Despite the high price, Microsoft isn’t turning a profit on the new Xbox – Business Insider

LOS ANGELES — At $500, the new Xbox One X game console is
expensive. It’s expensive compared to other game consoles, and
it’s expensive when you’re not comparing it to anything.

Unbelievably, at $500, Microsoft isn’t making any money on each
box sold.

“No,” Xbox leader Phil Spencer told me in an interview this week,
after I asked him if Microsoft makes any money selling the
Xbox One X at $500.


Xbox One X
The Xbox One X is the
smallest and most powerful Xbox One ever made. It’s also the most
expensive.

Microsoft

“So, you’re taking a loss?” I said. “I didn’t answer it that
way,” he responded, intentionally not offering more detail. 

Here’s what we know about why the Xbox One X is so
expensive: 

  1. It is capable of powering 4K games, which requires bleeding
    edge technology (read: expensive technology).
  2. It’s small, and small means custom. 

That’s pretty much it.

There’s no expensive peripheral included to bring up the price,
nor does it come with a bunch of games. It’s expensive because
it’s powerful (in fairness, it is far more powerful than
any other Xbox One). 

Like so many consoles before it, the Xbox One X is a means of
selling other stuff that makes money. Like what? Stuff
like games, peripherals, and services (Xbox Live Gold! Game
Pass!).


Metro: Exodus
A new game called “Metro:
Exodus” takes advantage of the Xbox One X’s processing power to
dazzle with 4K visuals (alongside a mountain of visual
detail).

4A Games

Here’s how Spencer put it:

“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.”

Over time, as the cost of making the console goes down,
Microsoft’s profit margin on each console sold will rise. Another
change that will come with time: The normalization of 4K. Right
now, in mid-2017, not many people own 4K televisions. But what
about this time next year? In five years? 

Though the price tag for the Xbox One X is high today, it will
assuredly come down over time as well. For now, though? If you
want the most bleeding edge Xbox One experience possible, there’s
a console for you — it’s just gonna cost ya.

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