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Simple... XBL still costs $50 per year.

Most early adopters are hardcore gamers, and they will be paying for LIVE for atleast 6 years into the generation.

$50 x 6 years = $300 + $300 Reatil price = $600 overall

 

Customers essentially pay half upfront, and the other half over the next 6 years. 

 

$299 Launch Price is very possible. With customers paying an extra $300 over the next 6 years. Overall the price is really $599.