Really what was Sony's plan with the PS3.

Right now the PS3 still isnt profitable, hardware is still so costly that this past holiday quarter with everything profitable in the games division (PS2, PS2 Software, PSP, PSP Software, PS2 Software), but the PS3 hardware, the division posted a 4 million dollar profit. 

Nintendo and Microsoft certainly plan 2011 or 2012 (my bet) launches of new consoles. 

So when and how did Sony ever plan for the PS3 to be profitable? Was the plan that they wouldnt drop the launch price until say end of this year?

They thought they wouldn't have to drop the price so fast.

They thought their brand name was more powerful than it is.

They didn't predict the financial crisis or the weakness in the dollar/euro relative to the yen.

"We have built up a certain brand equity over time since the launch of PlayStation in 1995 and PS2 in 2000 that the first five million are going to buy it, whatever it is, even [if] it didn't have games." - David Reeves

Sony's business model only works if they are the dominate system. If PS1 and PS2 had been 3rd place systems they would have lost money too. Sony takes a loss on the hardware expecting to make it up on the immense software sales.

But even then the loss on PS3's was much greater than originally anticipated and the software sales far lower than they ever imagined. They are screwed this gen (overall net profit-wise).

I expect them to follow a Nintendo business model in future where you sell hardware at a profit.

Crap my photo failed multiple times!

The ps3 is only doing really bad in North America. Maybe because we dont want to spend 500$ on a console when the xbox has the same graphic capabilities and the same games and is also almost 200$ cheaper.

I don't care what their plan was, all I care about is that they put the best console out so I hope they do the exact same thing next generation.

They may not be profitable but you can always count on Sony to put the best piece of hardware and games out there.

They were complacent. They thought they could push technology with their system, and it wouldn't sell like hotcakes to begin with, instead it would sell slowly to begin with, and the sales would increase as price fell and the PS2 was gradually phased out.

Sony, of course, never banked on the Wii being such a success, and underestimated Microsoft's budget. Then, of course, the economic crisis hit.

They didn't expect the Financial Crisis. Also, Nintendo and MS are really pushing this gen.