[pheaduch]

Why not? This is traditionally the video game hardware model where you sell the hardware at a lost and make up for it on video game sales.

Some smart company out there, if done right can easily undermine the Apple dominance by lowering the cost of hardware and trying to make up for it in app sales. You would have to own the entire vertical system like Apple, which now there are two -- RIM and Google with their Motorola acquisition. Google has the best chance, they are sitting on a pile cash and can easily subsidized the losses for their hardware partners like Samsung and HTC. However, I think RIM is the most ideal as they are dealing with a chicken-and-egg type scenario with developers and lack of apps. They are desperate to stay relevant in the market, so why not do something crazy.

[wccrawford]

That requires an exclusive system where only licensed developers can create games/apps for the device, and the device creator gets money from the game/app developers.

Without that, there's no way to recoup the money lost on the equipment sale.

And none of those involve losing 2/3 of the cost of the device.