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It's the walled garden model. Sell the hardware at a loss because you count on making the money from selling the content later. There's no opportunity for competition to enter the market because even if you have a better product there's no profit in the hardware and it's too hard to get people to switch. Established players don't have to improve the hardware because there's no competition. It's get in early, establish your market share and collect the money from your locked in customers.
The American market bought into it though and I suspect the European and Asian markets will follow.
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