One of the common arguments that I have seen on forums for years is that Sony and Microsoft appreciate their customers more because they're willing to take heavy losses on hardware; and Nintendo is somehow greedy for breaking-even/profiting on hardware. The thing that most people miss is that you will pay the difference in hardware costs anyways ...

Sony and Microsoft are following the standard loss leader strategy which has been used with many other products (Printers, Razors). How this works is you start off selling a product at a loss because people do not value the product enough to pay what it costs, and then you turn a profit through the recuring costs associated with the product (ink/toner, razor blades).

Now, Sony and Microsoft are planning on recovering these hardware losses by increasing the licencing cost of games (which is part of the reason the price of games increased by $10), paying for services ($50 per year for XBox Live), taking a larger chunk of the revenues from XBox Live Arcade/PSN games, introducing downloadable/episodic content, and using in game (in service) advertizements.

In that case then microsoft seems to be more of the money hog then, i mean where is sony getting all if there money back

^^^ psn game royalties, licensing fees, and in game advertising. The only place that Microsoft charges that Sony doesn't is XBL subscription.

@ nordlead: but isn't that exactly what Geenie is saying? Add in 50 dollars for all the members of XBL and you get a rather high number.

Exactly what he's saying.  He's saying that Microsoft does it more, but they both do it a lot.

The increase in the MSRP for games was because of increased development costs for games.  The only place where Sony or Microsoft sees any of that extra money is in first and second-party games.

If it is HD and graphics-heavy development that is the main change since the PS2/GC/Xbox era, then why haven't state-of-the-art PC game prices increased over time in line with graphics technology then?

They HAVE increased over time.  Last gen you could buy a $50 console game or a $40 PC game.  Now, you can buy a $60 console game or a $50 PC game.

 Pretty sure that is incorrect. 3rd party publishers must still pay the console company X amount on every copy sold.

Actually I thought Sony's fees were much higher when the PS3 launched, but they lowered them last summer. (I could be wrong, but that is what I remember) Not sure about MS.