Microsoft confirms it's never turned a profit on sale of Xbox consoles (2024)

FAQs

Microsoft confirms it's never turned a profit on sale of Xbox consoles? ›

In response to a question from Epic lawyer Wes Earnhardt asking "how much margin" Microsoft earns on the sale of Xbox consoles, Wright said: "We don't. We sell the consoles at a loss". Asked if Microsoft has ever earned a profit on the sale of an Xbox console, Wright replied: "no" (via Protocol).

Ultimately, Microsoft lost an accumulative total of $4 billion from the Xbox, only managing to turn a profit at the end of 2004.

In 2022, Microsoft's Xbox consoles 360, One and X's gaming hardware revenue amounted to 4 billion U.S. dollars. The latest Xbox Series X and S were released in November 2020 and are expected to boost sales in the following years.

In other words, Microsoft does not make money from selling Xbox consoles, and the hardware actually only plays a role in the company's long-term software and services strategy.

Microsoft is neither exiting the console market nor taking all its games multiplatform, as whipped-up rumour mongers had wildly speculated. And the (excellent value) Xbox Game Pass subscription service is remaining exclusive to Xbox and PC. This is, essentially, non-news.

An Epic lawyer asked Microsoft's vice president of Xbox business development, Lori Wright, about what profit margins the company has on its sales of console units. "We don't -- we sell the consoles at a loss," she replied, before confirming that Microsoft has never earned a profit on console sales.

Inflationary pressures and global economic factors have driven up the cost of materials and labor, squeezing Sony's profit margins on each PS5 unit sold. This, coupled with the supply constraints, forced the company to adjust its sales targets to reflect a more realistic, achievable level.

The PlayStation 5 is currently ahead by 25.42 million units. The PlayStation 5 has sold 52.65 million units in 38 months, while the Xbox Series X|S sold 27.23 million units. The PlayStation 5 has a 65.9 percent marketshare (+4.8% year-over-year), compared to 34.1 percent for the Xbox Series X|S (-4.8% year-over-year).

Gaming is now Microsoft's third largest business, bigger than Windows. Microsoft made $62 billion in Q2 2024 (fiscal). Gaming contributed $7.11 billion, more than the $5.26 billion from Windows theverge.com/2024/1/30/2405…

Sony has sold 50 million PlayStation 5 consoles in little over three years since its launch in November 2020. This year's November was the biggest for the PlayStation 5, the company said in the press release.

Does Xbox make money selling consoles? ›

Consoles have historically been sold for less than they actually cost to produce and distribute. Sony sold the PS4 at a loss, for example, and during its comments amid the Epic vs Apple lawsuit, Microsoft admitted it has never profited from the sale of any Xbox console.

Microsoft sells each Xbox One for $499 after spending $471 to build it, according to a peek inside Microsoft's new gaming console by research firm IHS, as shared with AllThingsD. The cost to build an Xbox One is $90 more than the $381 Sony spends on its PlayStation 4, which costs consumers $399.

The analysts Ampere estimated that in 2023 there were a total of around 46.5m consoles sold, of which only 7.6m were Microsoft's Xbox. That leaves nearly 39 million gamers that Xbox exclusives such as the long awaited Starfield from Bethesda, didn't reach.

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Xbox consoles undersold in 2023, but software and content sales remain strong, fueled by major acquisitions like ZeniMax and Activision Blizzard. Despite declining hardware sales, Xbox Game Pass continues to grow and is a consistent element of the Xbox brand, contributing to positive overall revenue projections.

While Sony is still way out in the lead on sales, the Xbox is only a failure in the sense that it's in a distant third place in the console market.

The original Xbox was released on November 15, 2001, in North America, February 22, 2002, in Japan, and March 14, 2002, in Australia and Europe. It was Microsoft's first foray into the gaming console market.

Xbox offered superior technological features (as compared with its competitors), but it initially lacked some of the software licensing benefits available to rivals Nintendo and Sony. Xbox Live, the Xbox's online gaming network, debuted in 2002 and allowed players to compete against one another over the Internet.

The Xbox was the first console to offer backward compatibility, which meant that players could play games from the previous generation of consoles. This was a major selling point for the Xbox, as it allowed players to keep their old games and n.

The Xbox games business is also profitable and is not operating at a loss. Records indicate that Microsoft's games division made $15.56 billion revenues in 2022, driven primarily by content and services, which includes full game sales, monetization, and subscriptions like Xbox Game Pass.