Yeah and they have advertising incomes with XBL too... People trying to downplay XBO selling like hot cake by pointing out that they are probably loosing money on it have very little understanding of the marks mechanics... The console market has never been about making money on the device during the initial purchase but on everything else after that... Accessories, games, subscriptions, ads... That's a lot like the printers marks or like the camera market when it was dominated by film cameras...
Slashing your price even if it means taking a bigger loss is an excellent strategy.. Even if they don't improve their market share in the long run (which I doubt they won't) it'd still be better than doing nothing.. Having more consoles in the consumers hands always generate more profit in the end... Especially the more they AR the more like they are to buy more stuff cause more people around them are buzzing about content and stuff...