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The Xbox Series X/S consoles are not profitable yet for Microsoft, nearly two years since they entered the market. Moreover, the company's gaming chief Phil Spencer confirmed that, at its current pricing, Microsoft is selling them at a significant loss per unit.
Spencer appeared to discuss Microsoft's future plans in the gaming industry at the WSJ Tech Live last week (via TweakTown), where he also confirmed that the company is still not making any profit directly from selling the Xbox Series X/S consoles. "When somebody goes and they buy an Xbox at their local retailer, we're subsidizing that purchase somewhere between $100 and $200 dollars," Spencer said.
The statement provides an insight into how much it costs Microsoft to produce every unit of Xbox Series X/S consoles. Currently, the Xbox Series X and Xbox Series S are priced at $499 and $299, respectively.
Spencer noted, however, that Microsoft has ways to recoup its Xbox Series X/S investments through the sales of Xbox accessories, as well as in games and digital goods sold through the Microsoft Store. Microsoft said the same thing after Xbox corporate VP Lori Wright said during her testimony at the Epic v. Apple trial last year that the company has never made a profit from selling Xbox consoles.
The company later clarified that it did not mean Microsoft is losing money from its gaming business. A spokesperson later told The Verge that such a business model is common in selling gaming consoles. "Game companies sell consoles at a loss to attract new customers. Profits are generated in-game sales and online service subscriptions," the company said at the time.
Similar to tech companies with digital stores, Microsoft also takes a commission from game sales made through the Microsoft Store. It means Microsoft has a pay cut when millions of Xbox console users purchase digital games through its first-party store. As gamers know, aside from consoles, the company also has a stable revenue stream from Xbox and PC Game Pass subscriptions.
While Microsoft has maintained that it is not losing money from its Xbox products and services, it does not dismiss the chance of increasing the Xbox Series X/S prices. Spencer said in the same event keeping the same console prices for good might be implausible, although he also implied that price hikes are unlikely to happen anytime soon -- at least not this holiday.
Photo by Billy Freeman on Unsplash
