Wow, are we suppose to be surprised by that? What's more amazing is the fact they charge $100 for a WiFi adapter when even that measly DS has it.

Companies making profits from selling products for more than they're worth!? Surely this must be a mistake.

yeah but that $45 you quoted is a 3.5" hard drive and the xbox uses a 2.5" hard drive, more expensive, but yeah you're probably still right about the profit margins.

"Companies making profits from selling products for more than they're worth!? Surely this must be a mistake."

"on a drive a consumer can buy sans 360 plastic for $45"

seems you a forgetting a long chain of profits are obtained before you get the drive at that price, you are getting it at manufacturing value or quantity wholesale. This explanation seems to be way off from the reality, how can Apple get a tailored HD made for the ipod way cheaper than microsoft's regular laptop HDs? the are also buying millions of them. and they are Microsoft, they probably own every part of the production chain for the xbox360.

Laptop (2.5") 120GB hard drive costs $70 on newegg. The "wholesale" and/or "bulk" price should be much lower than that.

If Microsoft buys the modified drives for $100, and they get sold for $150-$180, some of the profit goes to the retailer...not all in Microsoft's pocket.

However: all of that is irrelavant. The real issue is: why did microsoft decide to make the drives so damned proprietary in the first place? All they did was add a 4th profit making middle man on top of the 3 companies already making money on the 360 hard drive (Seagate/Toshiba, Microsoft and the retailer). And all the 4th guy does is strap some plastic on the drive?!!? Plastic that's only needed because Microsoft decided to turn a basically universal 2.5" hard drive into some proprietary nonsense?

Not that I expect businesses to act like a charity or anything...but why bring more steps into the loop to make money for somebody else? Even if Microsoft wanted to be able to make money on add-on drives, they could have just as easily ordered hard drives from Seagate/Toshiba with an extra chip or something on the controller to keep it proprietary...and that would have kept costs much lower (by eliminating the cost of plastic, the $20-$25 profit the plastic-putter-onner makes, and the trickle-down price increases that Microsoft and retailers charge down the line).

People complain a lot about Sony...but at least they didn't needlessly multiply the cost of a hard drive by 2.5x for no reason with the PS3. Added benefit: you can put any size hard drive you want in the PS3, while the 360 is limited to the few capacities that Microsoft is willing to sell.

(For the record, I don't own a PS3 or 360...I just like to complain when big businesses are illogical jerks).

I am honestly surprised that it's MS pulling the daft hardware crap, that's usually Sony "we know better" territory.

I really do have to give Sony props for making it so easy to swap out the hard drive in the PS3.

Comment on Behind the Xbox 360 Hard Drive's Insane Price You forget to add in development costs, labor, and shipping between vendors. I am sure I don't know the other costs that only those shared companies have between each other.

@EQC:

Basically you are right. BUT while a lot of people know how to exchange harddrives, a lot of people dont.

And since MS carter to those too, and would scare them off if they just sold a do it yourself - barebone - harddrive replacement its kinda logical that they have something built that anyone can install.

And since they dont manufacture those things themselfves, and since the HD makers also dont do that, they need someone else in the middle.

I do think that MS thought about those problems ... and it probably came down to the question : Who do i want to be able to install this. Everybody or (fantasy number) 50 % of my consumers.

Sony wins the hard drive competition. Once you muddle through all the various PS3 models, the best value really is the 40GB. Go to the PlayStation website, glance over the drive swap instructions, and in 15 minutes, you can have a 250 GB PS3 for about $500 (factoring in the drive cost).

The fact that Sony doesn't advertise the drive upgradeability shows that the marketing department still has its collective head up its proverbial ass.

*the downside to the PS3 is that games install themselves. if I wanted that PITA, I'd go back to gaming on my PC.

Although I might be wrong on this, IIRC, one of the reasons it's so insanely priced is because it includes a licensing fee to NVIDIA for some of the backwards compatibility support (NVIDIA made the first Xbox's graphic chip).

@OMG! Ponies!: *the downside to the PS3 is that games install themselves. if I wanted that PITA, I'd go back to gaming on my PC.

