[citation][nom]Filiprino[/nom]Nobody sells at a lost. If those statements were true then the companies would have big legal trouble.[/citation]
Nintendo is the only company that has not (until now) sold at a loss on hardware during launch. Console companies rely on game sales to make killer profits over time. Also, material costs go down over time, so while the console sells at a loss in the beginning, it is pretty much all profit at the end of the cycle 5-8 years later. Plus you have the over priced accessories which also help recover the cost of the initial losses.
But yes, if the console flops, while selling at a loss, then you do get in big trouble. That is pretty much what has killed every failed console company. Great hardware, at a discount, without a robust developer support means that you sell lots of hardware that you lose money on, and then never sell any games so you have to close up shop. Sony and MS have done well at this to the point where Nintendo is giving this a try, but it has not ended so well for other companies like Sega.
The PS3 had a bill of materials of ~$850 when it was initially released, and that same console now only costs ~$150 to produce, while eating much less power, making less noise due to less cooling requirements, and having a much smaller form factor. This is a perfectly normal hardware cycle.