Microsoft Says It Has Never Made a Profit on Xbox Hardware Sales
According to Microsoft, it has never turned a profit selling console hardware. While this isn’t entirely surprising — consoles have long been known to launch as loss leaders, more often than not — the company has never confirmed that its console hardware sales aren’t profitable in a court of law.
During questioning related to the ongoing Epic versus Apple case, Microsoft VP of Xbox business development Lori Wright was asked whether Microsoft had ever made a profit on the sale of Xbox hardware at any point. Her answer was straightforward:
“Has Microsoft ever earned a profit on the sale of an Xbox console?” lawyer asks.
“No,” Wright says.
— Adi Robertson (@thedextriarchy) May 5, 2021
Microsoft continues to sell consoles, Wright explained, because it earns the company revenue on software sales and subscriptions long-term. We’ve talked about Microsoft’s Xbox revenue mostly in terms of Game Pass lately, but long before it offered Game Pass it had methods of earning revenue off console players, including Xbox Live subscriptions, game sales, and the revenue it earns off various console accessories. It does not, however, make money on actual console hardware.
This matches what we’ve heard at various points. Microsoft lost money on the Xbox 360 launch, though the company still came out ahead of Sony early in the PS3’s life cycle. If the Xbox 360 lost money on launch day, the PS3 hemorrhaged it. Microsoft wound up fielding a weaker console compared with Sony back in 2013 because it had to charge an extra $100 for the dead weight of Kinect. In the years since Microsoft has proven willing to break even on console sales — neither the Xbox One X and Xbox Series X turned a launch-day profit — but it hasn’t wanted to eat a net loss on every unit.
There may be a certain amount of Hollywood accounting when Microsoft reports losses. Previous reports showed Microsoft hid huge losses by papering over them with Android royalties. Every single Xbox has always counted as a Windows license and Microsoft once paid itself a licensing fee every time it sold an Xbox. Presumably, it still does.
A quick check of eBay suggests the Xbox Series X is down to $650 to $800, while the PlayStation 5 looks to be more in the $700 to $900 range. That’s a terrible deal for either unless we consider the GPU market. Compared with what a PC GPU typically costs, $650 for an Xbox Series X is fabulous and $800 for an XSX or PS5 still isn’t bad. Not nearly as bad as it ought to be, at least.