I think that the PS3 actually will be $400, just think about it, i'm guessing by the time it actually launches it will cost roughly $700 to make, they'd be taking a huge hit of course, but this is where blu-ray comes in.  If the PS3 were that reasonably priced people would swarm to get it, and if a ton of PS3's were sold then that would almost guarantee blu-ray as the victor in the format wars.  Can you even begin to imagine how much money they would make by winning the format wars?  Definitely more than the hit they would be taking for the PS3, and the Cell processor of the PS3 should make it so the blu-ray technology used will be more affordable which i doubt lynch took into consideration, not to mention the fact that the report said it could be from 725-800, and prices of the parts will be sure to drop a good 100 dollars by then, so potentially it could only cost $625 to manufacture, that's a $225 difference compared to the 360's $150 or so, when you factor in blu-ray you can definitely see why $400 is a very likely price.  Other points I'd like to make is that Kutaragi said it would be expensive, making people think it would cost like 600 but not being specific, so people would save up a ton of unnecesarry money that they'd spend on games, thus making up for the lost money.