The PS3 has three revenue streams, which will more than make up for initial losses:

(1) games (disc plus downloads and online)
(2) BluRay media
(3) hardware devices (TVs, stereos, etc.)

The PS3 is powerful and reliable enough to hook up top-notch AV equipment to.

Do they have any profit streams, cause I think those would be most useful.

I kid because I love

No one is saying Sony as a company won't make up the losses. On the contrary, Sony still makes profit as a whole. However, the playstation division is suffering at the moment, and it is possible they won't be able to make it up in that division. The same way Microsoft's Entertainment and Devices division lost near 4 billion for the original Xbox, it was easily absorbed by Microsoft's lucrative Windows department. But companies aren't interested in absorbing losses from weak departments. They are interested in turning a profit in each sector.

This is exactly why Sony are completely changing their gameplan, to be a lot closer to what Nintendo does.

Sony have never been strong with software - hardware has been their focus, and they make money from 3rd-party fees (manufacturing) on their consoles. But now with the PS3 in so much trouble (chances of it selling anywhere as near to what the PS2 did 3rd-party software-wise is probably zero now) - Sony need a new way to make money.

Step in: software development

Sony's new strategy is to develop and publish as much in-house software as possible. New IP stuff, as its the IP that builds the value over a long period of time.

(looking at the current weekly charts - Sony is ranked 9th as publisher - with their best title being Prologue at #45)

It will take a few years for this strategy to play out (as software dev is a slow process) - and its also a risky one. They do have the advantage of platform holder (gives them financial, technical & marketing advantages) - but we all know that PS3 software dev is an expensive process (MGS4, Killzone II, etc..) - meaning that the titles have to be considerable hits to work out.

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Its ironic - but probably the best thing for Sony to do NOW would be to develop & release a number of quality PS2 titles. They could use the profit from these to bankroll their PS3 titles, and it might slow the momentum of the Wii.

They are in a really tough spot - primarily because of MS. MS could blow a couple more $bn on price cuts/buying software a lot easier than Sony can afford to ATM.

I completely agree for the most part... although some people are blind, gullible fools who CAN be easily controlled by giant corporations (ie CrazzyMan)

Considering that within the movie industry the publishers like Warner and New Line Cinema are worried about Bluray sales maybe Bluray will end up a big mistake. Anyway if that happens you can add all the Bluray research to that figure to. Seems a bad gen for Sony.

One thing I haven't seen touched on yet (BluRay wise):

BluRay is effectively a "higher-quality" DVD. Its also more expensive to manufacture (discs & players), and titles are more expensive to purchase for consumers (than DVD releases, which are dirt cheap now).

But I see this as a catch-22: For me personally, BluRay holds no appeal. For it to appeal, the price of movies AND players would have to come down to near-DVD price - 'cos, as a consumer I don't perceive the quality improvement to be significant price-wise (i.e. "I'll pay more for BluRay, but not MUCH more" - no more than maybe 10% at the moment).

For BluRay to replace DVD, prices are going to have to come down a lot - but the more they do come down, the less profit Sony & consortium members make.

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With DVD vrs video there was a significant difference in features, quality, shelf life (videos lost clarity over time), etc. People were happy to pay a LOT more for a DVD version of a movie rather than a VHS version.

This just doesn't exist with BluRay vrs DVD. I can't imagine DVD *ever* dying out completely - so that price differential will always be around.

DVD looks really good when upscaled, and although I can tell the difference between DVD and Blu-Ray, the average Joe would be hard pressed to notice a difference worth the $30-35 price tag new Blu-Rays carry, copared to the $10-15 price tag DVDs carry.

Also, @masterb8tr, you really think online HD movies won't become the norm for ANOTHER 10 years (2018)?!?!? You gotta be kidding me! In my area alone $50 a month gets me 10mbps up/down through Surewest fiber optics, and they keep on expanding. I noticed Comcast has effectively doubled their internet speeds lately from the ads I have seen, and this seems to be the norm for a lot of companies who are upgrading to higher bandwidth fiber optic lines. I don't think it will be but another few years before we see online HD movie viewing start to become viable, as internet speeds for households appear to be going up and up lately. Just my take on things, but I give it 5 years at the most before online HD content starts to eat away at physical media. In 2018 I think it will already be the standard.

I know this is off topic but why doesnt sony exclusivly release there big titles on Blu-ray to help them sell? It help them with this money problem

Sony does get a cut of DVD as well, since they co-developed it with Toshiba. Plus them having their own movie studio means they still get plenty of money from DVD. And since the PS3 plays DVD as well, this is not really a solution to the money problem.

Futhermore, the issue was that Sony was relying too much already on extra revenue to offset the PS3's cost.

It depends on what you mean by "Worth it" ...

For many of the companies in the consortium the value of being involved in a product like a new movie format is to be able to develop technology which may be of value in a wide variety of situations (look at the DRM as an example), or they anticipate that it will drive sales in other divisions of their company.

Movie Studios and Electronics manufacturers are always pushing for new movie formats because (if they're really successful) they will drive the sales of old movies (which produces high revenues at low costs) and sales of high end audio-visual equipment.

Certainly, when you factor in all revenue streams, Sony might recover their costs from the adoption of Blu-Ray but it is highly plausable that they would have gained these additional revenue streams had HD-DVD or Digital Downloads taken off and they wouldn't have faced the losses associated with Blu-Ray and the PS3.