Every company effectively takes a loss leader when developing something, and before money starts rolling in. Microsoft never made any profit off the original XBox, and only started making any profit a couple years ago off the 360. That's about seven years and billions of dollars behind. That's a loss leader. Microsoft basically bought its way into the console business.
So. Why do you care? It's all good as they have moved the console gaming business forward. Before XBOX there was no viable online component.