I'd definitely agree with Bill with this one. I'd never buy a modern console, but I do acknowledge that they provide better gaming hardware for a lower price than the equivalent PC. Sure, you might be able to build a decent gaming rig for $800, but that's still much more than most consoles. If you're only interest is playing games (i.e., no interest at all in word processing or what have you), then that's clearly the way to go. It also helps if you're content with owning only 3-4 games, or perhaps only buying 1-2 games per year, or shopping in bargain bins. Clearly, things get cost prohibitive very quickly if you're buying 12-15 new games a year. It wouldn't take long for someone to spend well over $800 on any of the modern consoles that way.

What seems to have happened historically is that whenever the big companies keep disappointing the public, some newcomer will rush in to fill the gap. It wasn't long ago when Sony and Microsoft were unknowns, or Sega for that matter. But something about this PSP story reminds me of the Lyn x. Advanced hardware, but it just didn't click.