Consoles have a history of selling at a loss, and while it is an unspoken understanding of sorts in the industry, save for a few special cases, these consoles will always make back the loss through software sales and services.
The statement rings true for Microsoft and Xbox consoles, as they’ve been the latest company that’s been put in the spotlight in the ongoing Apple vs Epic trial. Via Protocol, Xbox Business Development VP Lori Wright was questioned about how much Microsoft earns from console sales and answered with “We don’t. We sell the consoles at a loss.” In fact, Wright confirmed that Microsoft has never earned a profit from the sale of an Xbox device.
Wright continued to say that the Xbox business model aims to sell hardware at a loss but to subsidize it with game sales and subscription services like Game Pass, which has been their big push coming into the Series S and Series X.
It would be a safe statement to say that this is the same situation with Sony as well, but it was quite something to hear it from an executive in the industry saying it out in the open.
Industry analyst Daniel Ahmad has also confirmed this statement, saying that both next-gen consoles are being sold at a loss right now, but also mentioned that the PS4 was quite an example of a console that was profitable in the long run when it was brought down to a $299 price point. The Nintendo Switch on the other hand was profitable since its launch.
Microsoft (and the latest Xbox consoles) has been doing very well as of late, and have started the console generation very strong, thanks to the addition of initiatives like FPS boost and the incredible value that Game Pass provides players. It stands to reason that this may be their best outing in years, and if the trend continues, will only get better in the coming years.