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Microsoft Xbox: Phil Spencer reveals US$200 lost on every Series S console sale

Microsoft hopes that accessory and games sales will make up for the revenue it loses on Xbox console hardware. (Image source: Microsoft)
Microsoft hopes that accessory and games sales will make up for the revenue it loses on Xbox console hardware. (Image source: Microsoft)
Microsoft has not yet raised prices for either of its current-generation consoles. However, Phil Spencer has outlined that Microsoft's sales strategy leaves the Xbox Series S and Xbox Series X consoles as loss leaders, with up to US$200 lost per console.

It is a common occurrence for manufacturers to offer game consoles below production price to drive market share, with ancillaries yielding revenue, such as accessories, game sales and subscriptions. Typically, production costs fall after a console launch though, as has been the case with the Sony PlayStation 5. Hence, manufacturers should eventually return a profit on game consoles, maintaining profit well into a generation's lifespan.

Supposedly, Sony reached this point last August. However, the company resorted to increasing prices earlier this year to maintain profitability. Conversely, Phil Spencer has confirmed to CNBC that Microsoft still loses money with every Xbox sold. Presumably, a rise in production costs has increased these losses have increased in the last few months, too. On the other hand, the relative strength of the US dollar should have reduced losses in Microsoft's home currency.

Allegedly, Microsoft returns approximately a US$399 return on an Xbox Series X sale but only US$99 for a Series S. In other words, Microsoft sucks up losses of between US$100-US$200 per Xbox Series console. Unsurprisingly, Spencer has not ruled out raising console prices to plug the gap. Alternatively, Microsoft is exploring raising game prices. On the face of it, Microsoft will hold off from making any of its gaming product stack more expensive until the start of 2023.

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> Expert Reviews and News on Laptops, Smartphones and Tech Innovations > News > News Archive > Newsarchive 2022 11 > Microsoft Xbox: Phil Spencer reveals US$200 lost on every Series S console sale
Alex Alderson, 2022-11- 3 (Update: 2022-11- 3)