While it's no secret that consoles sell at a loss it's not very often that we get a chance to hear just how large that margin is. Video game consoles are heavily subsidized by the sales of games and services and it's what allows a console like the Xbox Series X to be sold at such a low cost when you take into account each of the components that power it. This week Xbox Head of Gaming, Phil Spencer, has revealed just how much that loss margin is for the Xbox Series X|S consoles.
In a recent interview with CNBC, Microsoft's Head of Gaming stated that as of right now, the company is losing upwards of $200 per Xbox console sold which has been further enhanced due to inflation. While inflation is nothing new to the gaming industry, as evident by Sony upping the price of their console back in August, it is worrisome. Spencer did make sure to inform CNBC that even though they are losing money by allowing the consumers to choose how much they'd like to spend on a console, i.e the different versions available like X and S, they do not anticipate a price hike at this time.
What Spencer does admit is that the console price may remain the same, but the price of games may not. Spencer goes on to state that he doesn't believe Microsoft will be able to keep these game prices as low as they are for much longer. He says that the console itself doesn't provide the entertainment, but the games do, offering hundreds of hours of gameplay.
Now, most companies that sell consoles do not make any profit on console sales due to the cost of manufacturing and goods. This money is always made up of game sales, subscriptions, headsets, and other gaming accessories the company sells. But as we learned, Microsoft is losing $100 per Xbox X sale and $200 per Xbox S sale; this is a significant loss to take on a console. Luckily, last week during an interview with The Verge, Spencer also made sure to announce that subscription sales are on the rise, making up for much of the losses they take from other avenues. Elaborating more on his point that the prices can't stay this good forever Spencer told The Verge,
"I do think at some point we’ll have to raise some prices on certain things, but going into this holiday we thought it was really important that we maintain the prices that we have."
With subscription sales making up almost 15% of Microsoft’s overall Xbox services revenue, it is hard to tell whether or not a price hike is on the horizon, but as of right now it seems that Microsoft is trying to keep their prices the same for as long as they can.