The landmark Apple v. Epic Games court case has turned into a fascinating case thanks to all the info that keeps coming out of court documents and testimonies. Today, Microsoft VP Lori Wright was asked about Xbox’s hardware business.
Console manufacturers don't make money on the hardware. They make money on software sales and online subscriptions.
Nintendo does, but they are an exception. Generally you're correct.
Im sure at some point for last gen Sony also started making a profit but not a huge profit. They never lowered the price of the systems aside from when the PS4 Pro came out and managed to sell over 100 million. Same goes for the PS2 besides never lowering the price. Xbox definitely hasn't considering the OG Xbox didnt sell very well and the 360 era was a billion dollar failure only to come out of the gates with the XB1 that managed to sell 50 mil over its lifetime which was worse than the 360 era. Im not trying to bash anybody here. Im just pointing out other facts as to why they have never made a profit on their consoles.
Nintendo are the worst at this. They've been selling old hardware at a premium since the Wii. Wii (OP++), Wii U (OP++), 3DS (OP), and Switch (OP) were all overpriced at launch comparatively speaking to the hardware that was available at the time of their launch.
@stoney, nothing is guaranteed in this industry. It all ebbs and flows. PS1 did 100m+ and followed it up with PS2 hitting 155m+ only to take a downward turn with PS3 and 87m+. PS4 got 115m+ of that back but like i said, nothing is guaranteed. Wii hit 100m+ only to have WiiU tank with only 12m+ and Switch is going up with 83m+... it happens. Xbox did 24m its first time out to boom upwards to 86m+ with 360 and then slide to 50m+ with XBO. You can look to just about every company that released a system over the years and see they tend to have a better 2nd release than their first and then their 3rd (if they made it that far) will take a dip and if they are lucky they climb back up with their next or the next after that. Nintendo knows that better than anyone. They are on their 7th home console platform and its been ups and downs in each one. Changing market conditions, consumer confidence... all that jazz. Its all ebbs and flows.
Stony, if this is to go by. PS4 and Xbone generally were about the same to manufacture and always cost the same for the most part. So that would mean neither was actually making money off the actual consoles the whole time. Which would make sense seeing usually by now consoles are about $150 to $200 across the board or lower
Nintendo has mastered the art of under powered hardware selling on marketing, gimmicks and their great software. If they ever got back into the serious power game I don't think they'd have an easy time with it. Though again operating from a profit right off the bat is definitely a smarter business model for a strictly games company.
agreed. they sell their old hardware for top money. they been doing this for years.
@Abizzel1 Love them or hate them, Nintendo's philosophy is "Lateral Thinking with Withered Technology" or "a creatively cheapskate" philosophy. Wii isn't HD, WiiU isn't significantly powerful compared to PS3, 3DS's TN screen were garbage, and Switch...only a small step forward of WiiU. So don't expect they'll sell you cutting edge technology.
@teflon "PS4 and Xbone generally were about the same to manufacture and always cost the same for the most part. So that would mean neither was actually making money off the actual consoles the whole time." So you're telling me the cost of the components in the PS4 and XB1 never got cheaper for them to manufacture? That's not how this works. As the years go by and technology advances, older components become cheaper to purchase which then lowers the cost of manufacturing the system. That's mainly why we get the slim versions and stuff. Maybe I'm wrong but that makes absolutely no sense to me that a console from 2013 costs the same to manufacture today as it did on day 1. "Which would make sense seeing usually by now consoles are about $150 to $200 across the board or lower" Please show me where I can purchase a ps4 slim for 150-200 brand new. They go for 280-300 still. Just cause the price isn't lower doesn't mean cost didn't go down for them. If it's still selling well then they have no reason to drop the price. Nintendo is a perfect example of this @darth I understand that nothing is guaranteed. But MS has probably had the worst luck when it comes to being able to profit from their console sales. Sure the 360 sold 86+ compared to the OG xbox but they lost 1 billion just due to RROD basically pulling any potential console profit from them that entire generation.
Only because their hardware is usually old and outdated. That's how they can make money on the hardware sales.
Thanks to the outdated hardware but if they ever wanted to make a powerful console one day, it'd be sold at a loss.
Sure they make more money with software but Sony managed to make profit with hardware too. https://www.polygon.com/201...
Sony made profit on ps4 relatively quick. About 1-2 years in they were making profit. Almost breaking even at launch
Sony were making a profit off of each PS4 from day one. It was part of their strategy after making huge losses on the PS3 hardware sales.
