Also, there should be some sort of economies of scale involved when VieVU is providing tens of thousands of cameras across the country. It's not just the NYPD.
I did some additional research and posted a follow up comment that sheds some light on the breakdown of the cost. It makes it more tolerable but still too expensive in my opinion.
In my time working in hardware (across consumer devices like smartphones and specialized devices for industry) I have never seen a product with only a 20% difference between low volume and mass manufacturing costs. The difference is in the range of 200-1000% when talking about going from 10,000 to a million units, depending on manufacturing setup cost. The lower range is only achievable if your manufacturing line is uninterrupted which I doubt is possible for such small orders and it's impractical for a small government contractor to make many units all at once due to inventory costs and risk.
$200 at 10,000 units for a device that sells for $50 or $25 at a million units is par for the course for any hardware product.
Even assuming that it's technically very different: there's ~1 million sworn police officers in the US according to Wikipedia. That quantifies as a mass market for me given the price segment.
If they sold a single batch of 1 million units to every police officer in the country, it would still not even be in the same league. 1 million total potential customers sold in small batches is not mass market.
[0]: http://appleinsider.com/articles/16/07/16/editorial-sorry-an....