But the system itself is creating a small profit.
But it isn't. Now I'll admit I don't have an accounting degree, but to me, if the amount of money you receive is less than the amount of money it costs to produce it, that's not a profit. I'm already leaving out all the other "stupid amounts" you refer to. I'm simply talking about the amount of money which Microsoft actually receive on a console. You can't seriously be telling me that you think Microsoft receive the full retail price every time a console is sold?