I think what you are seeing here is a bit of a different mentality towards pricing. It's like cellphone pricing..  Is 600 dollars too much for a cellphone??  Sure but if everybody is buying them at the subsidized price on contract how relevant is it?  I think Microsoft sees no need to sell a system at a loss if they are providing a very consumer friendly price on contract price. There may be a niche market of people who simply would rather just buy it out right and know that the can cancel their xbox live at any time they want and might be willing to pay the full 500 for the system. In fact I might be that person because I only buy consoles to play exclusives when they release and go long peroids where I don't touch a specific console. But most people will be fine with paying for xbox live for the required 3 or so years.

The average consumer might not be the best business partner. A console should not aim their price for day one mass market appeal. Market appeal goes far beyond a price tag and it is based on public perception. There are those that won't buy anything at full price and anything that is full price is considered expensive regardless of the actual or relative costs. If they price the system low but the consumers still won't buy the system then the company is in big trouble, see the Vita and the Wii U. Only so many price drops can be move to garner consumer attention. The higher the price of the consumer the more likely it will have more price drops to come. Consoles launch at a high price due to manufacturing cost and gradually go down over the course of years. They will eventually reach a more obtainable price.

You can charge a lot for something and then reduce the price if it doesn't work out or if you want a sales jump. But you can't price it low and expect to be able to do the same.

Still cheaper than the PS3 was at launch, an the loudest PS 'fans' scooped it up still with a quickness. So why the flip flop now when the rumored shoe is rumored to be on the other foot...?

500 USD or EUR is too much for any type of toy.

To me, $500 is a lot of money whichever way you look at it. However, I do think that you're getting value for what you pay for. A game console is one of the few items on the market where you're paying less than what it costs the manufacturer to make the item. So from a pure business standpoint you're getting back more than what you pay for. To me, that's value. I would much rather pay $500 for a game console which I know I'll use anywhere from 10-20 hours a week for 5-6 years than say pay $300 for a pair of Air Jordan's that I know costs Nike $10 to make and I know for certain won't last me 5-6 years.

$500???????
In my country that's like 10,000 mexican Pesos

How much am I getting. That's like asking, "Is $80,000 to much for a car?... It's a Ferrari." I don't know how much I am willing to spend on something until I see what's inside.

It's quite funny how people got defensive over the OP. Even if he did put a questionable sentence in there, he quickly brought it back to topic with, "But this discussion isn't really about whether these systems will cost $500. "

Yes, I think it is too much. Especially for this generation.

$399 is expensive

$499 is TOO expensive

$599 is overkill

how the hell hell can anyone complain $500 is too much for technology that is far superior to a fricken cellphone which everyone is willing to shell out far more than $500