3 forever. Perhaps they're just biding their time a year or two until it is more mainstream however, that way they don't have to waste production time to take a loss like the PS3.

I find it weird that people are saying PS3 is real close to breaking even, yet blu-ray players that offer less then a third of what PS3 offers can't seem to lower their prices below it.

What's up with that?

Sooo... Sonys got a big battle on their hands >

(Xbox360 vs Ps2 vs PSP) vs PS3 vs (Dvd vs HD DvD)

Holy monkey wrench...

Wonder what effect home will have.

 When Sony first entered the game market, it immediately proclaimed that its biggest opponent was neither Nintendo nor Sega, but Microsoft, because Windows was trying to be your all-in-one center for all your media needs. If you're interested, I can try to scrape up the quotes, although it'd take a while, since this was over a decade ago.

As to your second point, I quite agree. I also doubt that Blu-Ray will enjoy the success that DVDs did, and that digital distribution will likely be DVDs successor. And if that happens, then Sony's just shot itself in the foot. The thing is, like I said earlier, I don't pretend to be able to predict long-term trends: I don't have the time to pore through the data, and even if I did I lack to expertise to properly interpret it. So if I'm wrong, and Blu-Ray does win, then Sony will inevitably do pretty well for itself, even if its not the only person who profits from the medium. Remember though that Blu-Ray is only supposed to be one segment of Sony's long-term plan: it's a mean, not an end.

And yes, Sony is not going to recover its gaming dominance this generation. I wouldn't write them off for next time, though. As Nintendo just showed, its quite possible to go from last to first in no time. but does Sony still have the necessary drive and vision? We have three or four years before we find out. 

 Maybe Sony has the key patents on the technology, which makes it easier for them to produce new Blu-Ray players? Or perhaps Sony is the only major manufacturer which also holds some of the patent rights, whichgreatly lowers their costs? I honestly don't know, but I'd imagine either of those scenarios is plausible.

I doubt it. A lot of companies that make blu-ray players own key patents. I believe no one with a Patent actually pays anyone else with a patent a liscensing fee. At least that's what i've read before.

Phillips holds some as well. So that's 3 makers right there that could. They all hold essential pieces to make the technology work. So none holds an advantage over the other really.

Honestly Sony doesn't hold as much of the format as people thing. It's less then 35-40%

Still... if the liscensing fees were as high as DVD... and it's as big as DVD... that's pretty decent. DVD licensing costs per machine were like.... $10-$20 a machine i think. Sony made like... a penny per CD printed... not sure what DVD per disc royalties were.

Though it's likely they'll get less for Blu-ray then DVD, otherwise there will be little incentive for studios to bring over all new movies instead of just ones they think will sell well in HD.

It should make millions a year. It might not make up for the losses Sony incurred due to the PS3 early on if you think that's why it failed... but i'd say that's not why it failed. It just did a poor job targeting PS2 users and instead targeted only a very select group of PS3 owners.

Simple.  They want a new format and BR is it.  Why?

1) as prices come down the DVD physical market will shift to BR over time and in line with HD TV adoption

2) they know that even with backwards compatibility many diehards won't be able to resist buying favourte movies in higher def with new extras, giving them easy money on existing content (Star Wars, Matrix, Lord of Rings, etc. etc.)

I'm not saying they will do this abruptly or even right away, I'm merely stating they can (and I'm sure will) influence the situation - remember the studions want BR to succeed and they can easily make it more attractive.  I imagine the following choices in near future : rent film only (physical or digital), buy DVD film with decent extras, buy BR with additional extras plus exclusive 2.0 downloadable content...

At the end of the day the core owner of films/shows want a quality / price balance - get the price right and they will go for the higher quality every time.

As you say yourself the studios desire for a new format is wedded to the manufacturers desire for new formats and TV formats as well.  These huge companies need these regular shifts and every time they are the same - everyone moans and bitches that CRT, VHS, Tapes, etc. is fine then shifts along the following path:

1) the early adopters - who pay premium

2) the first wave - who pay somewhat above current gen - say $10 DVD vs $13 BR

3) the transition to mainstream

4) steady state (until the next shift)

Or perhaps you really believe the studios when they say the choice is the consumers... a lot of money is behind this shift (which will also go hand in hand with a growth in digital mediums) and at the end of the day these companies can make the shift a success should they chose too - and they have every reason to do so and none not to.

BD didn't win the war against HD-DVD, HD-DVD just failed. Sony owns more then half the movies ever made, so it was guaranteed that they would never see HD-DVD.

Because of this, HD-DVD had no chance to succeed.

I make this minor distinction, because BD is currently not in a position to beat anything. It's in its infancy. It's doing well for a new format, but it will probably be another 2-3 years before it's a mainstream competitor to DVD.