They lost money on the console itself, but were already profitable after accounting for software, accessories, and so on by 2008. [1] The console was released in late 2006 and was a beast of subsidization in part because of the heated blu-ray/hd-dvd war which now seems quite quaint. The modern business models are just really taking the consumer for a ride.

If either company maintained the previous business model, they'd have made the competitor look like a clown. It was basically a prisoner's dilemma, but they both chose to collude. It's hard to explain that without assuming that they're colluding, which is basically a tautology.

[1] - https://www.gamespot.com/articles/hirai-claims-ps3-platform-...