Microsoft remembered it sells (mostly) console, not (mostly) games. pleasing the pirates sells wonders. If you only lived your teenager years in the US or Japan, then you will not understand. But Sony et al sold millions of consoles to other countries where the market probably bought 1 game per 10 consoles sold (numbers vaguely remembered from a playstation1 analysis i read a long time ago)
I'm pretty sure for MS and Sony, they were selling software. Sony was selling every PS3 for a loss 6 years into its product life cycle.
They did sold consoles at a loss to be the number one console and then make money on the next one after they cornered the market and can extract real profits. Microsoft always did that with windows/office file format lock-in. Sony always did that with media formats lock-in. They would love to sell you at a loss for the chance to corner a market of betamax, minidisc, laserdisc, memorystick, blue-ray... oh wait, see the relation to PS3 there?