They do, but not on launch. Thats why sony went with speed and not with a huge gpu. That makes the apu cost more, because its bigger. Size matter. Selling million of consoles get you there. Of course Microsoft got low sales and spend millions more to create the one x and was force to sell without making profit, but thats another story.
A lot of people here misunderstanding that this refers to the Xbox hardware program over all, not individual consoles. Take PS4 for example, PS4 units started being sold for profit at some point, on a per-unit basis. That does not mean the entire hardware division started generating profit / offset the cost of initial HW development & the per-unit losses during launch. It is no secret consoles are sold as a loss-leader (with the exception of Nintendo).
What do you think is most likely contributing to the loss? I'm willing to bet Microsoft make a bundle off of accessories.
Most of the loss is research and development.
No, I said *MS* doesn't know what they're doing. Haven't since day one.
@Godmars but your statement applies to both Microsoft and Sony. Neither of them have profitable hardware programs - so presumably that means they both don't know what they're doing and only Nintendo does?
No. MS doesn't make money on hardware cause, as a monopolistic software company, they don't know what they're doing.
So we're now pretending Microsoft and Sony "don't know what they're doing" and only Nintendo do? Seems unlikely. Different business strategies is all.
I swear, Epic is going to have every partner they ever had angry with them once this is all said and done.
Maybe this is how we'll finally-maybe see Xbox One sales figures!
Hopefully they will get a Sony guy on the stand and ask "So what the f*ck happened with The Agent?"
Lmaooo Agent got put in a casket Execution style.
You get all the number you need to gauge Xbox success. They announced (3.5 billion I believe) in revenue last QT. Number of units doesn't matter. Revenue from the division and active users is what's important.
@TheGreatGazoo30 Sure. But nobody cares about how many dollars went into a massive company's bank lol. Stats and trends are super interesting and can tell a story. Knowing the number of units sold is more interesting than knowing a random meaningless number of dollars profited overall Plus it kinda settles a competition of who "won" the gen. As a dumb extreme example: If the... Switch 2 sells a 50 million units and profits $50 per console, but the PS Vita 2 shows up and ships 800 million units but Sony loses $50 per console - Sony would still be deemed the winner there even though they lost money
That's what I was saying earlier. They're messy. It's not just partners. Look how Steam got sucked into it. The slightest association with Epic can get companies caught up at this point. They emailed Xbox telling them to enjoy the fireworks. I can't imagine Xbox is entirely happy with the way they went about this.
Its not epics fault. Its the judges fault. Theyre a complete idiot. They were warned that it shouldnt be public record because of trade secrets being revealed. They actually took down all the info but slowly put it all back piece by piece. The judge just doesnt understand the totality. This is common its just in this instance alot of companies "secrets" are being revealed when usially they wouldnt. Im worried whats gonna happen after its all said and done.
@jukins: You have no clue of what you say. The judge on this case has handled tons of cases against Apple for similar issues and has a breadth of experience handling these types of cases. There is no judge better informed to handle this in California and why she handles them. Please don't try and armchair judicate.
Phew and I was worried someone wasn't going to respond to him, without being a dick.
I don't see why Xbox would care. They DID NOT say the Xbox Division hasn't made money. They said they've never turned a profit on the hardware sales... which everyone should've already known.
TheGreatGazoo Have to figure they would have confirmed it already if they didn't care about it being out there. The concern also would not be limited to the disclosure in this article, or limited to the disclosure of information specific to Xbox. The information that has been leaked goes beyond the stunt Epic has treated this as.
I'm actually surprised. I thought most consoles sold at a loss at first but a few years down the road broke profit. I know Sony announced like 2 years into last Gen they broke profit. I think the ps3 Gen they barely made profit on hardware towards the end. That's pretty crazy though and I guess it makes some sense with all the RROD's of the 360 and the initial camera only bundle of the Xbox one and then they changed it like a year in without it for 100 bucks cheaper but I thought at some point it would be profitable.
The problem is that Xbox one cost more to manufacture per unit than the ps4, but due to the inferior specs they ended up having to sell them for less for the entire generation.
It’s a myth of course at launches and maybe for a year or so after a launch of a new console and new components however once they manufactured/and or sold 10/30/50 million those parts come down massively in cost not only due to getting outdated but the fact they are bulk buying them in the millions. Sony consoles pretty much all clear 100 million except PS3 so pretty certain they’d get a hefty discount for bulk buying their components 🤷🏻♂️✌🏻 ;😜 switch for example is 4 years old the tech wasn’t even that top end on launch let alone now but having sold 90 million pretty sure they can manufacture cheaper than they selling them.
