Consoles are usually sold at a loss. Game sales and subscriptions are where they make up that money most of the time. Then of course console sales towards the mid/end of the console's life where production is much cheaper also helps.
Yes, that's why I find the existence of the PSVR baffling. It is, essentially, a peripheral. And yet, it basically functions as a console. So it doesn't really have its own peripherals as far as I know, subscriptions seem irrelevant to it, and they don't have that many VR games in the library. So how the heck is Sony making money off this thing? Is it actually profitable on its own?
That is was xbox is so baffling. They are losing money on xboxes and not actually releasing any games to make money back. You can argue that they are making money on Gamepass subs, but a lot of those subs are only 1 dollar or free with other purchases. Then you factor how much they spent on buying publishers and developers like bethesda and activision and i cant imagine MS has any hope to make any profit out of the gaming division for quite a long time.
Another thing to consider on the Gamepass front is that if MS is losing $200 per console, that means every single Xbox owner would have to sub to Gamepass for nearly two years to make up that $200 loss. That doesn't include whatever MS is spending to keep games on Gamepass in the first place.
In fairness, I'd imagine there are people who buy Gamepass subscriptions a year at a time. Also, while I don't know how most people use their consoles these days, my relatives in the US used theirs as a multimedia device. They'd buy movies on it, watch Netflix on it, even listen to Spotify. Perhaps these services are a more significant revenue stream than we think.
But yes, I have to wonder how the heck they can possibly be profitable after releasing essentially no games and selling significantly less consoles than the competition. If they're in it for the long haul, Godspeed I guess. Y'all should really release at a least one good game though.