Years after the start of the new console generation, Microsoft is still selling Xbox Series X | S consoles at a loss of up to $200.
Microsoft gaming boss Phil Spencer reiterated Microsoft's long-term plan for Xbox sales in a recent Wall Street Journal interview. "Consoles evolved to a business model much different than phones," he said. "Consoles are actually sold at a loss in the market, so when somebody goes and they buy an Xbox at their local retailer, we're subsidizing that purchase somewhere between 100 and 200 dollars, with the expectation that we will recoup that investment over time through accessory sales and the [Xbox] storefront."
Consoles have historically been sold for less than they actually cost to produce and distribute. Sony sold the PS4 at a loss, for example, and during its comments amid the Epic vs Apple lawsuit, Microsoft admitted it has never profited from the sale of any Xbox console. However, the newest hardware lineup has deviated from this trend a bit.
Nintendo declared from the outset that it would not sell the Nintendo Switch at a loss, and as Bloomberg reports, as of August 2021 Sony confirmed that the baseline $499 PS5 is profitable in its own right. That said, the $399 digital edition PS5 still loses money upfront and relies on the kind of recouped investment that Spencer mentioned. The eye-wateringly expensive PS5 DualSense Edge and Xbox Elite Series 2 controllers, for instance, have been positioned as profit-recovering peripherals.
It's unclear exactly how much money Microsoft loses on the sale of each Xbox Series X and S console by region, nor do we know how those figures compare between the two models, but it is interesting to see the company continue to eat significant losses in order to keep prices down.
In August 2022, the standard PS5 price increased in several markets, but not in America. Just last week, Spencer addressed the possibility of similar price hikes for Xbox Series X and/or Game Pass, affirming that the company won't be able to avoid some sort of increase forever. However, Spencer maintained that any potential price jump would come after the holiday season.
Losses and all, the Xbox Series S is doing exactly what Microsoft wanted: getting people into the ever-expanding Xbox ecosystem for the first time.
