The ongoing Epic vs. Apple trial saw an Xbox exec discuss Microsoft’s console business yesterday, and made it clear that the company isn’t making money from console sales. According to a report from Protocol, Head of business development at Xbox Lori Wright, who was one of the third-party witnesses offering a testimony yesterday, gave a straight answer to Epic lawyer Wes Earnhardt when asked her “how much margin does Microsoft earn on the sale on the Xbox consoles?”
"We don't. We sell the consoles at a loss,” Wright answered. When asked if Microsoft had ever made a profit on the sale of an Xbox device, Wright also said no. To our knowledge, this is the first time that a Microsoft exec has ever confirmed this fact. Presumably, this also means that even when Xbox consoles are discounted at the end of a console generation, Microsoft still isn’t making money from them. Teardowns of Xbox consoles over the years have revealed slim, if any margins.
The console business is quite particular as console makers subsidize the hardware and make a profit on game sales and subscription services. That’s why Microsoft and other console makers take a 30% cut on game purchases on their digital stores and also require gamers to pay a subscription for playing online multiplayer games.
This business model has been working very well for Microsoft, and the company confirmed in an official statement shared with The Verge that the Xbox division does bring Microsoft a lot of money. "With more than 23 studios creating games, more than 100 million monthly active Xbox players, and more than 18 million Xbox Game Pass subscribers across console, mobile, and PC, the Gaming business is a profitable and high-growth business for Microsoft," a company’s spokesperson said.