Cost breakdown : Xbox 360 retails for less than it cost to make

Not a surprise to those who know about the video game industry, but the Xbox 360 console costs Microsoft more per unit to make than they are selling it for. This is actually standard practice in the industry - the console is a loss leader, the company manufacturing it makes their money through software and peripherals and licensing fees. Also, as more consoles are produced, the cost per unit will come down. Eventually. The article linked above goes into a lot of detail, giving the breakdown of what's inside the Xbox 360 and how much each of the components cost.