Xbox Boss Spencer Claims Microsoft Loses Up To $200 For Each Game Console It Sells
Gaming has experienced substantial growth over the past few years, and many expect that trend to level off as the economy cools. But Phil Spencer, the CEO of Microsoft Gaming, says that the company will continue investing in Xbox as gaming tends to weather economic downturns well. To keep consoles accessible, Microsoft and others have long taken a loss on the hardware, and that's still the case with the latest Xboxes. Spencer says Microsoft loses up to $200 per unit. While prices are staying put for now, Spencer notes that increases may be inevitable across hardware, software, and services.
For as long as game consoles have existed, the model has been to get the hardware in as many homes as possible. Companies might lose some money up front, but they make profit selling the games. Currently, Microsoft offers two versions of its Xbox console; the Series S at $299 and the Series X at $499. In a recent interview with CNBC, Spencer was unusually forthcoming when discussing the loss Microsoft is willing to take on the hardware. He says selling a Series S costs Microsoft about $200, and it loses $100 on the Series X.
Console prices have indeed remained stable over the long haul. The Xbox One retailed for $500 in 2013, and even if you go all the way back to 2006, the PS3 was the same price. Microsoft doesn't have immediate plans to increase the price of consoles, but that day may be coming. "I do think at some point we'll have to raise some prices on certain things, but going into this holiday we thought it was important to maintain the prices," Spencer said at the Wall Street Journal's Tech Live.
Spencer hinted that game prices are probably going up, though. We've seen a few publishers push past the $60 price point to $70, including Activision Blizzard, which Microsoft is attempting to acquire for $68 billion. He justifies the inevitable price bump by noting that people can play a game for hundreds of hours. But let's be honest, paying billions of dollars for a game publisher probably has something to do with it. As Microsoft absorbs more game makers, we could also see greater emphasis on Game Pass, which offers a Netflix-style all-you-can-play system for $10 or $15 per month. Subscription revenue could help preserve the hardware subsidies, but you'll pay the price somehow.