Microsoft declares that it has never made a profit on Xbox hardware

It’s not a huge surprise, but it’s intriguing to see a Microsoft senior executive stand up in court and declare “No” in reply to the direct question “Has Microsoft ever earned a profit on the sale of an Xbox console?”

Another gem from the ongoing Epic vs Apple trial. 

Of course, that used to always be the way things were done, hardware sold at a loss in order to sell software (and now increasingly services and subscriptions). However, it’s widely known that Nintendo does make a profit on its Switch console, while Sony is believed to have made a profit on the PS4, which it retained at a higher price point in the latter years of its tenure. 

While Microsoft is still playing catch-up with Sony in terms of console install base, it seems likely it will continue to discount hardware to a non-profit making price for the foreseeable future. For example the Xbox Series X, based on both its design and silicon, looks to be more expensive to manufacture than the PS5, yet it sells at the same price. 

(Both consoles are certainly non-profit making at present of course)

A Microsoft document related to the case showed estimated gaming-related profits from the top companies in the industry, with Apple at the top of the pile with $5.2bn, Sony at $4.1bn, Google at $3.2bn, Netease at $2.4bn, Microsoft at $2.2bn, Activision Blizzard at $1.6bn, EA at $1.2bn and Epic at $1bn. 

(These are 2019 figures, so we’re at the height of Fortnite and PS4 here)

This was designed to show just how much money stores such as Apple and Google are making relative to the rest of the industry. And another slide pointed out that the top seven companies made roughly half the profit of the industry as a whole. 

Posted by industry analyst Daniel Ahmad to Twitter, he also noted that Sony was losing money on hardware at the time, with its $4.1bn of profit on software and services offset by -$1.7bn on hardware. 

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