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A $500 million gamble

Time: 08:13 EST/13:13 GMT | News Source: CNET | Posted By: Byron Hinson

For Microsoft, the video game market is a pay-to-play affair. Consumers who plunk down $299 for Microsoft's new Xbox game console, a system that will compete against Sony's PlayStation 2 and Nintendo's GameCube, will get their hardware at a discount. Like other console makers, Microsoft is subsidizing the cost of the console and hoping to recover its expenses through sales of game software and the decreasing cost of components over time. While other game makers also subsidize console purchases, the strategy isn't without risk. Former Dreamcast maker Sega scrapped its console business because it was no longer willing to cover losses associated with hardware production.

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