Microsoft Will Make A Profit On Every Xbox One Sold

Microsoft Yusuf Mehdi spoke at the Citi Global Conference last Tuesday, telling the audience:

“The strategy will continue which is that we’re looking to be break even or low margin at worst on [Xbox One],” he explained, “and then make money selling additional games, the Xbox Live service and other capabilities on top.

“And as we can cost-reduce our box as we’ve done with 360, we’ll do that to continue to price reduce and get even more competitive with our offering.”

“You’ve seen us over the years constantly be focused on profitability and improving year over year,” Mehdi explained when asked about the profitability of the Xbox business and how it would weather the launch of the One. “There are different points in the cycle when you invest in new hardware.

“If you look at 360 that platform lasted for seven to eight years and it’s going to go for another three years. It’s incredibly profitable now in the tail.

“Some of these things take some time in the launch year in which you invest, and then they play out over time. We’re going to continue to invest in Xbox 360, and the two devices can work in concert. So it’s not like the day we ship Xbox One your 360 won’t work. We’ll continue to support it.”

“We’ve seen our Xbox Live subscription service continue to grow. We’re up to 48 million members now. We’re shipping more games than we’ve ever done before. Those are things I look to say, ‘hey we can grow not just top line revenue but also profitability.’”

Translation: We expect to make a profit on every device sold from Day 1.  This is quite impressive, especially considering both Microsoft and Playstation were making a loss on their devices the last time the companies introduced their respective consoles.

Source: Games Industry

About the author  ⁄ Suril Amin

Suril is a scientist, journalist and obsessive Microsoft observer. He holds an advanced degree in Biotechnology with minors in Biochemistry, Microbiology, and Molecular Biology. Send him tips on twitter: http://www.twitter.com/surilamin

  • Yuan Taizong

    I hope that this will convice those bonkers shareholders who think that Microsoft should spin-off (or plainly abolish) their non-enterprize units.

    • Bugbog

      Just as well they can’t force them!

      • Guest

        Yeah, ask Ballmer about how powerless those shareholders are.

    • Guest

      Maybe you should stick to gaming and forget about financial analysis. Because Xbox has and continues to be a terrible investment from a shareholder’s perspective. It’s still not consistently profitable thirteen years after inception. And even when it does deliver profits they’re usually marginal, particularly as a percentage of revenue. As a result, after THIRTEEN YEARS of massive investment, the Xbox “business” still hasn’t even broken even on a net basis.

  • BIAS

    Cool. But if the Kinect breaks do you have to buy a new console to get it?

    • Blaze Blue

      I don’t know if you are trying to be funny being the fact that the news has been all over the place that Kinect don’t have to be connected for the Xbox one to work. So no you do not need to buy a new one!

      • BIAS

        sorry, I read that too, but I just forgot a little…

        • Blaze Blue

          I’m glad that you didn’t turn out to be a topical smart ass. Finally people with real personality. But my thing is if it does brake will there be replacement for those who want them

          • BIAS

            There’s likely to be

    • vidwa

      How do you plan on breaking your Kinect?

      • BIAS

        nvm, ive just been corrected…

    • techieg

      I’m sure they have a SKU for just that and just an Xbox one as well. They just need to publish all three SKUs. This will also help balance the price against PS4 that does sells the attachment separate and spin it as though its cheaper than XB1.

      • BIAS

        u right, the Kinect wont be needed…

    • Emily the Strange

      its OBVIOUS they will sell Kinect separated since you know, they will get it to work for PC next year, that means people with no Xbox would be able to use kinect.

      but of course its obvious (again) you dont want kinect, so why you worry?, if a game ask for you to connect your kinect, you might ignore it or plug it and use the features the game want you to use. becuase one thing is Microsoft saying, for MS stuff you dont need kinect, and other is game developers who will tell you if they want that if you dont connect it, you will not play the game. so good luck with Xbox one if you get one :) im sure some devs will not be “nice” and will want you to connect kinect.

      • BIAS

        I like the Kinect, I just got dumb for a second and forgot that since it won’t be needed, its likely to be offered as a stand alone device… “Xbox On!”

  • Guest

    Translation: We expect to make a profit on every device sold from Day 1.

    No. It says the strategy – i.e. the goal – over the lifetime is to do that. It leaves the door wide open for losing potentially a lot of money on each console during the launch year and perhaps for many years after. And then reversing that at some future point until you end up making an okay profit per unit in the “tail” end years, which makes up for loses in the lead years. Net result is breakeven or better on the hardware, but over time.