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That's what happens when you spearhead a new format in the face of a recession while adding value to a box at the same time.
Microsoft's business model is seeming to come out as a shortrun winner but that's only because they've got pockets deep enough to subsidize the mess. They're also benefiting from the fact that the recession hit Sony as the PS3 started turning the corner. All they have to do is continue to take up marketshare from the PS2/XBox days and they'll be set for when the XBox3 drops a few years from now. It gives them the time to make sure they build the XBox3 reliably. Consumers are sheep, they'll forgive and forget about RROD once the first few reports on the console's reliability are released.
While I doubt XBox is being sold at a profit, they're recouping some of their losses with their overpriced peripherals and $50/year every year from those who have Live. While I think the PS3 has to come down to $299 to survive, it is already being sold at a $50 loss. An article in Bloomberg suggests that if Sony does drop the price they'll be subsidizing the PS3 hereon.
The potential for Sony to make money off microtransactions and purchases online exists yet that can't be realized until they drop the price to $299, finally get those waiting for the price drop (there are over 125million PS2 owners afterall) and get them buying 3D images of Ligne Roset furniture in Home. Very much a Catch 22.
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