Xbox consoles sold at a loss, says MicrosoftMay 7, 2021
With the Epic and Apple legal battle still raging, Wright testified as a third-party witness, giving insight into the video game industry, according to Protocol. Wright was asked several questions by Epic’s lawyer Wes Earnhardt regarding Microsoft’s business model for the Xbox ecosystem and if the company made a profit from Xbox hardware sales. “How much margin does Microsoft earn on the sale on the Xbox consoles?” Earnhardt asked.
“We don’t. We sell the consoles at a loss,” Wright replied. The Xbox exec explained how Microsoft sells Xbox hardware at a loss and subsidises it with the sales of video games and subscription services such as Xbox Game Pass.
“Just to be clear, does Microsoft ever earn a profit on the sale of an Xbox console?” Earnhardt then asked. Wright simply replied, “No,” according to IGN.
Niko Partners senior analyst Daniel Ahmad notes that video game hardware is usually sold at a loss and for a while after, before pointing out outliers such as the Nintendo Switch and the PS4. Ahmad says that both the PS5 and Series X|S are being sold at a loss right now but “will become profitable down the line most likely,” before echoing Wright’s comments saying “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.”