Tread lightly with that PS3 FUD. Not all games install automatically. Some do and its horrendous. The upside is it reduces load time whereas you don't always have the option with the 360.

Sony does advertise the drive upgradability, but that falls to people actually having to read the manual.

@Rizzuh: typically, consoles are sold at a loss.

@Shnyzx:

Putting it in the manual is not advertising. That's called a "features list". Why wouldn't Sony advertise the drive upgradeability? I think we all know the answer to that question (hint: it's shaped like a $500 80 GB PS3).

Also, any speed gains from the install are usually destroyed by the 1x read speed from the disc. One of the drawbacks of BD gaming.

A lot of games install. I have three games - Heavenly Sword, Assasin's Creed, and Uncharted. Both HS and AC require 2GB of drive space for the install. The load time on Heavenly Sword is a huge PITA. Not a dealbreaker, but a definite minus.

@Rodime: Typically, consoles are initially sold at a loss. Both the Wii and 360 are sold at a profit, with the margin on the 360 being slimmer than that of the Wii. The off-the-shelf cost helps keep down costs.

ink for printers, cd's for cd burners, ethernet cables, usb cables etc...

Since when in time did accessories not become the higher profit margin product?

The 360 hard drives come in that hard plastic condom for the same reason you can't copy MP3s and movies directly to your 360. MS believes way to much in DRM now to ever let anybody at the drive if they can help it. Boxing the drive probably at least halves the number of people willing to do what it takes to remove the drive from the XBox and hook it up to a computer.

If you don't want to pay $180 for it, don't. If *no* one buys it at $180, MS will lower the price. But, since people buy it for $180, MS has no reason to reduce it's per unit profit. Once people stop buying it at $180, they'll lower the price to $150 and sell more.

Really, is this surprising to anyone? This is rudimentary business economics.

@EQC: Microsoft made it a proprietary connector for a reason- they wanted you to be able to pull the hard-drive off the 360 and put it on your friends 360 and not have to use any tools to do it with. Sure, most people KNOW how to remove a normal hdd, but do they WANT to remove it everytime, with screwdrivers and all?? Sometimes they don't even have screwdrivers in newer designed enclosures and whatever, but even then, the hard drive is bare and right there, made easier to tamper with. It would A-Make the Xbox a little bit easier to get into to hack (not saying it's hard),
B-Make the hard drive more fragile (not protected by any sort of case),
and C-less profitable for MS. Do you know how these manufacturers get their money back from losses on the consoles??? They sell slightly overpriced games and accessories, and I agree with that way of doing business. PS3 DOES have a removable drive, but do you think anyone goes to their friends house with their PS3 hard drive to play on their profiles??? No, and it's because Microsoft has made it easier for the average consumer to do just that. They have also made it much easier to upgrade your console- You want a 120GB drive, just plop that sucker on your 360 and transfer the files with the included cable from your old drive! Want a hard drive because you bought the core or arcade version of the xbox? Just buy the 20GB or 120GB and put it on your 360! I don't hear of anyone that does that with their PS3, and that's because the method of upgrade isn't as easy for the average person.

@EQC: That's funny because retailers profit next to nothing on console hardware - last I knew it was roughly 5%-7%; I highly doubt GameStop would be able to exist if it wasn't for game reselling.

@Rodime: Yeah, and? They sell the accessories (ie. HDD) and games at a profit to make up for the loss on the consoles. So his point still stands, that it should be no surprise that a for-profit company wants to make a profit.

Microsoft is definitely ripping us off when it comes to the 360. They buy cheap parts, put it all together and sell it to us for double the price!
Way too many people are having the unreadable disk problem, including myself!

I bought an arcade version at Target for the kids as that's all was in stock last minute. No drive, and still waiting for prices to drop....

So I'm paying more for an HDD loaded with a bunch of crap on it that I don't want and have to spend time deleting. Great deal!

I'd like a blank one for $75.

(Just went through this last week, paid $100 for a 20gb replacement when mine went bad)

@Boink: QOTD

Oops hit wrong button. Also yes the vertical chain gets expensive. I also figure the price is to help offset those initial launch hardware costs....

pyramid schemes in the video gaming industry? Blasphemy!

honestly, this is pure capitalism. There is no sin in making profit. If the market didnt like the price, they wouldnt sell enough to make that price justifiable. They are charging what the market will bare.

