Microsoft has officially admitted that it does not profit from sales of Xbox consoles
A Microsoft executive said the company is not making a profit on Xbox consoles. The statement was made yesterday in the Epic Games v Apple trial. The fact that the company does not make money on the consoles themselves has been known for many years, but now Microsoft has officially recognized this fact.
However, according to a spokesman for the Redmond corporation, this does not mean that the company does not make money on the Xbox. According to him, the gaming business is quite a profitable and rapidly developing area for Microsoft. The console gaming business has traditionally been based on a hardware subsidy model. Console manufacturers sell consoles at a loss or at a cost to attract new customers.
The profit comes from the sale of games and subscriptions to online services. Typically, Microsoft and Sony subsidize consoles the earliest in the console lifecycle, but component costs decline over time. However, along with the decrease in production costs, there comes a decrease in retail prices for consoles. For example, disassembling the Xbox One S revealed that the cost of the components used in the console is about $ 324, which is only $ 75 less than the starting price of a set-top box with a 2 TB drive at the start of sales. But this does not include logistics, development, and other costs.
Sony and Microsoft have similar business models, but Nintendo is the exception. According to documents provided by Microsoft as part of the Epic Games-Apple litigation, the company is confident that Nintendo is making good money selling the Switch consoles themselves.
The discussion on this issue has begun right now because Apple says that since Epic does not agree with its commission on the App Store, that is, it should also not agree with the 30 percent commission from Sony and Microsoft. As a result, many hours of debate began about how open platforms differ from closed ones. Microsoft says there is a huge difference between the two. This is why the Windows app store has a 12 percent commission, while Xbox purchases have a 30 percent commission.