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Squilliam said:

The software doesn't add cost on a per unit basis, its simply a fixed cost and you forgot the rumble (its a likely addon for tactile feedback) which means two pairs of royalties to whomever won that lawsuit and a pair of blu tooth units to interface with the PS3. I cannot comment on the rest at this time as I have a dog to walk.

And when the dog comes back, you might explain what you wanted to say with "The software doesn't add cost on a per unit basis". I can assure you that software adds a substantial part to the production costs of Natal - particularly when looking at the feature list MS has promised. (Same thing as rrod costs. Those roughly $1.5b used for rrods added $50 production cost to every one of the first 30m XBoxes). On a sidenote, I seriously doubt that Sony will have to pay additional blu tooth royalties for the gadgets. (These royalties are usually "wholesaled" - unless you sign dumb contracts. Regardless, we are talking cents here).