Redmond will sell every Xbox console at a big loss, says researcher iSuppli. Not to worry, the profit is in the associated software
Microsoft"s newest gaming console marks an improvement on the earlier version in some decisive ways. To name a few, the pricier Xbox 360 is sleeker and more powerful (see BW Online, 11/22/05, "Xbox: How It"s Designed to Thrill"). And unlike its predecessor, the Xbox 360 is being released months ahead of the comparable next-generation console from Microsoft"s chief gaming rival, Sony. But when it comes to profitability, the new machine won"t change anything. Microsoft will carry on its tradition of taking a loss on the console, according to a preliminary analysis by market researcher iSuppli.
An up-close look at the components and other materials used in the high-end version of the Xbox 360, which contains a hard drive, found that the materials inside the unit cost Microsoft $470 before assembly. The console sells at retail for $399, meaning a loss of $71 per unit -- and that is just the start. Other items packaged with the console -- including the power supply, cables, and controllers -- add another $55 to Microsoft"s cost, pushing the loss per unit to $126. These estimates include assumptions that Microsoft is getting a discount on many components.