Hardware is just one aspect of sales though. I assume they have much higher margin on software, especially rereleases of existing games on whatever the next platform is.

That's very simplistic. They also earn money on sales, both first-party and third-party games, so they need a large audience.

Hang on, halving your sales means doubling your price to stay even (ignoring your own cost), right?

I have a bridge to sell you …