In a talk on Wall Street Journal Live, Xbox boss Phil Spencer said the company sells its consoles at a loss.
Gaming is a priority sector for Microsoft. The company invests an astronomical amount of money each year in the development of the Xbox branch to consolidate and expand its market. The results are there, at the cost of some strategic sacrifices, and in particular by the loss of money on each console sale Xbox Series S et X.
A daring strategy
This isn’t news to anyone, but Microsoft, and by extension Xbox, has never really banked on its consoles to make money. This strategy can be seen even more today with the efforts made around Game Pass, the brand’s subscription service. At the microphone of the Wall Street Journal Phil Spencer, whose remarks were relayed by CNBCalso indicates that, for the purchase of an Xbox Series X at $499 or a Series S at $299, Xbox would lose between $100 and $200.
This loss is controlled, since the boss of Microsoft’s video game division tempers by saying that the brand intends to make up for this money through purchases of accessories and on the online console store. We can count in this the subscriptions to the Game Pass, which increased by 159% between 2021 and 2022. Game Pass revenues reach, again according to Spencer during his conference, 15% of Xbox gaming revenues, with between 25 and 30 million subscribers.
Note also that, according to half-year results of the brand, gaming revenues increased by 4% compared to last year, and those of hardware (consoles, accessories) by 19% if we take into account the current exchange rate. In contrast, the prices of subscriptions and equipment could increase as early as next year.
Xbox is just a medium
For Xbox, the console is ultimately just a medium like any other that gives access to the real offers put forward by the brand. Xbox is counting, on the hardware side, on the purchase of audio headsets, and especially of xbox controllersif possible personalized, to fill the boxes.
Its Game Pass and cloud gaming offers are also at the center of the giant’s strategy. The Game Pass is everywhere thanks to the many partnerships made with other brands such as Logitech or Razer for their consoles focusing on cloud gaming, but also recently on samsung televisions.
Xbox is also relying on major acquisitions of video game developers and publishers to further expand its catalog and thus make its Game Pass more attractive than it already is. It is with this strategy in mind that Xbox has already acquired the giant Bethesda and intends to close the gargantuan purchase of Activision-Blizzard early next year. This purchase would also allow Xbox to extend its strategy by developing a mobile game store and thus diversify and increase its revenues.