Microsoft is losing $100 and $200 in Xbox Series X/S console sales

Microsoft is losing $100 and $200 in Xbox Series XS console sales, GamersRD

One of the mysteries that Microsoft has always had is the public presentation of the sales numbers for Xbox consoles. Unlike Nintendo, which has always sold Switch at a profit, and Sony, which recently turned a profit on PS5, Microsoft sells its Xbox Series consoles at a loss.

In a recent interview with the Wall Street Journal, Phil Spencer said that Xbox Series consoles are selling at a loss of $100 to $200. Microsoft sells hardware at a loss on the assumption that it can break even through games, monetization, subscriptions, and accessories. Given the retail MSRP of these consoles, Spencer’s figures indicate that the Xbox Series S could cost up to $399 to produce, and the Xbox Series X could cost $599 – $699 to produce, manufacture, and ship.

Consoles as a business model, one, as I said, the overall reach of consoles is small relative to where people play. Consoles evolved into a very different business model than phones where consoles are sold at a loss in the market“.

When someone goes and buys an Xbox at their local retailer, we’re subsidizing that purchase between $100 and $200 in the expectation that we’ll recoup that investment over time through accessory sales and the store.“. By charging third-party developers and publishers a 30% commission, Microsoft is able to generate a return on its hardware losses. In the past, Microsoft has also said it has never sold an Xbox console at a profit.

What’s interesting is that Microsoft still makes billions on the hardware every year. In fiscal year 2022, Microsoft made $3.7 billion from hardware… but that doesn’t equate to profitability.

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Reference-gamersrd.com