The mention about the game development surprises me more than the music. They'd take a loss, but Sony can afford it. The developers would be reassigned or laid off and Sony would hardly notice.
But once I got past the initial thrill of writing this post, reality set in. Sony won't do anything drastic. Pulling the music would depend on having a good alternative (they're working on one), but frankly I don't think it's going to happen. iTunes is simply too important to abandon. Also, Sony could end game development, but they won't want to piss off their customers. Existing games will stay.
via The Age