The hardware might be a loss leader, but the manufacturer controls access to the hardware, so every game developer for the hardware is giving them a portion of the sale price. They were Steam before Steam existed. Sony didn't make most of their money on first party games, but on third party fees. The first party games, along with the loss leaders, were there to bootstrap getting consumers to buy the console.
The reason to abandon hardware is when you aren't going to get many third party sales regardless, because you are getting destroyed: In large part because your first party games and the console experience aren't attracting enough players. Microsoft hasn't whiffed with every game they released in the last 5 years, but their batting average has been very low.
If your games aren't selling, it makes sense to abandon hardware, but it's even more important to downsize your studios that are releasing underperforming games.
The reason to abandon hardware is when you aren't going to get many third party sales regardless, because you are getting destroyed: In large part because your first party games and the console experience aren't attracting enough players. Microsoft hasn't whiffed with every game they released in the last 5 years, but their batting average has been very low.
If your games aren't selling, it makes sense to abandon hardware, but it's even more important to downsize your studios that are releasing underperforming games.