The Xbox 360 is the leader of the home console market at the moment. Its year head-start has given it the largest user base along with the greatest number of quality titles. Despite all that, however, the Xbox 360 is a financial loser for Microsoft, which lost $315 million USD from its Entertainment end Devices Division in the third fiscal quarter.

Microsoft is in the gaming business for the long-haul. The company’s deep pockets allow it to sit in the trenches, weathering the storm until the tides turn – and according to Robbie Back, president of Microsoft's Entertainment and Devices Division, those days may be coming in 2008.

“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,” said Bach in an eWeek interview. “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.”

Bach details that the Xbox hardware itself is something that may never end up being profitable, though accessories such as controllers and other peripherals usually do bring in some money. A major source of revenue is from its own games divisions and royalties from other publishers. The last piece to the Xbox profit model is the Live service, which is now six million subscribers strong.

“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,” Bach explained when asked about turning a profit. “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.”

“Right now we're doing a pretty good job. We're humming pretty well in the business,” added Bach. “Our costs are a little higher than we'd like, [but] we're pushing those down; there are good initiatives underway to drive that.”