I think that's definitely true. Wii is a case-study of the right gaming product being sold at considerable profit. MS and Sony won't be able to recreate that in all probability, but at the same time a huge leap isn't necessary. A respectible improvement in tech for 2012 will be sufficiently beyond the current gen for people to be interested. And price wise, XB360 was outselling supply when first released at $400. MS could have charged more and satisfied demand at a high profit margin. If Sony hadn't have gone with, they could have been making much nicer returns per unit now. So next gen, both MS and Sony can produce console designed to be break-even or profitable at a $300 price point and release them for $400. Joe Earl-Adopter will think they're getting the latest, greatest technology and be happy to pony up the premium to be an exclusive owner of the new machine. The rest of us will have to wait a year or so for the price to drop to the 'mainstream' $300. Although $400 isn't such a premium on older consoles given inflation. Tech is becoming so cheap these days it's hard for anyone to ask a premium on CE goods!Interesting perspective, the only real difference between us may be that I was still considering the loss lead strategy whilst yours involved consoles being sold at a positive margin. The real question is demand. Can a $400 console offer enough of an improvement to the experience as to be worth a premium price over the current generation consoles?