Microsoft is losing up to $200 on every Xbox console it sells

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A close-up photo shows a white controller resting on a white Xbox console.

Image: Anthony McLaughlin (Shutterstock)

Video game consoles are very expensive pieces of computer hardware crammed into relatively small boxes and packed with expensive controllers. So it’s no surprise to hear that Microsoft doesn’t make money selling Xbox consoles. In fact, these days it loses up to $200 for every console sold.

Previously, Xbox boss and head of games at Microsoft, Phil Spencer, explained that the company could still increase the prices of “certain things”. but not during this holiday period. While many guessed he was talking about Game Pass or Xbox Live, it’s also possible that Microsoft will raise the price of its budget console, the next-gen Xbox Series S. It seems even more possible now that Spencer has confirmed that the company is losing money on every console. sold.

To a recent WSJ Tech Live eventas reported by CNBC, Spencer discussed how video games and the Xbox brand in particular are doing during the ongoing economic downturn. Rising prices and record inflation are put a pinch on a lot, because dollars don’t go as far as they used to. During the live event, Spencer confirmed that Microsoft loses around $100 to $200 each time it sells the $500 Xbox Series X or the smaller $300 Xbox Series S.

Spencer told the WSJ to interview that Microsoft expects customers to purchase accessories and games alongside subsidized consoles, which will help offset losses. Although Spencer didn’t say anything about the price increase on next-gen Xboxes, he let slip that he doesn’t think Microsoft will be able to keep game prices constant forever. We have already seen the rise of the $70 game since the launch of PS5 and Xbox Series X/S. Microsoft hasn’t released a $70 game yet, but it looks like future releases like red fall Where star field could take the leap.

Of course, selling consoles at a loss is not a new practice. Microsoft itself said in court in the Epic v. Apple case that it had never made a profit selling one of his Xbox consoles. Sony would also sold the PS3 with a loss of $240. The only real exception to all of this is Nintendo, as the company behind the Switch and Wii tends to make money off of its consoles. Even though Nintendo’s profit is only $6 per Wii, it’s much better than losing hundreds of dollars per unit sold. Meanwhile, Sony has increased the price of the PS5 in some parts of the world.

Correction 11/01/2022 6:25 PM ET: Updated language to better reflect Spencer’s comments on Xbox hardware manufacturing costs, and that the comments were made during a WSJ Tech Live event.

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