Two recent cost estimates, performed by different research firms, suggest that the XBox 360 may be bleeding Microsoft, at least imitially. Portelligent did an analysis of the product cost of the core model and figured that Microsoft spends $310 on each, while they retail for only $299. A report from iSuppli Corp. focusing on the premium package suggests a larger differential, with the retail price of $399 far below the estimated $525 cost.
Selling game consoles below cost, especially at launch, is not unheard of, but if the iSuppli figures are correct the premium 360 is losing an unusually high amount per unit. Traditionally, the one-time loss on the sale of a console is offset by income from sources such as licensing of game development technology and higher markups on game software. Alternately, Microsoft may have negotiated deals where hardware manufacturers provide components at lower prices, in which case these manufacturers would be eating some of this cost.