[Lewisham]

That's the nature of the game; loss on the razors (consoles), profit on the blades (game licenses).

Microsoft ate a huge amount of cash to push Sony into a game they thought Sony wouldn't win: they invested heavily in the Xbox being a software hub that connected with media over the Internet. I would argue they were pretty much successful.

The belief is that 360 launched with HD-DVD not because Microsoft didn't think Blu-Ray was a worse bet, but because Microsoft wanted to delay HD physical media long enough for digital distribution to take hold. They made a huge loss on marketing and manufacturing a losing piece of hardware, but like I said, it probably worked.

So, by the games Microsoft was playing, I would say they view Xbox as a major success.

They are now making a profit [1], but the cyclical nature of console lifespans means money is now going to have to get sunk into R&D then the marketing of a new console, which will push profits down in about 2-3 years. I'd also expect the WP7 push to eat up revenue as well.

[1] http://www.businessinsider.com/chart-of-the-day-microsoft-op...