Although some would agree with the sweatshop angle, I think this is a good case for “bait and hook”. Printer companies have been doing this for years; Buy a decent printer for $25.00 and now you will spend $32.00 every time you have to buy new ink for it. A billion dollar industry for the likes of HP and Canon. This is not even taking into account specialty printing paper.
So why not for the Xbox? As long as MS is waiting in the wings with a bevy of great game titles, they can sell the box for less than cost and they’ll still make out just fine It’s an investment for them. Now if they could only get some good press.