According to Phil Spencer, chief executive of Microsoft’s gaming division, Microsoft faces a loss of up to $200 for every Xbox console it sells. A report from the CNBC website stated that Phil Spencer recently revealed that Microsoft has to 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 make up for this gap through the sales of games and peripheral products, because it is well known that the company can indeed 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 players have learned that this generation of game consoles often face losses in sales. However, it is indeed the first time that a high-level executive from a game console publisher personally revealed detailed loss details to players, or gave a range for cost subsidies. Since CNBC did not directly quote Phil Spencer’s original words in this report, the GameSpot website tried to contact Microsoft in a follow-up interview, hoping to obtain more detailed information.
Just before Spencer disclosed the news, he also confirmed that Microsoft’s Xbox Game Pass platform has indeed brought them benefits, but he did not give too detailed data on the performance of this platform. In addition, the executive recently hinted that its Xbox host, services and other related costs may experience a wave of increases 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 an increase in the price of the console. Even though Microsoft emphasized at the time that they 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 Apple vs. Epic case a few months ago, Microsoft revealed that they never profited from the sale of the Xbox console itself, a strategy that dates back to the original Xbox console. As for Nintendo, it has become a rare case where 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 in the past three months has broken the company’s 20-year history record with the help of software and other services. In addition, Spencer also said that he does understand that Xbox has not launched a true console exclusive masterpiece for a long time, but will have to wait until 2023 to see the launch of works such as “Starry Sky” and “Blood Fall”.