Video game consoles are very expensive pieces of computer hardware crammed into relatively small boxes and packaged with pricey controllers. So it’s not surprising to hear that Microsoft isn’t making money selling Xbox consoles. In fact, these days it loses up to $200 for every console sold.
Previously, Xbox boss and Microsoft head of gaming Phil Spencer had explained that the company may still raise prices on “some things,” though not during this holiday season. While many guessed he was talking about Game Pass or Xbox Live, it’s also possible Microsoft could raise the price of its budget console, the next-gen Xbox Series S. This seems even more possible now that Spencer’s confirmed the company loses money on every console sold.
At a recent WSJ Tech Live event, as reported by CNBC, Spencer talked about how video games and the Xbox brand in specific are doing during the ongoing economic downturn. Rising prices and record inflation are putting a pinch on many, as dollars don’t go as far as they used to. During the live event, Spencer confirmed that Microsoft loses around $100 to $200 every time it sells the $500 Xbox Series X or the smaller, $300 Xbox Series S.
Spencer told the WSJ interviewer that the expectation at Microsoft is that customers will buy accessories and games alongside the subsidized consoles, helping to offset the losses. While Spencer didn’t say anything about raising the prices on either next-gen Xbox, he did let slip that he doesn’t think Microsoft will be able to keep game prices constant forever. We’ve already seen the rise of the $70 game since the launch of the PS5 and Xbox Series X/S. Microsoft has yet to release a $70 game, but it seems that future releases like Redfall or Starfield might make the leap.
Of course, selling consoles for a loss isn’t a new practice. Microsoft itself told the court during the Epic v. Apple case that it had never turned a profit selling any of its Xbox consoles. Sony reportedly also sold the PS3 at a $240 loss. The one real exception to all this is Nintendo, as the company behind the Switch and Wii tends to make money on its consoles. Even if Nintendo’s profit is only $6 per Wii, that’s a lot better than losing hundreds of dollars per unit sold. Meanwhile, Sony has raised the price of the PS5 in some parts of the world.
Correction 11/01/2022 18:25 p.m. ET: Updated language to better reflect Spencer’s comments on the costs of manufacturing Xbox hardware, and that the comments were made at a WSJ Tech Live event.