See, the niche part is people wanting a console that has "perfect upscaling", a built in CD drive and PSN network connectivity, and are willing to pay a premium price for a device that offers such things.

Sony could easily offer a PS1 classic that had 30-50 PS1 classics, no built-in CD drive, has upscaling about as good ad the NES Classic, and no network connectivity, sell it for $60-$100, and the vast majority of that retro crowd that you seem to think would want such a premium product would choose this one instead.

Just needs trophies and ill be all over it.

Thats not a niche part at all, Sony can make a better upscaler than what the Framemeister costs for a fraction due to economies of scale. The company behind Framemeister is nothing compared to an industrial giant like Sony. Sony has the resources to sell something better for cheaper.

Something like this shouldn't realistically cost more than $99-129. The Nes/Snes classic probably costs Nintendo ~$20 to manufacture, they have crazy margins on it.

No one would want a PS1 with preloaded games, people will want their own PS1 libraries, both on disc and digitally. Sony's gotta be more original than doing the same thing as Ninty.

lol. Okay man.

Let's break it down. I don't know what the framemeister does to do what it does, but they might utiliize some extremely specialized components to achieve what they're achieveing and it's not so simple for any company to make those components for fractions 1/10 or 1/30th of what it costs someone else just because they're ordering 2 million as opposed to 10,000. Even if they can, and can produce it cheaply, there could be IP that Sony needs to license that might not be cheap, which means Sony may need to pay a royalty more expensive than the components themselves in order to produce them. It is not that simple. You're grossly oversimpliying the concept of "economies of scale".

Why shouldn't something like this realistically cost more than $99-$129? Says who? Just because the sum of the components to make the device might be $50-60? What about the development costs? What about the Q+A costs? People are going to expect this thing to play every single PS1 game if it has the drive. That means ensuring they all work. And I assume they're going to want their memory cards to work as well. That's a whole other can of beans. Ohh and the digital copies of those games? You need to test those as well. Not exactly trivial.

No one would want a PS1 with preloaded games? I remember people saying the same thing about the NES classic.

Believe whatever you want to believe. At the end of the day, Sony isn't going to make your console, and you've been told why.

Sony just needed to properly advertise the PSTV and make it 100% compatible with PS1 Classics.

So, how big is the retro market right now?

It would need to be SLC Nand for reliability reasons. Or Rom.

Using cheap TLC Nand wouldn't be a good idea. Which does mean... It would be costly.

Cost would indeed be blown out. Games are orders-of-magnitude larger than the cart systems, which has allowed Nintendo to hit such low price points with it's classic console systems.

However... Unless someone tries, we won't know what the market reaction would be like, would a $150-$200 classic system sell? Think about the amount of people who spent hundreds on Ebay NES classic consoles...

Microsoft was more forward thinking with the Xbox than Sony was with the Playstation 4 when it came to the optical drives.
Ergo, the Xbox One supports CD's and the Playstation 4 doesn't, which means that the Playstation 4 cannot be backwards compatible with the Playstation 1's physical media.

Classic consoles seem to have a place, I mean... Nintendo has a decent backwards compatible library via it's digital stores on Wii, yet it's classic systems still sold like hotcakes.

Whilst accurate, I highly doubt Sony would be interested in developing it's own modern scaler chips for a limited market.
They would rather just piggyback off the efforts from AMD/Other chip manufacturers and use the scalers that they have already developed... And that makes better business sense as well.

Perhaps there is a market for it, but I strongly doubt it. Let's say Nintendo didn't want to throw money away and decided to produce millions more NES classics at launch, kept producing them until they started showing up at Bed, Bath and Beyond, and then shut down production at 10 million units instead of the 2ish they did. After all that. they then eventually all sold out after being readily available on store shelves for months. No one would be willing to spend $200 on one. I think the price people are willing to pay for it has more to do with the lack of availability and exlcusivity of owning one, much like the people that are willing to pay $500 for a Nintendo Switch today, or the people willing to spend over $1000 on a PS4 at launch.

Yet, no sane person is looking at eBay prices for Nintendo Switches and saying "I think Nintendo should make a $500 console, and Sony should make a $1000 PS4, there's clearly a market for it".

Don't forget Atari flashback and Sega genesis/megadrive retro consoles from the likes of At Games. Neither of these were made in nearly as high of quantities as the NES Classic, aren't sold out everywhere, and aren't going for 3-4 times the asking price on eBay, even when the latter upscales, and has a genesis/megadrive cartridge slot. The NES Classic is unique.

Some good points.

As for the NES Classic being unique... It actually isn't. The SNES classic is replicating the NES classics precedent. It sold out in a couple days that it was on pre-order here in Australia.

The AT Games consoles weren't really advertised too well either... Plus they have technical issues, such as sub-par sound... No HDMI in an era where some TV's ONLY come with HDMI... Shit wireless controllers... List goes on.

The new Atari Flashback 8 and Genesis/Mega Drive consoles seem to be ditching their old emulation platform, so I am keen to see how well they do. (I've got mine pre-ordered along with the SNES classic and soon Xbox One X.)
But I don't expect them to be NES Classic or SNES Classic-like success stories though. Nintendo's classic consoles are riding the wave of nostalgia and social media virality, that is a hard thing to match...
The only other company that could match that kind of brand awareness is Sony, heck take a look at Crash, the sales on that game went bonkers.

I think you're making an assumption about the SNES classic. If Nintendo is actually making "signficantly more" SNES classics to a point where they're readily available on store shelves in the weeks following launch (aka keeping up with demand), you're not going to see people buying them from ebay for 2--3 times the prices. That's a big if, though.

But fair enough about the flashback and At Games megadrive, but it appears we both agree you're not going to see people willing to pay 2-3 times retail prices for these consoles when they are released, even if they're at the NES classic level of quality.

At the end of the day, I just don't see a reason why Sony would bother making a console that plays PS1 discs and memory cards, has PSN connectivity, or has a better upscaler than their existing solutions in the PS3 or Vita. I just don't see that being critical to the popularity of such a device at all. It would be far far easier and cheaper to just make a box that plays digital copies of a few dozen included games, and maybe supports copying your digital PS1 games you purchased from the PSN to a USB drive that it can play.