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Honestly, this thing shouldn't cost all that much to make.  The iPhone 4, for example, costs under $200, but it sells for $499 by itself, and $199 with a phone contract.

The question is whether they'll price the device like smartphones and .mp3 players, with a hugh mark-up on each one sold, or whether they'll stick with how they've launched consoles in the past, selling it it at or below cost.

After all, the ps3 was far more functional than competing Blu-ray players at the time, yet it sold for far less when it launched ($599 vs $1000 or more).