a) Economies of scale. Consoles use a common, if not identical, design. Parts can be negotiated for the lowest dollar value possible. b) Console manufacturer doesn't necessarily need to make a profit on the console itself; in fact they can incur a loss if they do their analysis enough showing that the sale of games and accessories will make up for the loss. If so, that would fit their strategy, mirrored by Microsoft's xbox. c) Marketing campaigns brainwash the individual into thinking that consoles can do a lot more than they really can. This helps fuel the consumer's mind into thinking that a console can run circles around a PC. Sure. The examples here depitcting how a console is marvelous -- but only 640x480, a crappy resolution on a PC even in 1999, is a great example of how marketing can convince people that consoles beat PCs, when it's not sure.