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.
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 lost, 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 to freedom to the customers. Xbox consumers have the option to pick different tiers of Game Pass subscription or buy their games the traditional way.
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.
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