It kills you fanboy

True anyway, but to generate a popular thread, you need to bring on the contreversy.

For info, MS entertainement division contains XBOX, Games for Windows and the peripherals.

I'm not saying that your argument is without validity, but the balance sheet you provided a link to shows a total fiscal year gain for the entertainments division...not a loss.  Additionally the notes therein identify the performance of the XBOX 360 as a key factor.

Additionally, this statement: "No increase in Xbox live games sales..." seems contrary to the market as we know it.  Hardware sales are almost ALWAYS sold at a loss as the money is made from sales of software (Nintendo seems to be the exception here).  Microsoft's software attach rate is currently estimated as the highest among this generation platforms and XBLA sales add to that.  Therefore I'd argue that software sales, including XBLA sales, are exactly what drive profit for the 360 portion of the entertainment division.

As far as hardware costs go, I don't think anyone knows, if the 360 is being sold at a loss.  Would seem strange to me that with 3 years worth of improvements/cost reductions, that they would be, but you never know.

Just like sony did with crappy PS1s and PS2s that were avialable at launch. I had a ps2 dvd drive die in less than a year after buying it brand new. And we all remember the overheating problem in ps1s...where you had to turn off the system for 30 mins and let it cool down since it wouldn't read games.

The price cut was not forced? Lol. And stop comparing the PS2 to the 360. Its not the same at all. Sony never HAD to make as many revisions as the Xbox has had to because of reliability. They aren't in the black, these price drops were necessary because they were losing everywhere in the world.

They weren't in the black last quarter, so these price cuts WW without any major first party sales would definitely put them in the red regardless of hardware revisions. This holiday season with Gears 2 I would say they could make it in to the black depending on sales, but right now I would have to say they are in the red.

Sure they are selling more than last year, but buying exclusivity of games like RockBand 2 and paying Square to release Star Ocean exclusively and bring FFXIII over to the 360 all costs money. Microsoft's "we're in it to win it" mentality is almost foreshadowing losses in order to stay competitive. From my point of view its fine, they NEED to take losses or Sony will just bulldoze them, much like they have been doing all year up until this point.

The Xbox360 still uses the 65/65 chipset (same revisions as the most recent PS3 model) and takes extra precaution to maintain a exceptable failure rate right (have to maintain higher heat reduction precautions)? So how can they go from selling a $279 Arcade (15%total sales) $349 Premium (60%) and an Elite $449 (25%)  to $199 Arcade(40%) $299 Premium(35%) $349 Elite (25%).

Not only are they selling more of the MUCH cheaper model (which I would be absolutely amazed if they made money on) but they are selling less of the high end model which cost $50 less. The PS2 could reduce in price because they were selling so many of them. The more you sell, the more factories will be willing to invest in your machine and the development process, the cheaper your cost become. The 360 isn't selling that much more than last year. Its costs aren't dropping that quickly, and they are in the red still, bottom line.

I chose the latest quarterly performance as it reveals a more accurate snapshot of the divisions current fiscal performance. It was also a fairly steady quarter with no major releases in any of the divisions product lines, so it gives a good steady state image of the division. And you're absolutely right that software sales would play a massive part in regards to profit for the Xbox business, I tried to isolate the 'xbox live' game sales only, as the OP was trying to make the point that an increase in live sales would be proof of their profitability. Actual retail game sales would bring in the vast majority of their moolah without a doubt.

Anyway, OP was just being controversial. In other news beer is awesome.

You just don't know the history of the ps2 then. Sony made lots of revisions to the fat model. 3 major revisions and 8!!! minor revisions. While it was never openly admitted, some revisions were to fix the faulty DVD drive laser which would crap out within a year.

http://en.wikipedia.org/wiki/PlayStation_2#Hardware_revisions

Thus far xbox made 1 minor revison (putting larger heat sinks on the original model) and 3 major revisions.

Revenue <> Profit

The revenue increase wil help ... but it does not automatically mean that Microsoft is making money.

Mike from Morgantown

i'd have to disagree. AT LEAST one of the price-cuts' in europe were forced. you don't do 2 price cut's within 6 months. the cuts in the other regions were probably planned though.

It's amazing the Wii is thrashing the X360 (and PS3) in sales yet the X360 is now cheaper it has HD it has way higher specs and all than the Wii it probably cost's at least 2X to make it and probably selling at a loss.
Nintendo effectivley have a total monopoly of the console market they can sell their product at higher prices with huge profit while Ms loose money on every sale.
Ms are in some trouble- the lowest prices on HW yet barley outselling the PS3 after a large price cut.
The Ps3 looks like it will back on top of the 360 in the US and Japan without even having a price drop in just a few weeks time.
I wish i had nintendo shares their next console Wii2 will easily take them to 60% of the total market if they do it right.

It is great to see XBLA contribute to the continued success of the 360.