I don't see a cheaper box with cheaper components being anything to cheer about. The reason PS4 wasn't $600 was because it has less in it relative to PS4. The PS3 put $800 of hardware in a $600 box. PS4 puts $400 of hardware in a $400 box. How is PS4 far more favourable for gamers? The same favourability would put $500+ of hardware in a $400 box, or sell the current PS4 at $300.
I'm going to play devils advocat here a bit.
I cheered. When looking at the progression of the video games in the context of consoles, we've had a few generational shifts. For simplicities sake, I'll just look at it from the PlayStation perspective:
NSES -> PS (1994/95) -> PS2 (2000) -> PS3 (2006/07) -> PS4 (2013/14)
Going from NSES to the first PlayStation, we effectively went from 2d to 3d.
Going PS to PS2, we went from pixelated 3d to 3d in much higher fidelity.
Going from PS2 to PS3, the market saw a shift when we went from CRT to flatpanel and from Standard-Definition (480/576p) to HD (720p/1080p).
From PS3 to PS4 - there won't be such a big generational leap, neither in 3d technology nor in resolution. Even if at some point, there might be a shift to 4k, it's unproven that there is a big desire by the mainstream population because of viewing distance and because on standard sized televisions, 1080p already offers a very high pixel density across your viewing distance.
So what exactly does this new generation offer? Obviously not very much, when we look at it from the angle that this new generation isn't exactly pushing the bounderies of silicon. What if we look at the current state of the art what technology has to offer, i.e. PCs. What do they offer?
Now, from where casuals are sitting, I really don't see a huge generational leap between PS3 and what a high-end PC can offer (ignore resolution and framerate for a moment). Sure, Call of Duty and similar games do look much cleaner, better image quality, better textures etc - but the game mechanics are pretty much unchanged. That's because IMO, we are reaching a point of dimishing returns where games have reached a level where they are adequately satisfying across the board - from graphics to gameplay mechanics.
The jump is clearly not as high, as any of the previous generations when the market saw a huge shift in either resolution or technology (2d -> 3d).
So what exactly would the benefit be if Microsoft and Sony opted to go for loss-making $600-$700 hardware sold at a loss and pushing silicon and heat budgets? Better graphics? Sure. But to which extend? Looking at current PC's best, I really don't see THAT much of a difference. Sure, you can argue beauty is in the eye of the beholder and I'm certainly not argueing that there isn't a difference present... I am more arguing that we have reached a point, where the difference between x10 performance or x12 performance (compared to lasts generation) isn't that high when you're viewing it from a 12 feet distance on a 46" television.
On the other hand, the advantage we are getting by Sony and Microsoft shipping "medium-spec" consoles are smallish sized hardware that runs considerably cooler and energy-efficient, which some people actually care about.
IMO - the difference you can buy for going over the top hardware wise is not that big of a factor as it might have been during previous generation shifts.
As an example: Compare Resogun (PS4) to SuperStarDustHD (PS3). Both 1080p, both 60fps. One's a bit prettier, perhaps a bit more complex, but i wouldn't call Resogun a game that is a generational shift. Certainly, not any casual would either. The same apply to most games - as nice as KZ:SF is - KZ3 wasn't leaps behind and already a very pretty game by all accounts. I certainly think the difference between KZ3 and SF is less striking then comparing any games of the previous generation, like for instance MGS (PS) to MGS3 (PS2) or MGS3 (PS2) to MGS4. With each generation, the difference between the new and the old is getting smaller making striving for even better hardware more redundant.