Microsoft’s Xbox One X Console Isn’t Profitable At $500

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When it comes to gaming consoles, the newly revealed Xbox One X is the most powerful of them all. Despite being slightly smaller than the Xbox One S (which was already 40 percent smaller than the original Xbox One), the Xbox One X seriously outclasses its predecessor in graphics performance, offering up 6 TFLOPS compute power versus 1.4 TFLOPS.

The Xbox One X even overpowers the PlayStation 4 Pro, which brings 4.2 TFLOPS to the table. All of that power doesn’t come cheap, which is witnessed by the $499 price tag of the console. That is higher than pre-launch estimates, which pegged that console at between $399 (the same price as the PlayStation 4 Pro) and $449.

However, even at that lofty price, Microsoft isn’t making a profit on the Xbox One X. In an interview this week following the console’s launch, Xbox Chief Phil Spencer was asked point blank if Microsoft is making a profit on the Xbox One X. Spencer’s answer was a simple “No”. When asked if Microsoft was simply breaking even or if it was actually taking a loss, Spencer declined to elaborate.

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Spencer instead stuck to the often-repeated line when it comes to the console hardware business:

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.

Even though gamers would have likely welcomed a $399 price with open arms, we can’t forget that the Xbox One X packs in a 7-billion transistor AMD SoC with a custom 8-core GPU cluster and 40 Radeon compute units manufactured on a 16nm FinFET process. All of that custom hardware crammed into a relatively small box with a custom vapor chamber cooling system is expensive means that those earlier pricing estimates simply weren’t realistic.

It remains to be seen if the Xbox One X will be a success for Microsoft. The company is already fighting a losing battle in the sales race against the PlayStation 4, and Sony definitely has the upper hand when it comes to game exclusives. Despite the clear advantage in 4K gaming for Microsoft with the Xbox One X, the $499 price tag could be off-putting to gamers if there isn’t enough exclusive content (or discernible quality improvements in 4K content) to justify the price of entry.