You know, the Xbox sold so cheap because they got the P3 700 CPU so cheap from intel that AMD walked away because they were not going to "Give their chips away". I assume they were paying aroun $20 per CPU.
The technology going into to make both the Xbox and the PS3 is much more expensive. I really think that the new consoles will sell for a high premium at first and eventually come down so the average Joe can eventually afford it. I believe that the pricing for the consoles will follow the bell curve that most new cutting edge technologies follow.
Many people do not own HDTVs yet, because they have not yet become affordable for the average household.
I believe that the initial adoption to the new consoles will get an initial pop, but not sell as many as they anticipate at first. Many will hold out until 2007 to see if the prices come down.
Let's see the technology going into the Xbox, 3 3.2 Ghz Power PC CPUs, high end video that will be equivalent to PC cards that will sell for $500.
How can the Xbox sell for less that $500 and still not loose money with all the R&D costs?
The PS3 will have a cell chip, a PPU provided by Ageia (selling in bulk qty for no less than $50 a chip), and high end graphics by NVidia that will compare to a comparable $500 PC card. No telling how many millions Sony and their partners have poured into the development of the cell chip. I say the PS3 does not sell for less than $500 either. Remember, it is revolutionary.
This is why the console makers have been very quite about the prospective pricing. The average US household has an annual income of $40,000. Buying a $2,000 HDTV, and a $500 console, and another $500 in games is out of reach for many when they can buy a current analogue TV for $200, and a game console for $200.
I believe that NVDA will have contractual fits with Sony if the end user can get at least comparable performance as compared to a high end PC from a cheaper console. Their is no way that they will allow their market share to be trumped, and I believe the consoles could sell for at $1,000 at launch.
It is not the same game in the past, and using metrics that we have used in the past to speculate on earnings is just not the same. The game has changed.