$200 honestly feels like too much for what it offers.
That's twice the price of the Backbone peripheral, half the price of a whole ass PS5 Digital, the same as a Switch Lite, and only $100 less than a regular Switch or Xbox Series S.

I assume Sony knows it’s a relatively niche product so are selling it at a comfortable profit margin.

Also I’m not sure the price of those other devices are relevant because this device is aimed at a specific audience of people who want to play the PS5 games they already own in a handheld format. Various Switch or Xbox models can’t do that and require building a whole new library of games.

The only thing that stands out here is that the backbone Peripheral is $100 despite just being a controller to slot your phone into. 

Its a niche product for a some people, its not for everyone. Company sell cheap console wraps for fucking 50 dolars, there are special editions for game in their he store costing 99 dolars euros lmao. A controller, costs what ? That big screen is not cheap either. 

It's selling about as well as the first one. But it's a $550 peripheral with few mainstream games, so...

Controller prices are already a ripoff to be honest. And console wraps too. 

That's the thing, it offers a relatively narrow range of use cases, much more so than a lot of other things that compete for our gaming dollar. For $200 you can buy multiple big new games, or get a Backbone, a new game on top, and still pocket $30 or more. In this economy, a niche novelty is a tough sell.

If one falls within its limited focus then cool, but even among core PS fans I expect that's a small minority.

Accessories pricing is much different than console pricing with basically the objective to counterpoint their razor thin margin or even loss leading sales of consoles.

True but the same can be said of pretty much all the accessories/add-ons Sony has released over the years, like PSOne LCD screen, Eyetoy, PSP Camera, PS Move, PSTV, PSVR, etc. they have ranged from failures to modest successes at best.

Remember in 2000 when Sony released a $129 screen add-on and car adaptor so you could play PS games on road trips? You could argue Portal is a modern version of this.

I just don’t think it being a niche product that only appeals to a small percent of PS5 owners is a valid argument. Look at PSVR, it took over 3 years to sell 5 million units (last official numbers) and PS4 sales were 106 million at the time so less than 5% attach rate and they seemed happy with this (enough to get a successor) so I think they are fine if Portal only sells 2-3 million.

but what if they made this instead.