"Except PS3" And PSP. And Vita. And PSX. 40% =/= "pretty much all".
Not really surprised. I thought they made $$ on games and services. I am sure Nintendo is different but their hardware usually doesn't have the same level of bells and whistles as MS/Sony, so I think they make money on their hardware.
Bring in the games to entice the customer into buying your product.
What? Really? I’m sure they sold the og Xbox at a loss due to the chips, and they lost money on the 360 due to the ring of death. But on the xbone? They surely make money on each unit sold by now. I guess overall they can say they don’t make money on hardware due to only making money a couple of years out at all those.
In context, it makes a lot of sense now to see their interest in services over hardware. It works better for them, so long as the cost of infrastructure is recuperated on time. I can't say I blame them. I won't be joining them in their quest for games as a service, but I get why they want that now.
No because they aren’t learning from their mistakes
So Xbox is the only console of the big 3 who has never make a profit of their hardware. It was to be suspected due to their low hardware sales compared to Sony and Nintendo. ( In case someone is going to say Sony doesn't make a profit of its hardware) https://www.polygon.com/201...
MS had made some but obviously not enough to really brag about. Anything they did make during the 360 days they basically pumped it back into R&D. When systems get redesigns, its usually at points where they have found ways to reduce production costs and save some $$ while also passing some of those saving on to the consumer. And its those cost savings that lead to profits on units sold. But again, anything MS were bringing in was just going right back into the platform. They arent as concerned about the hardware profits as they are software / services.
They were, so far, the only one asked this question. It's unlikely, in this day and age and the price of hardware to compete with various trends (for Xbox and PS, it's PC capabilities), that any of them are making much if any profit. Especially considering they play a game of lowering prices as soon as manufacturing costs decrease to continue to increase their market reach potential.
Making a profit on units doesn’t mean the entire hardware program is profitable, R&D costs are pretty high. Most revenue (and profit) comes from games, MTX and subscriptions. The article you linked even covers it: “From a profitability perspective, PS4 is also already contributing profit on a hardware unit basis” Notice he explicitly calls out hardware unit - not program. I’d be very surprised if no xbox console ever got to being profitable on a per-unit basis given a generation lasts close to a decade. Whether Microsoft used that new profit margin for more profit or for further retail price reductions we will never know. The entire model (for Sony and Microsoft at least) is to get boxes in the hands of people for as cheap as possible, even if that means taking an upfront loss - so that they can recoup it and then some via software/MTX/services.
The judges were clearly not ready for these industry secrets lol
yes they do. They just don't care. Every federal judge in the US, since the Apple vs. Microsoft case in the 80's, has prior experience in corporate law as a trial attorney. It is a requirement.
Please. Stop. You have no clue on this matter. None.
Lets look at MS's console history: OG Xbox - failed to buy key components resulting in production costs never decreasing over the console's life. Xbox 360 - Released with several design flaws and substandard parts resulting in RRoD. At least one billion invested in correcting, along with a console redesign. Kinect - Motion add-on presented as its own platform. Intended to be mandatory part of XB1, which was initially designed around it, until always online plans were scrapped along with the add-on. XB1 - Built around Kinect. Two later more powerful redesigns introduced to compensate. Series X/S - Why? Just why?
Since MS used off the shelf parts for the original, they were under contract with Nvidia which in turn forced their hand in paying the price they wanted. MS was locked into that chip so it wasnt like they could go somewhere else for it. Which when they made the 360 they were smarter and negotiated certain deals with IBM that allowed them to take their design to another mfg at any point they wanted. The redesign was nothing new, every major platform has had at least one if not more and it was generally done at key points in the mfg process where they could attain higher yields with lower cost. It just took them a few tries to get it right but they got it right with the 360S and then even smaller with the 360E. They were able to generate some profit (not enough to really tout) during that time but they pumped it back into R&D. The XBO cost more because they spent more on a larger layout as well as cooling to make sure it was well ventilated to prevent HW issues and it didnt have any. Then they were able to internalize the power supply while reducing the overall size and keeping the cooling efficient. Those improvements allowed them to ramp up the clocks ever so slightly while staying within thermal levels for the cooling system. That revision resulted in better yields than the initial batch. Whatever gains they made from these revisions is what lead to them seeing if they could push things further with the one x. As for kinect, they had big dreams with that. and the tech is pretty sound but their use of it just didnt push things forward despite seeing others be able to do just that in the private sector. And Series X/S... why not? Are you wanting them to throw in the towel?
