Why doesn't Microsoft drop the price of the Xbox?

[Erik Aston]

Profitability is Peter Moore's #1 concern (and for good reason). Despite the fact that the hardware now costs less to produce than the sticker price, as a whole XBox isn't turning a profit due to marketing costs, the expense of XBL, ongoing development of a whole slate of services for consumers and developers, and most likely some pretty friendly deals with third and second party publishers creating that great 2007 lineup of games.