More on Xbox 360 pricing, compatibility revealed

Analysts are predicting that Microsoft's Xbox 360 will be introduced with a $299 price tag—$76 less than what each console is expected to actually cost. Selling a console for less than it costs to build won't be new for Microsoft, though. The original Xbox was sold at a loss, with Microsoft relying on higher margins from game and accessory sales, and even Xbox Live subscriptions to help offset the cost of the console.

In related news, more details are emerging on the Xbox 360's backwards compatibility:

Apparently, for Xbox games that are written in a single layer (which MS management believes to be most of the Xbox library) the emulation should be pretty smooth. The smaller percentage of Xbox titles that are written in multiple layers will require "patches" (separate emulation programs) in order to work. Pachter says that Microsoft currently plans to sell the 360 with these patches already pre-loaded on the included 20GB hard drive.
NVIDIA, which is currently finalizing the PlayStation 3's graphics chip, will apparently be paid a "small royalty" for allowing the Xbox 360 to emulate the original Xbox's hardware.
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