One of our interns found a sweet deal for a new 120GB HDD for the Xbox 360: $60. Sure, the website seemed a bit shady, and it shipped from Hong Kong, but $60 was a damn good price. So I ordered one.

A few weeks later, I get what appears to be a legit Microsoft Xbox 360 HDD. It comes in a distinctly non-legit box, but everything else looks OK. The problem? It's just the HDD, meaning I can't transfer anything over.

So, of course, I order a transfer cable from eBay. Only $10 this time, yet again from Hong Kong. This time, it doesn't come with the necessary disc to make the transfer.

So now I have a choice: either download an ISO of the transfer disc from any number of shady torrent sites, risking my computer and my Xbox in the process, or eat the $70 I've spent and just buy a legit HDD. At this point, I'm not even sure I trust the HDD I bought to work.

Is this a huge problem? No. Am I whining about something that I should have avoided by doing even a little bit of research first? Yes. Am I still annoyed and frustrated with this? Yes. So let this be a lesson to you: if you think you can outsmart Microsoft into paying less than their obscene HDD prices, you may be wrong.

With the Elite looking to get a $100 price cut, you'll be able to purchase a 120GB Xbox 360 console for $299. Yet the retail price on the 360's 120GB drive is still more than half that ($160).

Even though most retailers shave the price down to about $135, the idea that we should be paying anything approaching a dollar per gig is ludicrous.

Both Sony and Nintendo—two companies not necessarily renown for open hardware platforms—have both addressed and solved the issue of rapidly dropping storage prices on their current consoles by handing the reins to their users. The Wii has always been equipped with an SD slot that now even accepts stock 32GB SDHC cards—normal, consumer-grade tech that you can price-compare anywhere. And the PS3 has supported users who wanted to install their own hard drives (or even Linux!) since day freaking one.

Yet Microsoft, who has put forth so much effort in securing deals like Netflix and offering us a New Xbox Experience, is stuck in a proprietary hard drive pricing pattern so old that it probably doesn't know women can vote, Man's walked on the moon or we have 0-calorie sweeteners.

I know what you're thinking: Microsoft charges a lot for their drive because it's some special, expensive to produce tech. It's not. Inside that plastic shell is a stock, boring-as-hell 2.5-inch laptop drive. And you can find such a drive with 500GB of storage for $90 right now.

Keep in mind that Microsoft is buying in bulk.

Oh, and then there's the point that Microsoft is really, really, really, really stupid for not just subsidizing hard drives to begin with. How many of us with 20GB HDDs have gone to download demos only to find our drives full? How many of us are daunted by DLC because we know an extra few maps will necessitate deleting content? And while I know Microsoft doesn't take the 360's video store seriously, how could they ever expect any of us to have the free space to download I Love You Man?

But everything I listed above—that's not the worst of it. It's one final kick in the nuts that Microsoft has sent to those of us willing to do some modding ourselves that rubs me the wrong way.

While I could just pop open my 360 hard drive case and toss in a new drive myself (of course, I get to feel like a criminal while doing so as the process requires a separate PC and various unauthorized firmware files), Microsoft has limited the 360 to only supporting hard drives in their designated 20GB, 60GB and 120GB sizes.

So in other words, even though I can technically go through the trouble of installing a sweet, 500GB of storage capable of holding my entire game collection, Microsoft has taken the time specifically to thwart me in that endeavor. Doing my own installation is no longer a treat, like sticking a turbocharger on an engine. Instead it becomes a home repair I do myself to save a few bucks, like negotiating a new drain line to my dishwasher.

I never thought I'd see a day when Microsoft was more willing to give away software than hardware. But in a great irony, their latest dashboard update is once again free. The dinky hard drive to store it on? That'll still cost ya...more than even a new copy of Windows 7 Home Premium.

With the introduction of the 60GB Pro console in July, we have research that suggests it is very important to have a 60GB stand alone Hard Drive to go along with it to allow the consumer a full range of choices and values. In late October/early November (exact date TBD but most likely last week in October or 1st week in November), we will ship the Xbox 360 60GB Hard Drive, tentatively called the “Xbox 360 60GB LIVE Starter Pack”. This will be an excellent value price at and ERP of $99.99 with an 18% retail margin that contains:

· 60GB Hard Drive

· 3 Months of Xbox Live

· Xbox 360 Wired Headset

· Xbox 360 Ethernet Cable (same one that is included with Pro and Elite)

Positioning: For Xbox 360 Arcade and Core console owners, the Xbox 360 60GB Live Starter Pack offers all of the components to get onto Xbox LIVE and jump in to on line multiplayer gaming and Marketplace content downloads at an incredible value.

With the end of life of the 20GB Hard Drive and the price drop of the 120GB Hard Drive to $149.99 in September, this new 60GB hard drive will fit very well into our “Choice and Value” pillar and will fit nicely into our accessory line up. Exact SKU/UPC/Set up info will come soon and once we nail down the exact MSD, I will let you all know immediately.

[Xbox Family via Xbox 360 Fanboy]

Their supply chain break down goes along three steps. After a hard drive rolls out of the oven at either Seagate or Toshiba, it's preloaded with software and OS stuff (like Xbox Live). Next, it goes out to a Value Added Reseller, who buys the drives for about $75 a pop, and then slaps them inside the Xbox 360 compatible casing and pretties 'em up. They also do the retail packaging. This costs them about $5. They turn around and hit Microsoft up for $100 each. So Microsoft probably pulls about $80 of profit out of each one (though Amazon's got them on sale for $150 right now).

While that's a hell of a margin, it's actually less than I figured, because I didn't expect Microsoft to eat $100 on a drive a consumer would pay $45 $70 for, even with the little bits of plastic and software tacked on. Granted, these are all just estimates by iSuppli, so it's possible they're paying less and are reaping in totally obscene profits on each drive sold, but I actually don't relish assuming the worst all the time. [Multiplayer via Kotaku]