Rectify Gaming

Apple v. Epic Games Case Reveals Xbox Never Turning A Profit Per Console, But Microsoft Reiterates Subscriptions Is Its Moneymaker

Posted on May 6, 2021 by Nick Moreno

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In the past few days, many online should be aware of the ongoing trial between Fornite publisher Epic Games and App Store company Apple. It is no secret that the two firms butt heads on how the handling of mobile storefronts should be managed for the video game market, but, the juicier part of the case is the information that gets discovered when investigating actions against each party.

Earlier in the week, it was revealed that Sony Interactive Entertainment while allowing cross-play on its platform after a hardheaded campaign against bridging systems charged publishers a royalty for the feature on certain games. But, incite on Microsoft was also spared as well. In that, an email between Xbox head Phil Spencer and Epic Games CEO Tim Sweeney offers that the Xbox company is still targeting more platforms for xCloud to support.

The most intriguing of the discussion during the ongoing testimony happens to be the profitability of Xbox. Organically in the console market, hardware mostly sells at a loss, however, other attributes are to pay for profitability; such as software or services. For Xbox, the firm asserted “no”, IGN transcribes.

Xbox Vice President Lori Wirght during the trial went on to elaborate that Microsoft’s ambition is meet an “an end-to-end gaming experience.” Howbeit, given the absence of profit on consoles sold in return for Microsoft, Wright adds hardware “critical to us delivering that gaming experience.”

Most interesting is the follow-up from Microsoft that a spokesperson explained to The Verge. In the statement to the outlet, the Xbox company reiterates on services and online subscriptions being the stronger of the pair for the platform’s profits.

The gaming business is a profitable and high-growth business for Microsoft. The console gaming business is traditionally a hardware subsidy model. Game companies sell consoles at a loss to attract new customers. Profits are generated in game sales and online service subscriptions.

Elsewhere in the trial, as per Niko Partner’s analyst David Ahmad, he injects the success for Microsoft on its digital capital. On Twitter, he discloses that Microsoft tailored roughly $1 billion in profits from services in 2019 alone.

Currently, hardware revenue is reported to be up nearly three times the previous financial quarter according to Microsoft’s FY21 Q3 earnings call. In January, it was recorded about 80 percent increase in revenue. Now, hardware revenue is said to be a 232 percent increase. You can read the full report by heading here.

What are your thoughts on Microsoft’s profitability for its consoles?

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