Looks like Sony has a lot of ground to make up on the PS3 - if this report from Merrill Lynch is correct:

According to a report from Merrill Lynch, published in Japanese magazine Toyo Keizai, Sony is set to lose over US $1 billion on the Playstation 3 in the year following its launch. The report indicates that Sony may be willing to sell the console at less than the production cost - said to be around 54,000 yen (almost US $500) - in an effort to gain a significant share of the market.

That's a huge pile of cash to burn through - they better hope that the negative halo they gained from the DRM mess doesn't bleed over into this space.