only reason it has not is because of DLC and micro transactions.

It also helps that games a whole sell more than they used to. Selling a million used to be a really big deal, now it is a failure for a AAA game. The SNES best selling (non bundled) game was DKC at like 9.5 million, and only 6 games sold over 5million (including bundled games). Now selling 5 million is very common like Watchdogs just did in 2 months (all Platform combined, multiplat was much more uncommon then), and multiple games sell over 10 million. And it seems about 2 games a year sell over 20 million lifetime (mostly unbundled) which never happened back in the time period we are looking at.

So while the margin is low, the sheer volume and as I mention DLC and such help blunt that.

That's true. But would you prefer buying DLC or paying $80-$90 for a bigger game? I personally would prefer the latter. 

of course, I like the option of paying extra for a game I like after the fact for more content, its better than paying it up front and then not liking it.

But you shouldn't consider things in isolation!

Quote from my original post:

....the price levels in the IT sector has been generally decreasing. Computers are (even nominally) cheaper than ever. This goes for PCs, Laptops, Tablets, Smart phones and pretty much everything else EXCEPT GAME CONSOLES. So the RELATIVE price of game consoles have been steadily increasing, which is admittedly because they have been evolving into more capable and PC-like machines.

 In 1996, Playstation cost you $299 while an average laptop cost you north of $1500  (so the console was less 20% of a laptop)

In 2014, Playstation costs you $399 while an average laptop costs you around $600 (giving you about a 70% ratio)

Although the figures above are not precise, in general, console gaming has become RELATIVELY much more expensive over the years. I wanna emphasize the term "RELATIVE" here becuase when people make purchasing decisions, they always make comparisons and evaluate based on the second best alternative. Consoles in the past was particularly common because they were way cheaper. Today this is not a convincing reason anymore; but rather taken over by CONVENIENCE as the biggest reason behind console use as an alternative to PCs.

 ....

In Summary, the game consoles, in real terms, have slightly decreased in price by around 8%, although their relative price has increased up to 4 times as 1996 prices. In plain english, they cost you slightly less now, but much cheaper alternatives have appeared and all of sudden, consoles started to look way more expensive.

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i never paid more than $59 for a new n64 game and not more than $49 for ps1 game at Electronics Boutique, before gamestop bought them out.

i remember walmart selling doom 64 for $80 ffs. this was before collectors editions were even thought of.

The existance of options, cheaper or otherwise, does not effect the fact that theyre cheaper, it just means the buyer has more options.
I see what you're trying to say, but its not relative, not at all, if you're in the market for a console, you're not in the market for a pc, and if you're in the market for a pc, you're not in it for a console.

How many kids do you know that say to their parents, "i want a wiiu/xbox one/ps4/etc for christmas/birthday", then turn around and say "actually, maybe i'll get a mid range pc"

Conversely, gamers using primarilly PC are more than likely going to have hardware that costs significantly more than a console, and in most cases, said gamers will open both.
And why exactly?, might have something to do with high end grapics cards costing the same as/more than a games console, so to them, the consoles are comparatively cheap.

In my machine I have over 2K worth of GPU's, consoles look dirt cheap to me.

I remember that Conker's Bad Fur Day was 179 DM in Germany (the N64 was 199 DM) and Final Fantasy IX was 129 DM... New big box PC games were around 70 DM at that time. $1 was a little over 2 DM back then. It would be around 1.46 DM today which translates to $122,60 for Conker.

And the prices were more stable back then, you had to wait for the Platinum version to get PS1 games for 50 DM instead of 80-100 DM.

Today, the prices of most third-party games drop from 60 to 15 Euros (or less) within a year.

Real income was higher then, which allowed people more discretionary spending. This would certainly make games seem cheaper. Inflation is only part of the picture.

179 DM was the recommended retail price of CBFD, the street price was much lower (119 - 129 DM). PC games which were sold for 70 DM had a recommended retail price of 89 - 99 DM.

And Wing Commander 3 (PC) also had an extraordinary high UVP (recommended retail price) of 169 DM, but was sold for 99 - 119 DM.