Microsoft has been fighting this console generation to oust Playstation as the top console, and it appears that low prices are part of the strategy, at least for now.
It’s no secret that game consoles are typically sold at a loss to drive game sales. Companies make up revenue on the backend from subscriptions, games and accessory sales, so getting as many people onto a platform is crucial to success.
In a recent interview at the WSJ TechLive event that was later reported on by CNBC, Xbox boss Phil Spencer mentions that the Xbox Series X ($600 CAD) and the cheaper Xbox Series S ($379 CAD) are subsidized for around $100 to $200 per console (roughly $136 CAD to $272 CAD) by the company.
Spencer previously said that after the holidays, Xbox might raise the price of Xbox Game Pass subscriptions and its consoles. However, this new tidbit of typically secret Xbox sales information further suggests that the consoles will receive a price jump in 2023. There’s still a chance Spencer is referring to accessory and subscription prices going up, but we likely won’t get the full story until the new year.
In August, Bloomberg reported that the PS5 ($649 CAD) is no longer selling at a loss. However, the less expensive PS5 Digital Edition ($519 CAD) was still offset by subscriptions and accessory purchases.
During this same time, the company announced that the PlayStation Network had 104 million monthly active users, spending an average of $37.09 ($50.54 CAD) each during Q1 2021.
Microsoft has been more tight-lipped regarding how much it makes per user, but at the start of 2021, the company revealed that Xbox Live has over 100 million active users, and at the beginning of 2022, it claimed to have 25 million Game Pass subscribers. With both numbers continuing to grow, it will be interesting to see how much revenue Microsoft earns per user per quarter now.
Update Nov 1st 5:19 PM: This story has been updated to clarify that the Xbox Series S doesn’t lose exactly $200 and that the Xbox Series X doesn’t lose exactly $100 per sale. Instead, Xbox is subsidizing the cost somewhere between those amounts and plans to recoup the costs over time.