Great idea. Let's charge 10 times the royalties of DVD, then we only have to sell 48 discs per household.

how can so many people can take it from faith that blu-ray will cover losses from ps3, since it is not at all clear-cut. i recall reading somewhere--don't quote me on this--that toshiba's lifetime revenue from DVD royalties is something like $4 billion. i think it's kind of on the high side, but anyhow.

well, if sony gets $4 billion from blu-ray royalties lifetime, that just about covers up losses for the ps3.

either way, even the most ardent sony fan has to admit that kutaragi's plan is NOT to make the entire ps3 generation as a loss leader for blu-ray. he really though blu-ray, with its ultra high capacity and ps3's power, will bring in a truly new generation of video games. like most industry analysts back then, everybody thought that ps2's enormous momentum will carry over to ps3, making ps3 the home entertainment hub of choice. if so, ps3 were to be immensely successful, potentially the most influential piece of home electronics of all time and those profits are what sony was salivating over. so, the arrogance is real, and, with 20/20 hindsight--the mistakes are real.

Euhm don't forget they will make money on Blu Players aswell.

Like BKK2 stated:

The numbers add up quickly. Look at DVD, for example. To make a DVD player legally, manufacturers recently had to pay around $4 per player or drive, according to some estimates. A few years ago, those fees were around $15 to $20. Fees get paid every time a DVD drive gets included in a PC. Nearly every PC in the world has a DVD drive these days and roughly 250 million PCs get shipped every year.

Indeed, but it still doesn't look as if Blu-Ray is the magical cash cow which makes all the sacrifices Sony did worthwhile by a big margin. Just the breaking even part seems poised to take a few years if it occurs. I don't know of any other example where a company bled so much money to win a format war (granted I don't pay much attention to format wars in the first place).

I certainly haven't seen a company sacrificing a big brand for the sake of a format war. But of course, they didn't do it on purpose or expect it, not to this extent at least.

 Yeah so do I,  Sony will rather see this positive, just imagine what a blow Sony could have got if Blu ray lost the format war.

True, losing would be a lot worse to them than to Toshiba. The PS3 would probably be selling less than it is, and all the investment would be gone.

DVD was widely seen as too high when it came to royalties.

If anything it's lower.