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SvennoJ said:
Sure, but it would not cost much less than a comparable steam box and get no special optimization treatment from 3rd party devs.

Hardcore gamers already get the benefit of a relatively cheap launch price, subsidized by the vast majority of sales that happen when the console is cheaper to manufacture and MS can recoup R&D costs. Cut off the profitable part of the gen and the launch price will be $600 or $800.

The same thing is true for games. Game companies invest in new game engines at the start of a new gen to reap the benefits throughout the second half of the gen. Shorter cycles means more costly game development, next to more systems to maintain, game prices will be $80 or $100.

Of course that's assuming the market doesn't shrink after getting hit with more expensive consoles and game prices...

I see $500 is a good for the console market. Microsoft could build a faster apu with more memory for $350 and sell the console for $400. 

The point is to not selling the console at a loss, but at a profit.

Some gamers will get upset that there is a more powerful console out, they will just have to upgrade to have the latest.