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Microsoft VP confirms Xbox hardware has never sold at a profit

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.

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lelo2play47d ago (Edited 47d ago )

Console manufacturers don't make money on the hardware.
They make money on software sales and online subscriptions.

Nyxus47d ago

Nintendo does, but they are an exception. Generally you're correct.

47d ago
StoneyYoshi47d ago (Edited 47d ago )

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.

ABizzel147d ago

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.

darthv7247d ago (Edited 47d ago )

@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.

Teflon0247d ago

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

KingofBandits47d ago

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.

curtain_swoosh47d ago

agreed. they sell their old hardware for top money. they been doing this for years.

Melankolis47d ago

@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.

StoneyYoshi47d ago (Edited 47d ago )

@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.

DigitalDaniel47d ago (Edited 47d ago )

Only because their hardware is usually old and outdated. That's how they can make money on the hardware sales.

TheCaptainKuchiki47d ago

Thanks to the outdated hardware but if they ever wanted to make a powerful console one day, it'd be sold at a loss.

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PitbullMonster47d ago

Sure they make more money with software but Sony managed to make profit with hardware too.
https://www.polygon.com/201...

46d ago
jukins47d ago

Sony made profit on ps4 relatively quick. About 1-2 years in they were making profit. Almost breaking even at launch

MoonConquistador47d ago

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.

waverider47d ago (Edited 47d ago )

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.

Orchard47d ago

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).

Pricey47d ago

What do you think is most likely contributing to the loss? I'm willing to bet Microsoft make a bundle off of accessories.

jukins47d ago

Most of the loss is research and development.

Godmars29047d ago

No, I said *MS* doesn't know what they're doing. Haven't since day one.

Orchard47d ago

@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?

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Godmars29047d ago

No. MS doesn't make money on hardware cause, as a monopolistic software company, they don't know what they're doing.

Orchard47d ago (Edited 47d ago )

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.

46d ago
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lodossrage47d ago

I swear, Epic is going to have every partner they ever had angry with them once this is all said and done.

Tacoboto47d ago

Maybe this is how we'll finally-maybe see Xbox One sales figures!

RazzerRedux47d ago

Hopefully they will get a Sony guy on the stand and ask "So what the f*ck happened with The Agent?"

Teflon0247d ago

Lmaooo Agent got put in a casket Execution style.

TheGreatGazoo3046d ago

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.

Axecution46d ago (Edited 46d ago )

@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

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RauLeCreuset47d ago

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.

jukins47d ago

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.

Christopher47d ago

@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.

InUrFoxHole47d ago

Phew and I was worried someone wasn't going to respond to him, without being a dick.

TheGreatGazoo3046d ago

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.

RauLeCreuset46d ago

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.

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Darkborn47d ago (Edited 47d ago )

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.

Zhipp47d ago

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.

RosweeSon47d ago

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.

DOMination-47d ago

"Except PS3"

And PSP. And Vita. And PSX.

40% =/= "pretty much all".

hiawa2347d ago (Edited 47d ago )

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.

Knightofelemia47d ago (Edited 47d ago )

Bring in the games to entice the customer into buying your product.