Microsoft Not Profiting From Xbox One X, Biggest Threat Is Switch Not PS4

With all the hype surrounding the new Xbox One X console and its $500 price tag, people would be forgiven to think that Microsoft would be making a killing off of the product. It turns out that this isn’t a case since the company won’t be making any profit from the console at all. All the revenue will be coming from games and that’s only if adoption rate is good. Unfortunately, the Nintendo Switch might make that problematic.

Thanks to its considerable power and graphical capabilities, Microsoft is comfortable in pricing its new console as it did. In a recent interview with Business Insider, Xbox boss Phil Spencer admitted that the company stands to make no money out of the sales. On the other hand, he didn’t exactly say that the company was operating at a loss since the games would be the source of the revenue.

"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,” Spencer said. “The money-making part is in selling games."

On that note, Xbox might want to pay special attention to the Nintendo Switch since one analyst says that the portable console is its biggest threat, Forbes reports. At first glance, the two products might occupy a different niche in the video game industry, but DFC Intelligence analyst David Cole says otherwise.

"It's really targeting the people who already bought an an Xbox One or more likely a PS4, and who are ready to have a second system,” Cole said. “The issue I think is that overall, that's a fairly small market. And they are competing with the Nintendo Switch as an option of the second system. A lot of people who own the PS4 or Xbox One are going for the Switch because the Xbox One really plays the same games as the PS4."

In short, Xbox One X is competing with the Switch for the same target demographic, not the PS4 Pro.