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There’s a little wiggle track burned into PSX discs that’s impossible to duplicate with burners, and it won’t boot up unless it sees that. There’s workarounds that eventually came out, but console copy protection doesn’t have to last forever. It only has to last most of its primary life until the next gen comes out, and PSX managed that.
I’m not sure where you’re getting that Nintendo sells at a loss. They don’t have amazing margins on hardware, but they don’t like selling at a loss. IIRC, commodity prices and a price drop meant the GameCube was briefly sold at a loss, but it wasn’t long, and it wasn’t by much.
Whatever else you can say about Nintendo, they are really good at managing manufacturing costs.