When we think of Microsoft and Xbox within the confines of gaming, we think of a console that has remained competitive with the biggest names around. Microsoft have managed to sell millions of their consoles down the years, housed a number of amazing exclusive titles and given gamers some truly unique moments to savour and treasure forever. So with this in mind, it will likely come as a shock to you that Microsoft have reportedly never turned a profit on a single Xbox console they have ever sold.
Apple vs. Epic Games
In the ongoing Apple vs Epic trial, news surfaced that Microsoft as a company have always sold their Xbox consoles at a loss to their consumers. This came to light during the trial when Microsoft’s Vice President, Lori Wright was asked to detail the profit margins linked to console units for the company.
While many would be tempted to believe that this only relates to the most recent Xbox Series X/S following the news that Sony have been selling Playstation 5 units at a loss. However, it seems that the company have actually been selling consoles at a loss ever since the original Xbox released way back in 2001.
Attracting A New Generation of Gamers
According to a recent statement from Microsoft, this business model is hardly a surprising one. Microsoft see this approach as a means of attracting new customers to their community and ensuring profits through sales of games and other commodities. It is essentially a means to an end. They had this to say in their official statement:
With more than 23 game studios creating games, more than 100 million monthly active Xbox players, and more than 18 million Xbox Game Pass Subscribers across console, mobile, and PC, the gaming business is a profitable and high-growth business for Microsoft,
The console gaming business is traditionally a hardware subsidy model. Game companies sell consoles at a loss to attract new customers. Profits are generated in game sales and online service subscriptions.
Xbox has always seen more value in their services such as Cloud gaming and Xbox Game Pass rather than their hardware. This is the companies USP and the news that has come out of this trial all but confirms how much stock Microsoft place in their additional services. Plus, with the addition of several high-end third parties to their roster including the like of Bethesda Softworks, we reckon they will recoup these losses via game sales. In hindsight, it may not be that shocking but it certainly is interesting.
So that’s our news of the recent Microsoft news brought to light in the Apple vs Epic trial. What do you make of the news? Do you think that Xbox’s business model is smart? Or do you think that Microsoft are foolish for selling their hardware at low prices? Let us know in the comments section below and as always, thanks for reading.