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Gnizmo said:
Lucky day! I found it quickly. Relevant quote and then a link:

"Microsoft is not being dickheads," he said. "It was a simple kind of miscommunication. Microsoft does not charge a royalty per disc, but there is a cost of goods that goes along with manufacturing. "

http://www.shacknews.com/featuredarticle.x?id=1001

Thanks, makes sense. I like the fact he blames Carmack for being too "technically minded", lol. Quite an interesting read as well.