During the legal process between Apple and Epic Games, Xbox Vice President Lori Wright was called to testify. In her testimonial, Wright was asked by Epic Games attorney Wes Earnhardt about Xbox’s overall profitability model. Wright announced that no Xbox console has ever been sold for a profit for the company. While this doesn’t seem like a good business model, Wright announced that Xbox is instead benefiting from the software and subscriptions it sells. Wright’s statement was intended to show that game companies have to charge publishers 30% to sell their games, while smartphone companies like Apple don’t.
This is actually not uncommon in the video game industry. In February, Forbes reported that the PlayStation 5 sells at a loss despite record profits. Not all video game consoles have been sold at a loss in the past. On Twitter, Daniel Ahmad, Senior Analyst at Niko Partners, says that the Nintendo Switch currently sold at a profit for Nintendo. Often the value of console losses diminishes during a console generation. When a generation of consoles begins, the technology that powers the system is usually up to date. However, as the generation of consoles progresses, it becomes less expensive. As a result, the loss is reduced and sometimes the manufacturer makes a profit per console.
Unfortunately, Wright didn’t reveal exactly how much Xbox is losing per system, especially at the beginning of the Xbox Series X. Epoch. The next generation system is a technical powerhouse, so it is possible that the amount could be quite high. Of course, this generation of consoles has the benefit of the Xbox Game Pass to help the company grow profits. Last month of service It reportedly had 23 million subscribers. As long as fans continue to subscribe to services like Game Pass and purchase games, Xbox should continue to thrive.
It will be interesting to see if Epic Games can convince the court that Apple’s current profit model is unfair or represents a monopoly. The case has revealed many interesting details about the video game industry and it is clear that this will continue as the case progresses.
Are you surprised that Xbox consoles have always been sold at a loss? Have you already bought an Xbox Series X? Let us know in the comments or share your thoughts directly on Twitter @Marcdachamp to talk all about games!