If you want to buy the Sony Xperia play from Telstra outright, it will cost you $960. For that money, I could just about have two PS3s.
Sadly, this isn't an unusual experience. The Nintendo 3DS costs more or less the same as the Wii. If you decide to buy a shiny new iPhone, a lot of your games will be cheaper, but you'll be coughing up at least $719 for the device.
Yes, you can make an argument in the case of the phones that they're not solely gaming devices; they are also highly flexible communication/work/reading systems. And that is true. But you could also make the same case for the PS3: it's a Blu-ray player and a streaming entertainment delivery device, not just a gaming system.
For the Xperia Play in particular, $960 is a lot to pay for getting a better processor and some specific gaming controllers, no matter how great those controllers actually are. There are Android phones on the market for under $100, and plenty for under $500, and they will play the games in the Android market pretty sweetly. Tablet devices are also much cheaper than these kinds of phones. You can avoid some of the immediate fiscal pain by signing up for a contract, but that also leaves you stuck with the same device (and the same network) for two years or more.
On one level, there's nothing new about portable items costing more. I've been hanging around PCs long enough to remember when notebooks routinely had processors that were a year older but still cost twice as much. But you know what? That isn't the case any more. Notebooks are the dominant form of computing these days, and the price gap has all but disappeared.
The other unpleasant likelihood is that portable gaming devices cost more because the odds of people buying expensive games to run on them are much lower. Sony can subsidise the cost of the PS3 by assuming people will routinely splash down $50 or more for a game. That doesn't happen so much in the mobile world, where we've become accustomed to expecting sub-$5 prices.
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