You may need to educate me, but my recollection was that PlayStation's deep losses during that gen were largely due to the cost of manufacturing the PS3 itself. They just couldn't get ahead of it, despite selling good amounts of software. Even after a hardware revision, cutting things like hardware BC, PlayStation lost insane money on every PS3 sold.
The loses on the initial model were believed to be literally half its sticker price, despite launching at the infamous US$599.00.
you're absolutely right about hardware cost, their main losses were hardware and also studio/game development costs. The game sales weren't what was expected though, they weren't OK or "good amounts". They were using expected spend to see how much they can afford to lose on hardware over the lifetime of the PS3s '10yr plan'. The plan was that good sales of first and third party games would recoup their cost. That didn't happen. They had the entire gen of losses with first and especially third party game sales underperforming on their system. They had a 40gb $399 console, they even took steps to strip out the PS3 to reduce cost substantially, lowering the required consumer spend to turn a profit but still didn't. They weren't making those expected lifetimes sales numbers from users anymore even with lots of first party releases. Their third party sales I'm sure
hurt them the most (xbox 360 had a 8:1 software sales ratio early in the gen) . They were trying to make up for the lost income of game sales all gen. Especially MS taking substantial GTA4 sales with content exclusivity right before console launch and DF posting GTA4, Skyrim, and Fallout 3 performance comparisons about how 360 was better and word getting round that third party PS3 performance was bad. Add to that COD having most the game sales on 360 due to content exclusivity and performance, Bioshock and ME timed exclusive as well, PS had very little going for it in terms of third party sales to recoup. People were spending elsewhere now even if they were buying the occasional exclusive.
Keep in mind that online play was free and mtx weren't really a thing at the beginning of that gen either. They were truly relying on just game sales to turn a profit which didn't happen as well as they'd hoped. xbox was taking those expected sales due to third party game performance and exclusivity/content agreements. They were fighting an uphill battle all gen and even their good first party output wasn't enough to recover from the losses through the gen. The only first party that might have helped were the ICE team in trying to lower the performance gap for later releases like GTA5.
The PS4 cut those loses, because Cerny designed the PS4 to be, among other things, ultimately profitable. That's part of what made Cerny's work so darn good - the PS4 did everything it needed to: compete with the Xbox, cheap to manufacture, become profitable quickly. PS4 didn't launch with COD marketing - it picked it up after, yet, I believe PlayStation became profitable shortly after the PS4 launch. My understanding was that, with the shift to PS4 manufacturing, they stopped the PS3's bleeding and that finally turned things around. Happy to be wrong, it's been a pretty long time since I've gone through those numbers.
The PS4 was still sold at a loss on release but just a substantially lower loss which is why they still had that big loss at launch 2013 you can see on the graph. What made it good though was the fact that it had better third party game performance along with that sticker price meaning they could get enough third party game sales and subscriptions for online third party games to turn a profit soon enough.
The PS3 gave you almost everything except performance in third party games. The PS4 gave you almost nothing but performance, no real apps or fancy auxiliary stuff. On PS3 nobody cared that they were releasing big budget games that looked better like Killzone 2,3, Uncharted 2,3, GOW3, GT5/6 those weren't shifting the profit needle much at all.
Over the years of PS4 on the other hand they had third party performance and sales and PS+ on the back of those multiplayer games like COD or Battlefield 4, as well as their first party (which was kind of lacklustre at launch). You're correct that it didn't have COD marketing from release but it had it 2 yrs in and that's when their profits and PS+ numbers started to really pick up. Keep in mind Battlefield 4 was also a lot more competitive than Battlefield is today against COD where again PS4 performed better and had PS marketing.
For 4yrs during PS3 PS+ subs got nowhere in terms of profit offering 'free' games (some of the best PS+ years in terms of games offered were the late PS3 era, people complained about it into the PS4 gen) still PS+ struggled with subscriber numbers on PS3, but as soon as they became the place to play third party games like CoD or Battlefield 4 online that's when they saw real revenue and profit recovery. with CoD 2015 (BO3) onwards and becaming the place to play third party multiplayer games their subs near doubled in 1 year and continued to grow:
I'm sure if CoD left or important/big third party games like COD, The next Skyrim, Fallout 5, GTA performed badly near a new console release it would truly be bad for their business exactly like it was during PS3, without exaggeration. They might not go into big losses anymore depending on how aggressive competing companies are with pricing/console losses but I believe it wouldn't be a pretty scenario if what they are saying actually transpired.
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