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Because look how popular it is.

NGU has had thousands of new members sign up recently, and NGU has made over a thousand dollars worth of donations in SIX DAYS.

There were 1697 users on yesterday.

This is all because of the CFW.

And that's JUST NGU, think of the people on other sites, the ones who got it through their friends etc. and it's not much of an overstatement to say that soon 10% of ALL PS3 users that have PSN will have the CFW.

Sony is in direct competition with Microsoft, especially with the release of Kinect and PS Move.

Do you REALLY think Sony can afford to lose 10% of their consumers right now?

UPDATE: So a lot of people are bringing up the whole "Piracy" thing...

Well, most of the people with the CFW only want it for MW2 lobbies, so that means that a very few percent of the people who get the CFW will use it for piracy.

On top of this, NOBODY has edited the lv2 and the kernel to allow the Backup Manager to be used, and chances are nobody is gonna be bothered to do it because nearly EVERYONE on this site just leeches.

Then theres the few people who will try, but won't be able to do it...

And then there's the odd couple who will try AND be able to...

Odds are if those few people manage to do that, and get the Backup Manager on PS3, they WON'T release it, why? Because although Sony most likely CAN'T patch the firmware, they CAN block the MD5 hash of the programs, and set a function to automatically IP ban any user running a program with that MD5 hash while on PSN. If they widely release it, there's more chance that Sony will introduce a check for that MD5 hash.

With that in mind, that means anyone going on PSN while running the Backup Manager CAN be banned, which would stop most people from using it.

I agree...

Examples of how many people have used this: 20000 people looked at just my thread on it, its on EVERY hacking site, THOUSANDS of youtube videos on it, I could go on and on.

Thats logically speaking, but technically speaking, The PS3 doesnt send Sony info about the firmware your running. This comes from me testing the PS3's game OS and i havent found any piece of software that sends Sony your firmware info. The only info the PS3 sends Sony is your "game ID" and maybe some other account related but im not completely sure.

Exactly, do Sony REALLY wanna lose all those customers? I thought not.

This could be a good thing for Sony, I would bet sales of the PS3 go up from this

Mhm, and in the end everything revolves around money, but you have to keep in mind the future loss of money with full game copies being used compared to money made if it wasn't possible, and banning of ps3 in most cases = buy another PS3

Oh not you again, your sig is too entertaining to NOT distract me XD.

But back on topic, yes, it would attract a lot of developers and coders from Wii and Xbox to PS3...

They are saying they are not gonna ban because they cant tell who has a CFW and who doesnt.

They(sony) haven't said anything, people who know whats actually going on have said that.