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scottie said:

I suspecty (assuming that analysis is true) that Microsoft is making a fairly healthy profit margin on the hardware, although that is not overly surprising - accessories have the highest profit margin of MS:EDD products by a considerable margin.

Also, isn't there a game bundled for that cost?

Yeah, but it's developed at Microsoft, so the only cost is the disc and packaging and what else comes with that. That's not a whole lot.