A lot of people tend to forget that though the original suggested retail price of the Sony PlayStation was $299, there was an industry wide 32-bit trade-in program launched at the same time. I think that if someone traded in a SNES or a Genesis with 3 games for that system, they would get a $100 discount on purchasing a PlayStation. So, for many people, the PlayStation effectively cost them only $199. At the time the Saturn cost $399 and even with the trade-in it still cost $299. This was a major reason for the initial sales success of the PlayStation, since systems like the Phillips CD-i and 3DO were not even remotely as popular at the time. I'm sure Nintendo took note of this before lowering the MSRP of the Nintendo64 to $199 rather than the proposed initial $249.
The gaming industry as a whole has now learned what Sony realized before launching the PlayStation - there is absolutely no room in the market for high-end video game systems sales. This has been proven time and again by the likes of NEC (Turbo-CD $400), SNK (Neo-Geo $500), Magnavox (3DO $700), Phillips (CD-i $995), Commodore (Amiga CD32 $999), Pioneer (LaserActive $1200) and oh yes, Sega (Saturn $400). In a dreadful attempt to court the "elite" gamer, each of these systems failed to achieve any form of resounding market success.
Even if people wanted to buy the system, the exhorbitant price tag for the system and needed software was simply too high to overwhelm common sense. Let's see, Neo-Geo plus two games equals $750 plus tax - about fifteen Genesis games and eleven SNES titles... Hmmm... You'd need a LOT of disposable income to get past that hurdle of logic wouldn't you? The solution rather, is to place your game system at a price point that your target audience can actually reach in some way by reason or force of sheer will.
No, it's not likely that the next Sega system will be a Model 3 or Model 4 unit in a box for under $200, but you may expect that WHATEVER is in the case will be worth more than the sum of its parts. Likewise, PlayStation 2 won't be a Namco System 33 or System 44 for some paltry price tag. Ultimately the game companies will earn their cash from revenue generated by software sales and will not be so concerned about making a profit on the hardware itself. Take care, happy gaming, enjoy life!