Sony CFO Nobuyuki Oneda noted recently that the PS3's cost is still 10 percent higher than the system's price, reports Andriasang.com. With the console's price differences in each region, if Oneda is talking about Japan, that would be approximately ¥4,000 ($42). In North America the same $40 loss would also hold true.

As bad as losing money on each console manufactured sounds, it used to be worse. Just a year ago the estimate was that Sony was losing over $100 per system. Losing a couple Jacksons (four Hideyo's in Japan) per console isn't great, but it appears that Sony's costs and sales on the console are slowly finding equilibrium. Unless, of course, there's another $100 price drop in the PS3's near future.

http://www.joystiq.com/2009/05/15/report-sony-losing-about-40-on-each-ps3/

I think this generation has proved that the business plan of taking a loss on a console to gain market share that will be made up when software is purchased is going out the window. It is only magnified by higher development costs translating to less profit from software to counteract the loss taken on the consoles.

Hopefully Sony (and Microsoft) have learned that lesson, all they can do right now though is hold off price cuts as long as possible and strive to make their systems easier and cheaper to manufacture.

Well its not a good loss but it sure beats how it originally started.

Despite the negative spin that will obviously be generated by the OP - this is actually good news. It shows Sony is very close to cutting even. This Fall when the 45 nm gets installed, with a smaller mother board, an external power supply, and a overall smaller chasis - you can rack that up to a savings of almost 100 bucks- Perfect for a slim line :D.

It pretty much gets that 40€ back with software/PSN/home.
So why should they drop price..

If they actually save a 100$. And that's a big if. The 45 nm switch won't get them that much. Why do you think they would pass that on to the consumer? Sony needs all the profits it can muster. It's operating more or less in survivalmode.

Asked specifically about price cuts, Sony corporate executive officer Nobuyuki Oneda said the company had no announcements to make at this time.

"This is a very serious issue," he said. "If we announce our pricing strategies, that affects our inventory level."

Minutes later, when another analyst asked how the company planned to reach the higher guidance number, though, Oneda said, "Well, I think you have to guess what will be our pricing strategy."

Any price cut for the PS3 would be good news for consumers. At $400, the system is by far the most expensive gaming machine on the market. That, combined with an underwhelming software lineup, has resulted in slow sales.

http://www.cnbc.com/id/30749308

Hopefully this will answer ur question.. 

Won't the "underwhelming" software lineup be dealt with this year? The PS3 has good to great exclusives coming out. The third party is nearly identical between both also.

Price cut might help, but no guarantee either. There is an issue when you try to cut price to gain marketshare. If your competitor matches, it throws it out the window. It is industry game of chicken you are playing.

If they go slimline, it will lead to a decent amount of cost saving.  Dropping to 45nm Cell and RSX leads to more dies per ceramic wafer, which leads to far less ceramic used.  Plus, because the new chips use less power and produce less heat, this leads to smaller power supplies, heatsinks, and fans, which leads to a smaller motherboard overall, which means they'll be using less materials on the motherboard in addition to less materials on these other parts.  If they can manage to cram all that into a much smaller case, that'll be yet another area where they can save money on plastics.

Dropping to 45nm Cell+RSX should save them more money than any hardware reduction yet, if they can manage to create a slim ps3.

Ouch, I figured Sony was making a profit on each unit by now.

Anyone know if the 360 takes a hit on each console? I assume the Arcade takes a hit but how about the Premium?