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I honestly believe that Sony didn't want the 20GB to be successful so they kept supply low ...

Now, there could be many reasons for this but I suspect they wanted to advertize that the PS3 was $500 but they didn't want the 20GB model to exist in the long run because it lacked "important" features for Sony.

It is obvious that both Sony and Microsoft want to push downloadable content (videos and games) in order to increase the ammount of money they make; Sony probably wants to push for a lot of HD content (1080p trailers for Blu-Ray movies as an example) and it is probably difficult to convince people to supply you with content when a user can only have a couple of files on their hard-drive at a time.

The other important feature is probably WiFi. This isn't because of internet access (although that is part of it, a WiFi system in your home entertainment center is probably far more likely to get hooked up to the net) but is for PSP connectivity. The Gamecube-GBA connectivity provided a lot of potential for developers but wasn't utilized all that much because few people were willing to buy a cable to connect the systems. If a publisher is thinking of including features in their PS3 games that take advantage of the PSP they want to know that anyone who already owns both systems can readily take advantage of the feature.

Anyways ... I expect that they made a mistake because they could (potentially) boost current sales by 10-20% if the 20GB model was readily available and I anticipate that if there was a price drop ($400 for 20GB)  the 20GB model would probably account for 30% (or more) of sales.