Microsoft has never made a profit from Xbox console sales

Microsoft has never made a profit from Xbox console sales

The Epic Games vs. Apple court case has revealed another nugget of information: the fact that Microsoft has never made a penny from Xbox hardware.

The ongoing Epic Games vs. Apple legal battle has revealed more information companies would’ve rather kept secret, this time revealing that Microsoft has never made a profit on its console hardware.

Although it was assumed that Xbox consoles became profitable towards the end of their life, after hardware revisions and manufacturing techniques were fine-tuned, according to Microsoft that’s not the case.

During the court case, Xbox head of business development Lori Wright, was asked how much margin Microsoft makes on its consoles and she revealed, ‘We don’t. We sell the consoles at a loss.’

Wright was then asked if Microsoft had ever made a profit on an Xbox device and she answered simply, ‘No’.

Although both Sony and Microsoft (but very much not Nintendo) initially sell their consoles at a loss, because most of their money is made from software and services, it was thought they eventually turn a profit after a few years.

Apparently that’s not the case for Microsoft though, which has surprised many analysts, with Niko Partners’ Daniel Ahmad going into considerable detail on the issue on Twitter.

He states that the PlayStation 5 and Xbox Series X are both currently being sold at a loss but will ‘likely’ become profitable in the future.

Apart from Nintendo consoles, the only major exception to this rule is the PlayStation 4, which never needed to lower its price and was profitable.

Although the complete lack of profits on hardware is surprising, from the start Microsoft’s goal with Xbox was to prevent other companies, specifically Sony, from gaining control of the living room.

On that count it has succeeded and while Game Pass is likely to be running at a loss at the moment, while Microsoft promote it as the killer app for the Xbox Series X/S, in general Xbox services and subscriptions do make money.

This isn’t too unusual for the console space

The console is sold at a loss initially & usually for some time after

The platform holder recoups the investment in hardware via its own first party game sales + services + the cut it takes from third parties that sell games / DLC https://t.co/j1wDjoRac9

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