Microsoft has never turned a profit on Xbox console sales alone, but other aspects of its gaming business make it profitable.
Microsoft has always sold Xbox consoles at a loss, an executive confirmed during the Epic Games v. Apple trial on Wednesday, as previously reported by Business Insider. An Epic lawyer asked Microsoft’s vice president of Xbox business development, Lori Wright, about what profit margins the company has on its sales of console units.
“We don’t — we sell the consoles at a loss,” she replied, before confirming that Microsoft has never earned a profit on console sales.
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Microsoft has been making games consoles since the original Xbox in 2001. It released the Xbox Series X and S last November.
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It’s not an unusual strategy for companies to sell consoles at a loss — they typically act as a loss leader for sales of games, accessories and subscription services. A Microsoft spokesperson confirmed that via email.
“With more than 23 game studios creating games, more than 100 million monthly active Xbox players, and more than 18 million Xbox Game Pass subscribers across console, mobile, and PC, the gaming business is a profitable and high-growth business for Microsoft,” they wrote in a statement. “The console gaming business is traditionally a hardware subsidy model. Game companies sell consoles at a loss to attract new customers. Profits are generated in game sales and online service subscriptions.”
The cost of making consoles tends to drop over their lifespan, but companies cut the retail prices of their consoles as well.
See also: Xbox Series X restock: Inventory updates from GameStop, Best Buy, Target, Amazon and more