It's entirely possible to lose money on consoles. Microsoft wrote off such a huge loss on the first XBOX, between $5bn and $7bn, that counting inflation on the losses they probably still haven't made a profit off it.

The other problem with that is it would make it flat out impossible for any other company ever to enter the console market. The up front cost is device losses would be staggering. It was bad enough for Microsoft as it is.

Not at all. I'm merely pointing on that their console business is composed of many streams and focusing on one part of it to the exclusion of others is deceiving. Supposedly, Return of the Jedi has never made money yet they kept making Star Wars movies.

> it would make it flat out impossible for any other company ever to enter the console market

I disagree. It's harder to compete with competitors that are selling their product below the cost of production. I've always wondered if an EU-based company came out with a console, what would happen? I think Sony, Microsoft, and Nintendo would be forced to sell their consoles at or above cost in the EU or face dumping charges.

It seems to me that if the consoles cost 1/3 more they would sell fewer of them (Lots of empirical evidence for this), and therefore sell fewer games and make less revenue on services to their smaller customer base, who now can by games from other publishers without the console vendor making a penny. After all isn’t the point of this to cut off their other revenue streams at the knees? I may well be missing something though.