MS had no excuse with OG Xbox. Nothing but the same shortsightedness on display with Kinect, which might have worked, yet failed to prove itself versus what MS wanted from it. Which if you look online was more a marketing scanner for to sell household user info to advertisers than a game system. And while console usually see revisions and upgrades throughout their life, ones for Xbox tend to be in direct response to shortcomings. MS all but had a public breakdown once they realized original XB1 was less powerful than the PS4. Literally fell over advertising promoting cloud servers as an advantage while announcing the XB1S - or whatever the later one was called - this crap has gotten THAT boring for me! Likewise why I question the very existence of the Series X when actual games for it may be no-shows years after its release. Its a system more reliant on its prior system's library, and anything else MS can get their hands on, than having one of its own. As far as I can tell MS threw in the towel with XB1 and "TV-TV-TV!" What I'm waiting for is the them to either realize that and pack things up, or get some honest creatives to run their damn game division.
"As far as I can tell MS threw in the towel with XB1 and "TV-TV-TV!" What I'm waiting for is the them to either realize that and pack things up" They just bought Zenimax for 7.5bn dollars, and had their biggest quarter ever. Which part of that is 'throwing in the towel'? and why would they 'pack things up' on the back of their biggest quarter. Thank god you don't run a company, especially a successful one.
"Series X/S - Why? Just why?" I guess you couldn't find anything negative to say about the X/S and that was the best you could come up with? Kinda devalues the rest of your post. From a hardware perspective, X and S are pretty impressive in their own ways. MS has come a long way from the days of OG Xbox.
They put out a console that doesn't have any of its own games. Nothing that defines or shows it off. Released a system that really only improves games from its prior version. I've got nothing that describes something so stupid.
Except it does have games… and has more coming out this year. “ I've got nothing that describes something so stupid.” Well whatever it was, it worked - the console is sold out everywhere and people aren’t spending $500 on a gaming console to not play games. It’s also not like we are swimming in PS5 exclusives either. We have like 3… it’s normal in the first year of a console - especially during a pandemic.
"Except it does have games… and has more coming out this year." You don't understand the difference between having games, and games built for a system so as to define it. That MS had to buy Zenimax in order to give Xbox a semblance of relevance to Sony and Nintendo, especially after all this time in the industry, only says they never understood that either.
Does anybody know if there has been some kind of profit made on slim versions of consoles? They probably break even. I hope Microsoft gets in gear soon because I can't wait for for Perfect Dark. That was my favorite game on N64. Their games and subs bring in the money but I'm not sure how profitable GamePass is at the moment.
Now you see why Microsoft has created all these services. Normally once a console has sold enough and the parts get cheaper to make over time, the profit starts to come on each console sold. Is that number 50 mil? 80m? Depends on the system. Sony makes money on their consoles because they sell so many. They pass that threshold and it goes from red to black. Microsoft’s lifetime sales of consoles never gets past whatever number & time span they need. Services make up that difference. If Sony, with a bigger player base that usually doubles Microsoft’s, gets its services offered to be appealing its going to be crazy for them financially. I’m sure they are already working on something. PlayStation now has already started offering new games on there. Just a matter of time.
Neither company really gets 'in the black' with hardware programs, only individual units. Both Microsoft and Sony start making profit per box sold, yes. But that doesn't mean it has offset the R&D costs. "Normally once a console has sold enough and the parts get cheaper to make over time, the profit starts to come on each console sold" This is no longer true. It was true when we only had one console SKU which just kept getting made with cheaper parts or made smaller, but we will have 'pro' versions of PS5 and Xbox Series at some point, which will reset the cycle - they will have a large upfront R&D cost, and will not be profitable for a while. So while the old units will become proftiable, they don't sit back and rake in the profit like before - they have to re-invest immediately in the newer SKU R&D costs. I mean even the rough numbers don't compute: - PS spends about 1.3bn dollars per year on R&D - The R&D process for the PS5 was likely 5-10 years. - Assuming they get to the point where they make about $50 profit per box, they would still need to sell close to 30 million units per year just to break even on their R&D costs for that year. That doesn't factor in the past R&D costs for the last 5 - 10 years. "Now you see why Microsoft has created all these services." But for every service Xbox has... PS has a directly competing service... Sony and Microsoft are operating in the same way - selling us hardware at a loss, and making huge gains on software, MTX and services - that is where the real money is. ~70% of PS revenue comes from the digital store. That excludes console hardware, accessories, physical games, etc. Literally 70% just from people buying games/mtx/subscriptions via the digital store - with a much bigger profit margin than consoles when they become profitable. The only outlier here is the only one making profit on hardware - Nintendo.
