I don't disagree that this device is very likely too expensive to sell well.
But! The price is not insulting. You can built a slightly faster PC for a little less, but that PC would be ~10 times larger, it would be louder, it would lack features like HDMI-CEC and good wifi/bluetooth. It really wouldn't compare for living room usage.
In order to get anywhere near the size of the Steam Machine, you'd have to exceed its costs.
But! The price is not insulting. You can built a slightly faster PC for a little less, but that PC would be ~10 times larger, it would be louder, it would lack features like HDMI-CEC and good wifi/bluetooth. It really wouldn't compare for living room usage.
In order to get anywhere near the size of the Steam Machine, you'd have to exceed its costs.