eWeek published an interview with Microsoft's Entertainment and Devices Division president Robbie Bach about the Xbox, the Zune and Microsoft's rivals.
One of the things that he revealed is that Microsoft expects their Xbox 360 console will start becoming profitable next year:
Right now we're doing a pretty good job. We're humming pretty well in the business. Our costs are a little higher than we'd like, [but] we're pushing those down; there are good initiatives underway to drive that. Game attach rate [is at the] highest level in history for a game console at this stage in the life cycle. The same with our peripheral attach rate. Xbox Live has over 6 million members.
The pieces are in place to drive the proverbial billion dollars. Specific date—oh, that's going to depend on what happens in pricing, which partly we control, partly we don't. You know what happens in component costs—mostly we have pretty good influence over that, but there are places where we don't. Pricing on memory goes up and down seemingly like a yo-yo, so [we have to manage] through that.
So, it's a business that will be profitable next year—we'll make money next year and that will be the first time, which is pretty exciting. And then the next two or three years are the place where you need to make tracks, and the next two or three years are where you have to make money.