This ignores another big part of the equation historically (I don't know if it applies today, and AFAIK it never applied to Nintendo) which is using a clever bu

This ignores another big part of the equation historically (I don't know if it applies today, and AFAIK it never applied to Nintendo) which is using a clever business model. Many consoles have been sold at a significant loss at launch. An equivalently powerful PC would have cost much more, and did, in fact, cost the manufacturer more than they were selling it for. The cost would then be recaptured in game royalties.