You are forgetting retailers like game stop takes a cut as well and I'm sure there are other things we are not factoring like bundles and discounts.
Oh, all of that profit was wiped away with Concord alone. Not including all of the Sony failed GAAS attempts they poured billions of dollars into.

Sony first party studios isn't doing as well as you think it is. That is why they are remastering and now porting their games to other platforms. They have no choice or else share holders will get involve and start forcing Sony to close their studios down and take less risk.

Exactly, they need to raise the capital to purchase more studios. The future isn't consoles but cloud streaming.

Concord was $800 million. Just two exclusives would cover the loss of Concord. 

You can only keep selling the same game to the same audience for so long. At some point you have to expand to other platforms to gather a new audience. I think those games would have sold more on Xbox and Switch than PS5 especially since those gamers already had access to them from PS4 and had a $10 upgrade, whereas the other platforms would have to pay full price. Those games reached their max potential on PS and PC, so the next step is Xbox and Switch.

I've always wondered this. Sony said they were expanding their games to PC initially because they wanted to expose the PC audience to their games to get them to buy a PS (obviously didn't work and are now doing it just to make more money), so why not apply that same logic to Xbox and Switch?

Making 10% profit is considered golden in most businesses. Even if you factored in the negligible $10 that retailers kept and sales there's more than enough to have well over 70% profit. Exclusives like Spiderman 2 literally print money. 

Concord was $800 million. Just two exclusives would cover the loss of Concord. And Sony's solution to that issue shouldn't be to go 3rd party. As it was pointed out previously in this thread Sony makes $800 per PS5 customer during a console life cycle. That number is profit and doesn't include the $550 for a PS5 sold. If you included pure revenue it would be much higher. Meanwhile your average 3rd party customer might buy 3 or 4 Sony titles that are taxed at 30% on Steam. A customer moving from PS5 to mainly being on PC costs Sony well over $600 per console cycle. You need five to six non-PS5 owning customers to replace a single PS5 owning customer. 

But again, what happens when a PS5 costs $800 due to Trump tariffs? Well then, you can't sell consoles. And what happens if you decide to sell those $800 PS5s for $550 anyway? Well then, you incur a $350 loss per console, and that eats into your profits massively. Sony can't sustain selling consoles at that kind of a loss. They are afraid that one bump in the road will destroy their console business model so they are going 3rd party. 

So their profits increase because of PSN and the 30% revenue tax they get from 3rd party sales? That means their profits increase from increasing the number of PS5 users. And guess what increases the number of PS5 users? Exclusives. 

In movies the general rule is you need to make at least 1.5 to two times the costs for it to be profitable. I do t see why that's different for games. So a game costing 200 million, better bring in at least 400 million of revenue. Playstation is now one of the biggest players in the business, however without PlayStation hardware, they are not much bigger than EA. Sony doesn't release and sell that many titles a year.

Yeah production budgets usually don't include advertising costs, which for modern games/movies (at least the big ones) is often colossal in its own right.

What's going to happen here is that Sony will slowly shrink and then close their 1st party studios since some part of Sony's leadership has deemed them "unnecessary". Sony's corporate leadership has taken the same braindead position as Phil Spencer by thinking "I could make the greatest game of all time and it wouldn't move console sales one bit". Once you start thinking that way 1st party games take a backseat to whatever other nonsense you are doing. It's already started happening. Bend Studio got its game canceled. Insomniac had layoffs despite Spiderman 2 selling insanely well. The Gravityrush team was let go. Naughty Dog hasn't made a game since 2019. Media Molecule is pretty much dead.

It's so frustrating to see such non-competition between Sony and MS. It's a two horse race and there's no penalty for coming in second anymore. Anything Xbox does to make their brand worse Sony will copy because where else are high-end console players going to go? It's similar to how the Republican and Democratic parties work in the USA. Republicans plan to increase the national debt by 100%. Democrats counter by saying they will only increase the national debt by 95%. A few years later Republicans say they will increase the national debt by 180%. Democrats then decide that they will only increase it by 175%. So you have this non-competitive two man race to the bottom.

Thank God for Nintendo, Indies, and quirky Japanese 3rd party devs. That's where creativity will come from in this industry.

Niche-Man 2 had a marketing cost of around $35m.

Marketing campaigns are not the same with games as with movies.