Umm. Microsoft most certainly didn't make their console profitable from the start...Although they designed it in such a way to ensure it wouldn't be a loss leader after awhile.

The initial wave of X360's to the market cost Microsoft over $500 per Premium ($513 to be exact). Fortunately, MS has sawed down costs significantly, and the Arcades are being made for under $200 (probably closer to $150-160 before shipping costs come in).

@NightstalkerX -

Microsoft does have a strategy to keep the X360 relevant in 2009. It's called the Slim model. We've known for a year that Microsoft was/is going to put out a fully-redone version of the X360 in 2009, and every source close to the manufcaturer has stated that we're going to see a totally new Xbox 360 that is similar to the PS2-PStwo changes...That should keep momentum strong in 09.

I don't think MS will have a problem of 'overshipping' the X360 this Christmas...Everything I've seen points to MS having a rather weak manufacturing base in comparison to Nintendo, so there are only so many consoles MS can pump out a month. It's very unlikely that, given the X360's strong performance this quarter, that they could overship...Estimates point to 5-6m consoles shipped in the Oct-Dec timeframe..Well above 06 which was at 4.0m, but it should have very strong sellthrough. If anything, MS may go supply constrained.

I'm pretty sure that's what he ment

As for Microsoft's production... I think they were caught a bit by surprise by the sales, but I've noticed at my walmart that we are starting to get a bigger supply of the Arcades and those are the ones that sell the fastest.

Cueil - I agree that MS was most likely caught by surprise with the brisk Arcade sales.

Back when the Core launched, MS planned on shipping 33% of all units to be Cores...But actual sellthrough (after launch) was much closer to 10%.

Once the Arcade came out, sales bumped up to 15-20%, and MS was supply constrained for a few months last Christmas.

Now, it seems that Arcade sellthrough is closer to 40-50% which would certainly cause supply issues for Microsoft 'till they fix it...Hopefully MS keeps up the brisk Arcade sellthrough, because in the end, it means more profits (since they can charge 100% for the HDD addon).

@ mrstickball

I often wondered when the slim would come out.

I didn't realise it was that imminent.

On the other hand if the 360 sales stay up 09 maybe they might delay it to milk the present model.

Yes, the Slim is imminent. There are a few very industry-specific sites you can look for X360 information at, such as TGDaily.com.

If you want hardcore insider information, TGDaily is the best site to look at, because they report hardware information from the Taiwanese suppliers that actually develop the products that go inside the Xbox 360. They've called 100% of big info (such as the Jasper chipset) months ahead of it coming out (TGDaily notified everyone of Jasper about 4 months before it was produced, and gave a manfucaturing date of August - which proved true)...They also gave out product information such as Microsoft ordering 5 million DVD drives for Q3 this year (so they planned on shipping 5m+ for this Holiday).

A few noteworthy items from them:

65nm in Production, Xbox 540 in 2009 - May 8th, 2008.

Xbox 360 to go 65nm in Fall - April 30th, 2007

Great news. Gives Microsoft more ammo to bring the price down a tiny bit more next year if needed.

Even though MS owns less studios/game developers now they seem to be really smart just "buying" exclusives rather then spending tons of money on in house projects. Combined with XBLA sales and insane attach rates they are on their way to some high profits. We'll see the reports soon enough.

As console sales go up (especially to the 'casuals'), the attachment ratio is bound to go down.

Oh, MS and their devious psychological warfare! They are out to destroy the hopes and dreams of PlayStation fans across the globe by spreading such lies and deceit!  But do not be faint dear PS3-fans, your console shall not stop working as a result of MS' profit margins. Oh no, your PlayStation shall yet still turn on tomorrow as if nothing had ever happened. And for that, you can be thankful... there is a God, and he must love Sony!

On a serious note, MS' profit margins are hard to figure out because they don't seperate the numbers so that you can see how the XBOX division is doing.. so could be truth, or could be pretense in the form of propaganda.. who knows?

Doesn't mean much - high shipments = high shipments of software. If they were making a profit on each hardware, I'd expect them to be raking in a LOT more money than they are.