Although a general understanding of how the console market works, platform holders front the bill for its hardware whilst software is where profits generate revenue. For Microsoft however, it never turned a profit. Most of Nintendo and even the PlayStation 4 turned a profit, but it was revealed in 2021 that the hardware was never profitable. Instead, services & subscriptions is told to be the main contender for gross profit according to a spokesperson.

Now looking at Xbox Game Pass, the service is told to be profitable said Xbox head Phil Spencer. When glancing at the current state of the market and the overall economy, price increases are almost inevitable for many products. And Xbox is no exception. But, Spencer in a previous statement told that not to be the case. Howbeit, it appears that only applied for this coming holiday.

On the topic of profitability of Xbox, Spencer when speaking during the Wall Street Journal TechLive event last week, he shared that Xbox consoles are up to a $200 loss for Microsoft, Eurogamer transcribes.

Consoles as a business model, in the overall scope of gaming, is fairly small relative to the places people play. Consoles evolved to a business model much different from phones where consoles are actually sold at a loss in the market. So when somebody goes and they buy an Xbox at their local retailer we’re subsidizing that purchase somewhere between a hundred and two hundred dollars, with the expectation that we will recoup that investment over time through accessory sales and storefront.

From Spencer’s comment, it shows he views this as a minor retainer in a larger scope for where the industry is heading. Previously, Spencer has expressed continued interest in evolving Microsoft’s focus towards mobile gaming. He even acknowledged the main desire from the Activision Blizzard deal to be for its established standing on the mobile market.

And while Microsoft is pushing hardware currently, it is questioned how much they can continue doing this with more criticisms rising against its two SKU business model. In a string of comments towards the Xbox Series S, it appears more and more developers are growing against the entry-level system. You can read the full report by heading here.

Are you surprised by the loss Microsoft takes per console?

Source: Eurogamer