See my previous post. Basically # of total Xbox owners is not a linear function of profitability, on a per-user basis.
My theory hinges on the idea that connected customers pay so much more in a given time span than unconnected customers, that they've decided this is worth "losing" the unconnected customers, to guarantee a fully-connected userbase.
Think of what it means
just in advertising revenue alone, for MS to claim "we have X million 720 users, and every single one of them will see your ad".
Then add the potential for upsell, the anti-piracy, etc.