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Microsoft's upcoming Xbox One X is an impressive slice of kit, given its $499 price point. Simply Microsoft could merely striking the specs information technology targeted past compromising on one critical issue: Profitability. Dissimilar the Xbox Ane and Xbox Ane S refresh, both of which fabricated money from Day 1 and were assisting pieces of hardware, Microsoft isn't earning a cent on the Xbox One 10.

That's the give-and-take from Phil Spencer, head of the Xbox division. When asked by Business organization Insider if the Xbox One 10 would exist profitable for Microsoft, Spencer flatly answered "No." When Business concern Insider asked if that meant Microsoft was taking a loss on the hardware, Spencer stated "I didn't answer it that way." That's non quite a denial, just it definitely implies that the console's cost makes it revenue neutral, at all-time.

Prior to this generation, information technology was normal for Sony and Microsoft to launch consoles at a loss and so make back their investments via software sales royalties. But the Xbox 360 and PS3 generations changed all that, because the consoles themselves (particularly the PS3) were so expensive to produce. It took Microsoft years to plough a turn a profit on the Xbox 360, and Sony's losses in the early days of the PS3 were and then steep, information technology had pulled their total earnings from 2000 – 2022 into the negative. The console was eventually assisting, merely it'due south not clear if that was enough to articulate the losses from early in its own life bicycle.

sony_profits_2012

Sony'southward cumulative profits on the PS2 and PS3 through 2022.

It's a chance for Microsoft to return to the strategy of not-profitable hardware. Any problems that arise with the platform, such every bit the Xbox 360'southward Reddish Ring of Death, will immediately plow the device into a financial liability with no cushion to absorb the shot. And despite offering quite a bit of horsepower at the $500 mark, the company still clearly feels constrained to keep costs under control. Sony tried pushing the PlayStation 3 at a $500 to $600 price bespeak, and suffered disaster for its hubris. Microsoft won't want to make the aforementioned mistake.

This could as well explicate why Microsoft is keeping a lot of focus on the Xbox I S, which is profitable at its much lower price. If the Xbox Ane X doesn't show a hit with consumers, the company notwithstanding has a money-making game console to rely on for the mass market. Spencer alluded to Microsoft's other ways of earning turn a profit through Xbox Live subscriptions and software sales. It'due south clear the company has a multi-pronged earnings strategy to generate acquirement, even without a per-unit turn a profit margin.

Now read: The Best Gratis Games on the Xbox One