not really, if they are making money on the arcade, the HD wouldn't cost them more that $100. Also the old elites came with 2 games and still made money, and holiday bundles will come with games too.

Who cares if MS is losing money on each console? There making it up on Xbox Live and MS points.

he got his source from this blog

http://blogs.barrons.com/techtraderdaily/2009/09/23/good-news-on-msft-earnings-xbox-sales-tanking/

In a research note today, Shauger warned that weakening Xbox sales were likely to hurt top-line results for  both the fiscal first quarter ending September and for the June 2010 fiscal year. Shauger trimmed his Q1 revenue forecast to $12.3 billion from $12.8 billion; for the full year he goes to $59.1 billion from $59.9 billion. The cuts specifically reflect lower expectations for Xbox 360 sales, which he says are getting hit by a combination of Microsoft’s price cuts on the consoles, weaker end demand and competitive pricing moves by Sony (SNE) on the Playstation3 .

so their annual revenue is $59.1 billion and they will make a loss of $800 million ??????  OH NOES!!!!!

Don't we have to really look at the whole Game division?

First, are MS making profit on every 360 hardware sale? No one really knows. We can safely assume if they were, it might be a few bucks. Probably no more than 20 bucks :).

Consider: They drop the price 100 bucks just before ODST comes out. They know they will get probably 4 million sales of that game by Xmas. The console business model is really about making money on the software sales. ODST means maximum profit - it's an inhouse development.

As soon as ODST got released, what else happens? a $50 buck rebate. That's money coming from somewhere. ODST is not going to cause the purchase of 4 million 360's but it can go some way to subsidising new sales - hence a temporary rebate. :)

Now look at the other parts of the MS game division.

1. Live subscription - well there's about half a bill in revenue a year.
2. It's no secret that MS has paid big in this gen to ensure timed exclusives (especially in Japan where they are struggling), exclusive DLC, much bigger advertising. Does a lot of this even show up in the game division book keeping. We don't know? This expense must be in the low 100's of mills by now?
3. The extended 3 year warranty. We do know as fact that MS put just over 1 bill aside to cover this. We will never know the true cost.
4. Zune and Zune HD: We have no revenue figures on this baby. We suspect it is not good? It's all part of the game division.
5. Sony maybe hurting with the cost of making PS3's but the Playstation division gets a lot of buffer from the PS2 and PSP. They make money on those. MS so not have this luxury.

I guess it's not easy to make money in this business. I am not trying to say MS are in a bad position compared to Sony or Nintendo. Sony is definitely hurting too but I think Sony had a clear strategy when it came to Blu-ray. They had a holistic and pragmatic strategy. You can see how Sony has shifted their efforts from marketing and pushing the PS3 as a Blu-ray/ home theatre product, to a games console.

MS seem to be pushing towards making the 360 do a lot more than what it did at launch. Netflix (rumoured timed exclusive), Facebox, Twitter etc.

On top of all this, MS are obviously putting a big investment into Natal. It looks like Sony's effort is more conservative which probably means less investment.

To finish, this console gen is a hell of a lot more interesting and competitive than the previous and that's a great thing. However, I'd hate to be the chief accountant for MS or Sony - they must be completely bald by now with stress :).

They were making money, but the Elite dropped its price by $100, and now $150, so obviously Microsoft will lose big amounts of money, also adding in the RROD reapirs.

Check MS own financial reports there.
For what its worth, ED+D (which xbox is considered under) have shown a loss the last 2 quarters.

The company as a whole will make a huge profit this year (As they do every year) due to MS windows + MS office

Given the low cost of additional features, it's more likely that if they are losing money on any consoles, it's on the Arcade ones...

Oh so a guy who signs up yesterday posts in the Sony forums with glee and *yet* his post in the Microsoft forum is opening a can of worms.

Hrm... nope won't bite.

im pretty sure M$ is making money on each xbox sold. i remember them saying as much. However i could possibly see them dropping their expected profit margins for the year because of the increased competition

i love how so many people hold their street corner analyst skills over a professional. the article could be full of crap, but the posts i'm reading are just silly.