14 DAY TRIAL // The legal dispute between Epic and Apple has provided us with some very interesting revelations, some of which aren’t necessarily related to the two companies involved in the lawsuit.
For example, the trial has disclosed some data regarding Microsoft’s Xbox sales, confirming what some people have already suggested but which has never been confirmed by the company itself: the software giant is selling consoles at a loss, making zero profit on them.
In other words, Microsoft isn’t making any money by selling Xbox consoles, and the hardware is actually just playing a role in the company’s long-term software and service strategy.
Xbox vice president of business development Lori Wright was one of the executives who testified in the lawsuit, telling Epic lawyer Wes Earnhardt that Microsoft doesn’t make any money with consoles.
“How much margin does Microsoft earn on the sale on the Xbox consoles?” the lawyer has reportedly asked. “We don't. We sell the consoles at a loss,” quickly responded.
“Just to be clear, does Microsoft ever earn a profit on the sale of an Xbox console?” Earnhardt continued. “No,” the Xbox vice president responded.
Sony also selling consoles at a loss?
So in other words, hardware is actually generating a loss for Microsoft in gaming, and according to analyst Daniel Ahmad, the same thing happens for Sony too. Nintendo is the only company that’s making a profit with its consoles.
“Hardware being unprofitable certainly played a bigger role in the late 90's and early 2000's (oh and PS3 era lol). Both the PS5 and Series X/S are being sold at a loss right now, but will become profitable down the line most likely. Nintendo is somewhat of an outlier,” the analyst says.
For Microsoft, it somehow makes sense, as the company is said to generate big profits from its software and services sales, so the consoles serve as a way to get customers there.