One of the thing that we have learned during the Microsoft conference was the price tag which is $499. In a brief interview with Business Insider, Phil Spencer was asked essentially if Microsoft is actually making a profit on the console at point of sale and the answer seems to be simple “NO!“. But that doesn’t necessarily means that they are taking a loss when he was asked if they are taking loss on it, he said “I didn’t answer it that way” a rather intentional not offering anymore details.
It’s hardly surprising that the Xbox One X is expensive to produce, it is very very powerful for a console with the most powerful console ever built that’s not hyperbole, it is true and it is by long-shot as well.
Not only it is powerful Xbox, it is the smallest Xbox. Small means custom and custom means it costs more than a standard part and obviously the size isn’t the only reason why it needs custom parts. It has vapor cooling system and all this other stuff. Some of it is going to have to be custom made because of Microsoft’s requirements for the machine but like most other console manufacturers Microsoft doesn’t just need the hardware in terms of making money on the console. Spencer actually did touch on the this a little bit he said:
“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.”
So, basically he’s saying that it’s not actually that bad that they are not making any money on the Xbox One X. It’s very likely judging from his comments that they are just about breaking even or they are taking a small loss on Xbox One X. As of course years goes on the components for the machine are going to get cheaper to product and the cost of producing machine in total is going to go down that generally happens over a console’s lifespan.
Microsoft has the longer picture in mind, not only this because they don’t have just console, they have PC gaming, they have PC in general, they have got phones and tablets etc etc. But when it comes to gaming even then they are looking at the bigger picture.