Exactly what I was thinking ...

Im talking about hardware itself. Not everything else.

Of course, with everything added on, both will be profiting.

Actually they are not, if you believe what Kaz said.

He said they're making positive "gross profit"... which means that they're only making profit if you ignore advertising costs, employee salaries and things like that.

im guess its the other way around. Microsoft is profiting and Sony isnt.

Sony has already said they will still sell the PS3Slim at a loss.

360's have been sold for a profit for a couple of years now. Arcade not nearly as much. Since the cost of a 120GB HDD is now down to the level that 60GB HDD were last year even without removing the Component and HDMI cable the Elite at $299.99 would be just as profitable as the Pro was. In fact now 120GB HDD costs less than a 60GB HDD does.

Microsoft yes, Sony no.

Microsoft pay ridiculous money to publishers for exclusive content. Their only trump card over the PS3.

Microsoft also have one hell of a warranty bill to pay.

Well, Sony are paying too. Check the new batman game.

This.

They paid out for that over 2 years ago, so the RROD bill is a non point. Not to mention Microsoft do make money back on the exclusive content.