Microsoft Won’t Make Profit on Xbox One X Sales

One of the biggest questions on the minds of gamers for the last year has finally been answered: The Xbox One X (formerly Project Scorpio) will cost $500. Now, Xbox boss Phil Spencer has revealed that Microsoft will not make any profit from Xbox One X sales at this price.

While speaking with Business Insider, Spencer gave a simple “no” to the question about whether or not Microsoft would make money from the Xbox One X. While it seems counter-intuitive to sell a product that doesn’t make any profit, Spencer is convinced this will be a very positive business decision.

In Spencer’s mind, the Xbox One X is really just a vehicle for more sales in other areas, including peripherals, games, and services (such as Game Pass or Xbox Live Gold). Here’s how Spencer explained it during the interview:

“I don’t want to get into all the numbers, but in aggregate you should think about the hardware part of the console business is not the money-making part of the business. The money-making part is in selling games.”

The fact that Microsoft isn’t making any money on the Xbox One X, despite the $500 price tag, isn’t surprising considering the impressive hardware contained inside the little black box. As has been mentioned countless times before, the Xbox One X is easily the most powerful console on the market, and will give gamers a chance to experience many titles in stunning 4K at 60 frames per second. The pieces needed to make something that powerful will cost even Microsoft a pretty penny.

In fact, many gamers have pointed out that Xbox One consoles (namely the Xbox One S and Xbox One X) are among the cheapest 4K Blu-ray players on the market. And since these devices are about far more than just playing Blu-ray videos – i.e. it’s a gaming device with tons of computing power and storage space – it’s no wonder there won’t be any profit coming from Xbox One X sales.

Xbox One X and S

It’s worth noting that for the most part, console makers as a whole don’t rely on console sales to make money. For instance, Nintendo makes roughly $40 profit for each Nintendo Switch sold. Even with the large initial sales of the Nintendo Switch, that likely isn’t enough to cover the research and development that went into creating the new console.

For Microsoft, the creation of the Xbox One X seems mostly an attempt to stay just ahead of the curve when it comes to console gaming. At the moment, not many households have 4K televisions. However, with many high-quality 4K TVs dropping under $1,000, and with deeper discounts expected around the holiday season, it seems the perfect time for Xbox to capitalize on the shift toward 4K entertainment.

It will be interesting to see how well the Xbox One X sells when it launches later this year, and if Microsoft will be able to increase sales in other areas as a result.

e3 2017 button link image
Xbox One X
is set to release holiday 2017.

Source: Business Insider

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