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- Microsoft does not make any profit from Xbox Series S|X sales.
- Each console is sold at around losses of $100-200.
- Xbox makes up for these losses through software sales.
- This could explain why Xbox is losing interest in the hardware market.
- Rumors suggest it wants to bring first-party titles to all platforms in an attempt to make more profits from software sales.
Xbox has been slowly gaining back market share in the console gaming industry. Much of this recent success can be attributed to the incredible gaming subscription, Xbox Game Pass. However, Microsoft has made a number of sacrifices to remain competitive with rival console brands.
The company is currently striving to provide cost-effective offerings, and a new statement reveals more information about this effort. According to CNBC, Phil Spencer has stated that Microsoft is subsidizing $100 to $200 per Xbox console.
This may be why recent rumors state Xbox is considering its options, possibly looking to quit the hardware market and bring various exclusives like Starfield to PlayStation consoles.
Both Xbox consoles are currently offering incredible hardware for their price points. The Xbox Series X costs $500, but it can offer a solid 4K gaming experience. As such, it makes sense that Microsoft is taking a loss on the hardware costs of the new consoles.
However, Phil Spencer also stated that Microsoft expects to cover the loss with accessories and digital sales. He said,
“Microsoft subsidizes the cost to the tune of $100 to $200 per console, with the expectation that it will make the money back on sales of accessories and storefront Purchases.”
Microsoft is also betting big on Xbox Game Pass. The company made over $2.9 billion from the subscription in 2021, and the service is expected to continue to grow further. With big titles like Starfield headed to the service next year, Game Pass could see its most successful year very soon.
However, Phil’s statement means that Microsoft is taking huge losses on the Xbox hardware. Recently, Phil Spencer has also hinted at potential price hikes, and this new figure only makes the price hikes seem more probable.
Sony has already increased PlayStation 5 prices in several regions. While consoles have always been sold at a loss, recent economic conditions have proved to be more challenging than ever. Microsoft has recently laid off a large number of employees in an attempt to deal with the changing economic situation.
Phil Spencer also mentioned that Microsoft provides a lot of freedom to the customers. Xbox consumers have the option to pick different tiers of the Game Pass subscription or buy their games the traditional way.
One solution to these losses may be Microsoft’s multiplatform approach. Through software sales on the PlayStation and Nintendo platforms, the Xbox ecosystem could expand further and maintain its current value.
As the generation continues to move forward, the hardware will likely become cheaper to produce and might even prove to be profitable. But, Microsoft is betting big on Xbox Game Pass and digital offerings for now, hoping to compensate for the loss on hardware costs.
Featured Image Credit: Padraig Treanor
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[Senior News Reporter]
Avinash is currently pursuing a Business degree in Australia. For more than 5 years, he has been working as a gaming journalist, utilizing his writing skills and love for gaming to report on the latest updates in the industry. Avinash loves to play action games like Devil May Cry and has also been mentioned on highly regarded websites, such as IGN, GamesRadar, GameRant, Dualshockers, CBR, and Gamespot.
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