Try $229.
See, some time ago, there was a meeting of the Jedi Council about the future of multimedia entertainment. The discussion went like this:
• Make a box with broadband.
• Make it work across a lot of screens: lappies, PDAs, TVs, PiMPs.
• Download media directly from the content owner.
• Make it dirt simple to use.
• Make it affordable.
That was 1999, and then again, in 2004. No company hit all the right spots back then. Now you have one company that (finally) covers all of these areas. The only company in the industry, by most accounts (you best check yourself before you trot out tired-ass M$ and the X-Tremely Nubtarded Xbox 360.) AppleTV in it’s current form makes this happen for $229.
If you only watch some basic shows, the ATV+iTunes offering might be more affordable for some people, at $2 per show, $3 movie rental. Or it might scratch the itch of someone with a large multimedia library. When you add portability to this offering, the value is even better. And since no competitor makes it this simple or affordable, they can make a little money on this, I bet. And if the hackers have their way, you’ll be able to do a lot more with the box than meets the eye.
The down side of course is that it doesn’t appeal to power users. And that’s fine. Some people have larger collections of media, and need to do a lot more with it. They get computers 
Instead, talk to a kid who is knee-deep(totally) into iTunes, and then run the clock forward a few years. Think they might not bother with getting a traditional TV subscription? What about when their favorite shows are ad-supported and free, available on all the screens they own? Now how much would you pay?
While people are focusing on the rentals, and the total cost of ownership, they really need to be looking at this little announcement from the BBC. This is just the first major (read: non-UGC) content owner to plumb programs directly to the AppleTV over broadband.
When the big 5 networks do this, and make it free, how long will it take before the larger masses start moving away from appointment viewing that has been with us since Punch and Judy tickled our funny bones? If the trends continue, 5-10 years might not be too outrageous to envision. Then what happens to the traditional providers?
Hmmm…that’s a good question.
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