@NJ5

With the financial results that the PS3 will accomplish when it is time to launch the PS4 it is safe to assume that Sony will not be shooting for the bleeding edge with the PS4. Modestly more powerful and about $400. I would assume that the max that Sony will be willing to lose on each sale at launch will be $50.00.

I agree with that, what I had a problem with was the implication that everything is going according to plan regarding PS3 losses.

Nope. I believe it is safe to say Sony expected this gen to progress in a very different manner. I believe they expected the public to swarm to the PS3 even at $600 and the first price cut to happen in 2008 and not 2007. Dont think Sony expected to be at $300 until fall 2011.

Without a doubt, I don't think jsut Sony, but most analysts expected PS3 to dominate at any price...M$ also expected this, which is why they rushed the 360 out a year ahead to avoid the mistakes of the last gen.  Alot has been made over the reliability of the Xbox 360, but people forget how absolutely reliable the original Xbox was...I even dropped the darn thing, and it lasted me the entire gen.  So, I think for the next gen, M$ and Sony are going to factor in getting to market early, but also making sure you diversify your base...ala Wii.  It's going to be interesting to see how it all plays out, but I think we are going to see consoles launched in the $499 range at max for top end models.  The other side of it is going to be developer support to prevent increased cost to bring new products to the street...