Each Xbox 360 Sold Nets Microsoft $115 in Profits.

Michael Pachter told Bloomberg that he estimates each console sold nets Microsoft about $115 in profit.

[Fat Onion]

I figure the 4GB model will get reduced to $159.99-$179.99 later this year.

[CarlitoBrigante]

Here in Europe you can already find the 4GB version for 160 euros and 250GB version for 190 euros, its dirt cheap, a pricecut won't do much here in Europe.

[360GamerFG]

Europe =/= The World.
"Microsoft shouldn't rest on its laurels too long. It will eventually have to worry about pulling a Sony and losing out on the next console cycle. But currently, there's no need to panic."
Pulling a SONY? Lol, is that a thing now and I missed it?

[LORD-PHOENIX]

and i should care they make $115 dollar in profits because....????

exactly i dont, i have no shares in ms, and its not as if they are putting any of that money back into the brand by making exclusive games!!

nope that money just lines the fat cats pockets whilst they still have the cheek to charge us to play online,or bring us crap like kinect starwars...

[Disccordia]

There's no point in making exclusives now for the 360 when we are nearing a new generation. Especially with such strong third party support.

They ARE investing money into their brand though. Here is a list of first party Microsoft Studios.
343 Industries
Good Science
MGS Core
MGS Family
MGS Flight
MGS KLE
MGS LEAP
MGS Mobile (made ilomilo so it does count)
"Platform Next" Studios
Turn 10
Twisted Pixel
Xbox Live Productions
Lionhead
MGS Soho
Rare
BigPark
MGS Vancouver
MGS Victoria
MGS Sports Entertainment Group
MGS Incubation Group

That's 20 studios in total, 18 if you don't include the last two (because nobody knows what they are for yet). That's 12 new studios they've opened in the last 12 months - all of which are making exclusive titles for their next console.

[LORD-PHOENIX]

you do realise over half of them are kinect studios right?

[SuperLupe]

lean green money making machine.

[hulk_bash1987]

And that doesnt include the pretty penny M$ is making off of XBOX Live subs.

[360GamerFG]

That is almost criminal! I'd be appalled if I wasn't so impressed.
Now this is how you run a profit making company; well.

[LX-General-Kaos]

Very true. All other console manufacturers can learn a thing or two from Microsoft when it comes to great business decisions. They have been making profit on consoles sold for a very long time now, plus they are completely raking in green with Live subscriptions. I remember hearing much negativity around here about how Microsoft were making a mistake by not including super powered processors, and over the top disc formats. It worked out great for them in the end.

Microsoft is very well off financially. And the xbox 360 proved to be risk worth taking. I hope that my gaming console of choice pulls a Microsoft as well next generation financially. Because I know that they made a massive profit in this one. I unfortunately can not say the same for Microsofts direct competitor.

Rated E For Everyone

[catfrog]

if companies start following microsofts lead there wont be any games and you'll be forced to pay for things that you shouldnt have to.

i cant believe consumers are going for this, it makes me doubt that consumers can protect themselves

[LX-General-Kaos]

@ Catfrog

What game company besides Microsoft should console producers follow to make a profit then?

The only other two are Nintendo and Sony. Decisions... decisions.

[humbleopinion]

If a base 200$ console nets 115$ in profit, and you subtract from the total the retail share (which should account for at least 50$ or 25% in the usual case), it means that the costs of the console to Microsoft (including parts, manufacturing, assembly, packaging and shipping ) is less than 35$!

Makes sense? Nope. But then again Patcher never did make much sense with his past statements...

[Persistantthug]

Retail makes the majority of its money from the games.....that's how the RAZOR BLADE BUSINESS MODEL works.

[dcbronco]

Retail wishes they got 25% of the console sales. Not even close. I worked at Best Buy and games and consoles provide very little income for the stores. they make their ,money off of the traffic they produce and volume. And accessories. Electronics are sold for much more than they are produced for. But not consoles. Best Buy used to get a couple of dollars per games and around ten to twenty per console.

That's why a kiosk for digital games would be better for stores than physical disc. No more turning a sale away because you don't have the space to carry that particular game or enough copies. You always have plenty of copies of everything.

[humbleopinion]

You said yourself that consoles net them 10%-20%, which is not far from my 25% estimate. My estimate includes however the money that MS pays shops like Best Buy for promotions. As an ex worker you are probably aware that retailers charge money for premium shelf space, on store promitions and stuff like appearing in the store brochures and leaflets.

The thing is: even if the store didn't make any money from the console, Do you think that what is basically a triple core PowerPC computer with on board graphics, a DVD drive, 4GB of flash memory, a power supply, a wireless controller, case and cables costs only 85$ to manufacture, package and ship to stores? No way in hell

[dcbronco]

Sorry about the misunderstanding. I meant to write $10-20. Not percent.

Premium space is sold. But games are a major driving force in creating traffic for stores like Best Buy. So I'm not sure how much they can demand from console makers. It's more like the console makers have the pull in that deal.

Of all of the products sold in those stores and advertised each week, games almost always get into the pages. Even when they aren't on sale. The biggest consumers in stores like Best Buy are tweens and young adults. So gaming is the best way to get them in the door. Gaming is bigger than music and movies. So it kinda gets it's a-- kissed.

On the cost of the mchines, the 360 they are talking about is the $299 machine. At this point it couldn't be costing MS much more than $150 to produce. You have to remember that they own the major parts. And they have done constant die shrinks.

When they started out, the graphics chip and CPU cost about $240. Almost half the cost of the machine. Each time you shrink the die you can make more chips for the same money. Say $100 for one wafer of chips and you get 20 chips. You do that for the CPU and GPU. So $200 for 40 chips and you can make 20 360's.

Shrink the die to 45nm from the original 90nm size. But you still pay $100 for the wafer of chips but have a lot more chips from the wafer. So you might cut your cost by 20-30%. Maybe more. Then MS made the Valhalla chip and combine the CPU and the GPU onto one die at 45nm. Now you have doubled your chips for the same money.

Plus other parts shrink too. Become cheaper because demand for them has gone up or down. Things are cheaper if you make a lot of them and if no one wants it you sell it for less. The box shrinks because you have a smaller machine. Machine is smaller because smaller dies are cooler and need less cooling and you have one less chip. The companies making parts give you better deals because you are a good customer if your product sells. And since you own the chips there is no need to make a profit from yourself so you find the cheapest guy around to make your parts.

All of those things lead to a really cheap machine. I believe they are making a little more than Pachter believes. The 360 is almost seven years old. It really should be 150.00 by now in stores. With a hard drive. I think they will drop the die down to 32nm or 28 and they will be making them for just over $100.

[blue7_7]

I think Michael pacther is correct on this one. I mean MS does make billions in profits from the Xbox division every year. So it makes sense they make $115 in profit every year.

[Droid Control]

I think M$ bank around $1bn a year just from XBL gold subscriptions. That doesn't include DLC,Arcade games etc...

M$ have probably made more money than Nintendo's Wii have for them this gen when you factor in the LIVE pricing...

[dcbronco]

MS annual reports say they made around 700 million on Gold subscriptions. But they make a lot more on other Live sales. DLC of all kinds generates a ton of money. CoD maps are a whole business unto themselves.

[josephayal]

The guy is talking nonsense

[ShaunCameron]

So that would mean to date they made $7 544 000 000 from the XBox 360, right?