Microsoft Won’t Make a Profit Selling Xbox One X

Posted on June 15, 2017 by Paul Thurrott in Xbox One with 47 Comments

Microsoft Won't Make a Profit Selling Xbox One X

Microsoft has never made a profit selling Xbox consoles. And it looks like the Xbox One X won’t be an exception to that rule.

As you may recall, Microsoft priced the Xbox One X at $500, or about $100 more than its only real competitor, the Sony PlayStation 4 Pro. This price point is controversial in some circles, mostly because people don’t understand how much it costs to design and build hardware this powerful. But as I noted earlier this week, the $500 price point is a reasonable, if premium, price tag for a device this capable.

So this week, Business Insider asked Microsoft’s Phil Spencer if the firm would make a profit selling the Xbox One X at $500. This is a curious question, in a way, because console hardware is always sold at a loss initially. (And in Microsoft’s case, it never actually turns a profit on Xbox consoles, despite rounds of cost reductions in each generation.)

But Spencer spoke plainly, which is one of the things I like about him and the Xbox team these days.

“No.”

So that sounds clear enough. But then the publication pressed him to clarify, asking is Microsoft was “taking a loss.”

“I didn’t answer it that way,” he responded. Probably irritated. “I don’t want to get into all the numbers, but in aggregate, you should think about the hardware part of the console business is not the money-making part of the business. The money-making part is in selling games.”

Put simply, the Xbox One X is full of expensive components, which makes sense, since it is the most powerful video game console ever made. Will the price of those components come down over time? Of course. But then it’s reasonable to expect that Microsoft will likewise lower the cost of the Xbox One X for consumers in order to open it up to a wider audience.

In other words, Microsoft will never turn a profit on the Xbox One X hardware. Because they never do.

New technology is expensive. Fortunately, we also have options, and if you don’t want to live on the bleeding edge today, or simply can’t afford the price, you can always turn to the incredibly affordable Xbox One S. Obviously.

 

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