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How much do you think Sony actually lost on the thing? Considering they're getting more royalties for every game sold, it might be close to as cheap to make as the other psp without the umd drive. I don't think they're selling it at a loss. If it hurts Digital distribution; I actually like that - I want my games big and meaty. I'm willing to bet the price will eventually drop to match the other psp in due time, and over time it will outsell the old one - and probably replace it.