[rwallace]

I have seen it claimed that, roughly speaking,

- The sale price of the Xbox itself pays for the per-unit cost of the machine

- The percentage Microsoft gets of the sale price of games, adds just about enough to pay for the development and marketing costs, so at that point, the business doesn't do much better than breaking even

- But when you add in the ongoing revenue from online gaming, that's where the profit comes from

Can anyone confirm or refute this?

[dfxm12]

After start up costs (starting from scratch with the original Xbox was certainly more expensive than iterating to the current version), in general, consoles are loss leaders and you make up for them in rights fees from games (console makers traditionally do much better than breaking even here). Online services, like Xbox live gold, is another revenue stream.

MS probably gets some value from more people getting Microsoft accounts, too.