Well, presumably the business model is to take all that money MS & Sony throw at publishers and developers to get exclusives and instead use it to subsidise the hardware(Very debatable whether that;s sensible/worthwhile). MS & Sony forgone hardware margins in the X360/PS3 days, but both the PS3 and the X360 were technically commercial failures that never made a net profit iirc. The PS4 and Xbone launched with quite thick margins in comparison, though I'm sure now they're only a fraction of what they were, I think we can assume they'll be looking to keep up the stable margins with next gens launch. Sony in particular had no room to be making any loss or even slim profit on the base PS4 hardware given their near-bankruptcy at the time.
If the plan is to sell this console on low margins then the primary source of income will be from game licensing & store cuts & the like, so either this business model is built on getting as large a user base as possible(And they're trying to pull off a business model neither Sony nor Microsoft could do) or they've got other plans.