If Microsoft didn't make a profit from the original XBOX, why did they make the 360?

Because gaming is a billion dollar industry now and Microsoft wants a piece of that market. They wanted the jump on Sony because Ninetendo wasn't really a factor in the last generation, and PS2 dominated everything. Like sony said in the beginning, its an Xbox 1.5. There online community is the only thing keeping them on top right now, but that will soon change...