Despite a year-over-year dip in both revenues (14%) and net income (18%) for the company as a whole, Microsoft's Entertainment and Devices Division – which houses the Xbox, Games for Windows, and Zune brands, amongst others – nearly doubled its operating income in the period ending September 30, thanks to "decreased Xbox 360 platform costs," meaning console production costs.

The company reports that "EDD revenue was flat with growth in Xbox 360 platform and PC game revenue offset by decreased revenue from the non-gaming portion of the business" (think: Zune, Windows Mobile). Even with "decreased revenue per console resulting from price reductions during the past 12 months," Xbox 360 platform and PC game revenue increased by 8% "due mainly to increased revenue from Xbox Live and Xbox 360 video games." While the 2.1 million Xbox consoles shipped for the quarter just misses the 2.2 million mark from last year, those reduced production costs help.

With the Xbox sharing top billing with Microsoft's flagship money maker, Windows, on the earnings announcement – both "exceed[ing] expectations due to strong consumer demand" – it seems that Microsoft finally has a consistent hit on its hands. Now, let's talk about accessory pricing ...