Oh great. Now I can't get the image of platters coming out of industrial oven out of my head.

Come on, Microsoft. PC hard drives have been under $1/GB for years. Throw us a bone here.

@Rodime: Yes, but accessories make up that loss.

While I do agree the price should come down somewhat, it's not about how much the actual drive costs.

It's about selling a specialty part to a specialty product. It always makes the items more expensive.

Sometimes I wonder how many people realize what it takes to make a console. You need an INSANE amount of cash to do it. I swear some people think that from the get go you just plop some parts in a plastic case and charge double.

The amount of R&D, licensing, and employee overhead is huge...and to fund that you need a massive warchest. And to get that massive warchest you have to sell things at large profits.

I think the reason why 80Gb PS3 costs $100 more than 40Gb is more related to backwards compatibility with PS2 games than drive capacity.

@makanai: Not strictly true, if no one buys at $180 then they will probably just discontinue selling the drive. No point selling it if no one buys it.

"Microsoft made it a proprietary connector for a reason- they wanted you to be able to pull the hard-drive off the 360 and put it on your friends 360 and not have to use any tools to do it with."

Best Microsoft Apologist comment ever.

They made it proprietary for one reason-to make money on it, and prevent people from going to Newegg to get a bigger drive without giving MS a cut. Just typical console business sense.

Making it easy to share with your friends? LOL.

Hard drives, shmard drives - that's only a 100 - 200% markup. Take a look at those PS2 memory cards - now THAT'S a healthy percentage markup.

@dbc:
dbc, exactly. The PS1 and PS2 memory cards were like printing money in those days.

Don't people buy these to spend more money on live? That would be the only reason I can see(other than their old one broke).
Why don't they break even to sell more and make more long term money on live?
Also, they already designed this for the Elite model so selling the larger drive after market is just gravy.
Also, there isn't much difference in price for the 20GB and 120GB drives as it's not even easy to find a 20GB 2.5" any more. Point, just stop selling the 20GB alone and drop the price of the 120GB.

@dremon21: economics much?

@Sam_Zebian: My Thinkpad has a screw-on latch. Open that up, and you can see the hard drive, enclosed in a (probably $1) plastic-and-very-thin-aluminum harness. It can be easily pulled out and replaced with another drive.

So, what stops Microsoft from doing something similar, and providing an inexpensive harness that doesn't interfere with the industry-standard connections, while still allowing the drive to be easily removable?

Greed.

I dont mind the $180 120g drives. Really. What pisses me off is the drive key encryption scheme they run to prevent you from swapping your own drive in the case. I mean really what was the point of that? If I want to take apart the enclosure and upgrade my own drive I should be able to.

The Wii has built in Wi Fi and Wireless Controllers since day one, both were optional on the xbox, The xbox Elite is 50 less Than the PS3 Top Line, but Offers No Blue Ray With A huge Failure Rate, I have A PS3 and I've upgraded The hard Drive Twice, First With A 320gb wd $150 And Later With A 200gb 7200 Hitachi for $170, Note This Does Not Void Your Warranty And Online Play is free, and you won't be banned for upgrading your hardware, Don't Get Me Wrong If Asus Does Make A 360 With Blue Ray I'll buy one, i planed on getting all three from the beginning but the build quality and price for what you get needs to improve first.

Yeah downloadable HD content is the future?....when we have tp pay that much for space to store it on, I'll put my money Blu-ray.

I bought one of these drives with my $50 HD-DVD gift card from Best Buy (dont' laugh).

The difference between the standard 20GB and 120GB is amazing. I've downloaded virtually ever demo and XBL demo and I still have gobs of space left.

