I have no idea why people are downvoting this, as it's pretty accurate. If anything it understates the difficulty. The original Xbox cost tons to develop, and Microsoft spent a lot more money getting games for the thing. In the process they created the canonical example of a console first-person shooter, the genre that now dominates game sales. (You could argue that Goldeneye and Perfect Dark on the N64 got there first, but Halo is the one that really moved the market to where it is now.) Then on top of that, they created Xbox Live, which has had at least as much impact on how we play games as Halo did. And you're absolutely right that they lost money in the process. So yeah, dumping an insane amount of money into creating two products that revolutionized the game industry and not recouping that investment until the the second-generation product launched is how they did it.