about likely assuming bu bu but sony
@Orchard So I said Sony consoles get to the point where they are profitable because they sell so many and the cost to make it goes down. What you do with said profits is irrelevant to the point of “Does said console get to the point that it makes money per sale”. The answer is yes. You agreed with your line of “So while the old units will become profitable”. This leads me to ask what the heck is all that other stuff for. Microsoft themselves telling you they’ve never sold a console sell in the black. They’ve never reached the threshold to cross over. THEY telling you that. Sony told us with the PS4 and the 3 before it when the system went from red to black per unit sold. What they do with said profits, obviously reinvest, is besides the point. It made the money to do so. Everybody makes money on games and peripherals. That’s always been like that. Microsoft pushes services because they know it’s unlikely to sell enough units to make console sales profitable. I think they will with series S this time, but the services is where they pick their money up. It’s like you agreed but went on a irrelevant tangent that had me wondering it was meant for a different post. Microsoft themselves tell you they’ve never made money on a sold console (to my point) and you still said “ Both Microsoft and Sony start making profit per box sold, yes.” It makes no sense. You start talking about R&D and stuff.... sir. You just sold this item. Did it make money from that sale? Yes? Cool. Nobody says did it make money? No because we owe R&D. So did it make money to GIVE toward R&D? Yes? Then at the end of the day, IT MADE MONEY. PlayStation consoles have made money per unit sold. I swear it’s like people have create their own understanding.
@deathdeliverer Being profitable per unit sold and being profitable across the entire program are two different things. Profitable per unit = manufacturing costs less than what you sell it for Profitable as a program = you have completely covered your up front costs, and any losses, and are now making profit on hardware alone/excluding software etc Sony themselves said they got to being profitable PER UNIT. Those words are important. PS4 and XB1 both got to points where their respective manufacturers were making profit on each unit sold - that doesn’t mean hardware itself, as a program, is profitable. It isn’t. Sony and Microsoft have made no secret of that. Spending double digit billions of dollars on R&D to get the latest tech crammed into a box, to go ahead and sell it at a loss for a few years before making about $50 profit per box is not where Sony and MS are posting their profits from. It won’t even offset the hardware program costs to ship that product.
Orchard is just desperate in trying to lump Sony in the same bracket as Microsoft. Microsoft admits to never making a profit on Xbox hardware. Sony has admitted to making a profit. And we know they have more than once even though they lost money on the Cell processing PS3 by selling it at a loss. It's why Sony put in place a new system architect after Ken Kutaragi. Which balances power, performance, ease of development and getting into the black sooner rather than later. But even with PSVR, the headset was sold at a profit day one. But he can't let it go. Two companies that have been in the console business for a very long time have strategies to make money. But the almost 2 trillion dollar worth company can't seemed to learn anything after almost 2 decades in the business. Only thing they can come up with is subscriptions, making last generation games prettier and run better without offering nothing new for current gen for over 6 months. He's trying to defend a 2 trillion dollar company's failures.
Please show me where Sony said the hardware program is profitable. They didn’t, they said profitable on a per unit basis. It’s no secret or surprise to anyone that console hardware programs aren’t profitable. You clearly lack basic understanding of business / this field, despite Sony themselves having said it. And court documents coming out this week showing MS and Sony taking a loss on HW overall while Nintendo makes profits. So I’m out - keep thinking Sony are getting rich from hardware (they aren’t - it’s software and services, in fact 70% of their revenue is from the digital store alone).
@Orchard Where in ANYWHERE did anyone say something about hardware as a program? Not in the article. Not in my comment. I’m talking about the article and Microsoft’s own words. Sony’s own words. You went into a whole tangent about irrelevant things. Sony made money per unit. Microsoft never have. It’s indisputable and it’s in black and white. Again, I ask what are you talking about and why are you on a whole different page? In the grand scheme of things yes there’s a lot of moving parts. Sony playstations online sales makes more money than Microsoft’s entire gaming division. That’s not the point. In the grand scheme of things it’s factors, but the grand scheme isn’t in question here. It’s simple. Someone bought a PlayStation 4 today. Did Sony make money on that sale yes or no. Yes they did. A Xbox one, ANY VERSION was bought today. Did they make money? No. Please stop trying to start talking about the shipping cost and all this other stuff. You’re off topic.