Microsoft dropped the ball on the 360 as a Digital Download device, in my opinion. It's got a great marketplace for purchasing and downloading movies, but when you can buy a 250 GB drive to pop in a PS3 and still come out (before tax/shipping) $60 cheaper there's a bit of an issue. I realize that Microsoft has to pay a fair bit of money to set the hard drive up as it is currently, and I can even figure that they need to mark it up a bit so that they can turn a profit, but when it turns out that I could get more than double the storage on one platform for a lower price... Honestly though, I got my 360 to play games, it's sitting by the TV with it's 20 GB hard drive and it's happy. I got my PS3 as an basic all-in-one media center that happens to play some pretty spiffy games. In the future though, I can say that I'd be more inclined to download a movie from the Playstation Network than Xbox Live.

@mat360:

You're doing it wrong.

@Cake_Eater:

In case anyone's curious, this is the hard drive I was talking about:

[www.newegg.com]

even that why didnt they just comisioned directly to toshiba or someone else, totally, i mean WD gets their own casing softare, and packaging and after all that they still can offer a mybook with 500 gb for 100 bucks, so what is the diference from making an external drive to make a xbox drive??

(i mean both are made, isntalled software, cased and packaged, is there someting im missing???)

@matt360: Read before pressing the "submit" button.

Yes, Sony gives free online play but the experience is nowhere near as robust as on the 360. XBox Live is well worth the $4 a month.

Blu-Ray is single-speed reading and even with installs, framerates on some PS3 games are choppy.

You note that the Elite costs $50 less than the now-discontinued 80GB PS3 and then elaborate that you've spent another $320 on your PS3. What is your point there?

Both platforms have advantages and drawbacks.

-signed, a PS360 owner

@Sam_Zebian:

I would guess that people don't transfer more stuff on the ps3 because they don't know that they can use a common usb stick drive to do that.

It's really a lot easier since the PS3 doesn't lock your user profiles,game saves, into a drm scheme.

Its very stupid...
Actually to me everything about the xbox hardware is stupid (except the controller). Paying for xbox live is also absurd, but at least we can sometimes find it at a reasonably discounted price but never tried the PS3 one. Propriety wireless communication protocol (no bt headset) but headsets are almost a dime a dozen now and I will never use it to listen to the whining, propriety drives (when they can obviously profit from our downloading but I don't because of the 20gb limit), and worse of all the RRoD which I am beginning to believe every xbox owner will experience at least once.

But I still prefer the Xbox games and controller over the ones offered for the ps3.

This is new? Proprietary hardware for consoles is always going to be over priced. It still costs more to get an 8mb memory card for a ps2 than it does to buy a 2gb flash drive.

Personally, I find this to be ridiculous. Why can't console developers use a common standard that is accepted in the pc market? Consoles are basically pcs anyways.

wait a minute...
Are you trying to tell me that Microsoft is profiting from a product they sell? How out of character.

These iSupply articles are pointless. All businesses balance their product offerings with low (or even negative) margin products in order to gain market share, and high margin add ons designed to make the overall business profitable. Why is this a problem?

With Microsoft making little or no money on the 360, they have to recoup somewhere. Give away the razor and sell the blades, it's business 101.

It really matters less how much something costs to manufacture than it does how much it would cost you to make it yourself. Try making your own Coca Cola some day, I guarantee the raw materials will come out to much less that .75 a can.

Next up: iSupply breaks down the cost to manufacture a copy of Adobe CS3 (Hint: waaaay less than $1799.99!)

OMG!ponies!
PS3 games are Not choppy, at least not the ones I've played, dark sector, time shift, resistance, among others, And yes the elite is cheaper because they don't sell the $180 HD add on anymore, blue ray has always been a part of the PS3, like wifi and wireless controller's, yet with a years lead only a $50 Difference? as fore my upgrades, I like to tinker, and the 320gb drive is running in my Mac book, replacing the stock SATA drive it came with, because the Sony uses standard PC/MAC parts, that is my point, instead of trying to sell a 20gb proprietary drive on ebay, i upgraded something else, I owned a xbox long before i owned a PS3, when the xbox came out the warranty was only 90 days, if it red ringed after that you could go buy yourself another one,Thank god for Best Buy warranty, If asus makes one with blue ray as rumored, I will buy another one, I trust their build Quality and it will have more to offer including more than likely a larger hard drive and no red ring, and as for online play, there wasn't much of that going on during Xmas when the site was down for a month, so much for getting what you pay for.