According to Phil Spencer, chief executive officer of Microsoft’s games division, Microsoft faces a loss of up to $200 for every Xbox console it sells. A report from the CNBC website claims that Phil Spencer recently revealed that Microsoft must subsidize the development cost of each Xbox console by $100 to $200.
The content of this report mentioned that Phil Spencer added that Microsoft officially hopes to fill this gap through the sale of games and peripheral products, because it is known that the company can actually bring higher revenue performance in this part. However, the report did not detail the differences in cost subsidies between Microsoft’s Xbox Series X, Xbox Series S, and Xbox One consoles.
During the past period, many gamers have learned that this generation of game consoles often suffer losses in sales. However, it is truly the first time that a high-level executive of a game console publisher has personally disclosed detailed details of losses to players or provided a range of cost subsidies. Since CNBC did not directly quote Phil Spencer’s original words in this report, GameSpot’s website attempted to reach out to Microsoft in a follow-up interview, hoping to get more detailed information.
Just before Spencer revealed the news, he also confirmed that Microsoft’s Xbox Game Pass platform has indeed brought them benefits, but did not provide too detailed data on the performance of this platform. Additionally, the executive also recently hinted that its Xbox consoles, services, and other related expenses could see a wave of hikes after this year’s festival schedule. Prior to this, Microsoft’s competitor Sony had already announced that its PS5 console had increased costs due to supply chain and logistics costs, so it announced a price increase for the console, even though Microsoft at the era had stressed that it would not follow up , it seems that this probably not for long.
However, the loss of sales of the Xbox console is not unexpected, because selling the console at a loss and then making up for it with other sales has been a strategy adopted by Microsoft and Sony for several generations. According to court documents released in the case of Apple vs. Epic a few months ago, Microsoft revealed that it has never made a profit from selling the Xbox console itself, a strategy that dates back to the original Xbox console. As for Nintendo, it has become a rare case that they can make a profit just by selling the Nintendo Switch console.
Even though Microsoft is losing money on sales of the console itself, Xbox’s total first-quarter revenue over the past three months broke the company’s 20-year history record with the help of software and other services. Additionally, Spencer also said he understands that Xbox hasn’t launched a true console-exclusive masterpiece in a long time, but will have to wait until 2023 to see the launch of works like “Starry Sky” and “Blood Fall.”
