For those who don't know, the PS2 is still the best-sellling console of all time, with more than 155 million sold. I would say that one of the primary reasons was that this console could also play DVD's, whose players were expensive back then. Having to purchase a cheaper device that could also play video games? Heck, it was the reason why my family bought one back in the day.

So now comes the PS3 - at this point, Sony ("rightfully") thought it was the king of gaming consoles - Xbox from Microsoft did pretty good, and the Nintendo 64 was ridiculed for it clamoring to cartridges in a time of CD's. I can't even imagine the R&D Sony put into a device like this - it essentially had a PS2 in it (Later iterations could still play PS1 games, but not PS2), had an SD card reader, and of course acted as a Blu-Ray player. Even with the $300 loss per console, Sony thought that because of the PS2, every consumer would flock to the PS3 - thus, with the profit margins from software, Sony would've been able to theoretically make back the costs in the end.