Author: Perez Clark
Microsoft Gaming CEO, Phil Spencer admits that Microsoft is making a loss of $100-$200 On every Xbox Series X and Xbox Series S sold. This announcement comes as Sony confirms that it no longer makes losses on the PS5.
Microsoft Loses Between $100-$200 On Every Xbox It Sells.
Phil Spencer, Microsoft Gaming CEO & business executive, acknowledged that Microsoft makes a considerable loss on every Xbox Series S and Series X bought.
Following IGN’s report, the Xbox boss admits that the loss on each Series console is between $100-$200, depending on the specific model. These numbers confirm that the Xbox Series S costs $399 to manufacture and sells for $299, while the Series X costs $699 to manufacture and sells for $499.
Losing $100-$200 per model is a fairly significant amount to be losing on every sale, which raises the question – why is Microsoft selling the Xbox Series at a loss?
Why Do They Sell Consoles At A Loss?
Selling consoles without profit isn’t a new phenomenon in the gaming industry. Gaming studios are selling newer-gen consoles at a loss only to turn a more significant profit through games and accessories purchases.
Spencer already explains that Microsoft reduces the Xbox consoles’ prices in hopes customers spend more money on its profitable add-on services. Losing that much on the first sale may be reasonable, considering the money made from headsets, games, and additional controllers.
The company’s other subscription services, like Game Pass and Xbox Live, generated $2.9 Bn and $1.2Bn in 2021.
Nowadays, most consoles, except for some Nintendo models, are significantly undervalued and sold at lower prices to take advantage of the more-profitable side of the game industry.
However, Microsoft’s attempt at using this revenue model with the current Xbox generation may be more complex because instead of buying gaming discs at their total prices, Xbox encourages its users to pay for its subscription service, Game Pass.
Spencer also revealed last week that the price of Xbox games, consoles, and Game Pass might rise after the holiday. Given his comments, we think it’s safe enough to conclude Microsoft is cutting prices to boost holiday sales numbers.
Sony is already raising PlayStation 5 prices globally, with the U.S being the only exception.
“Sooner or later, we’ll have no choice but to increase the prices of certain products, but we’ve considered our options, and going into the holiday with these prices is the best choice right now,” he said.
That’s not to mean Microsoft is actively planning to increase the price of its Series consoles, as Spencer mentioned in September that Microsoft does not intend to increase the cost of its products.
Conclusion
As you now know, selling consoles at a loss isn’t a strange practice in the gaming industry. Several game studios use this model to generate exciting figures from games, gear, and premium subscription services. Sony claims to have taken a $240 cut whenever it sells a Play Station 3, and Microsoft has even said in a court hearing that they’ve failed to turn a profit on every console released during the Epic Games Vs. Apple case.