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Xbox consoles have never been profitable on their own, Microsoft admits in court (MSFT)

Summary List PlacementAfter nearly two decades of sales, Xbox consoles have never been a profitable product for Microsoft. The Washington-based tech giant sells every Xbox at a loss, according to sworn testimony from Microsoft's VP of Xbox business development Lori Wright. "Has Microsoft ever earned a profit on the sale of...

Xbox Series X and Xbox Series S

Summary List Placement

After nearly two decades of sales, Xbox consoles have never been a profitable product for Microsoft.

The Washington-based tech giant sells every Xbox at a loss, according to sworn testimony from Microsoft’s VP of Xbox business development Lori Wright.

“Has Microsoft ever earned a profit on the sale of an Xbox console?” she was asked. “No,” she said.

Wright appeared as a witness on Wednesday in the ongoing trial between “Fortnite” maker Epic Games and Apple

Epic Games filed suit against Apple last summer after its hit game, “Fortnite,” was pulled from Apple’s App Store. 

Apple says it pulled the game because Epic violated the terms of its developer agreement when Epic implemented a payment system in the game that enabled players to circumvent Apple’s App Store. Epic says the App Store is a monopoly, and argues that iPhones and iPads are no different from computers.

Microsoft has openly supported Epic Games in the case, and has clashed with Apple publicly over App Store policies like the ones Epic is contesting in court.

The subject of Xbox profitability came up in questioning because of how Microsoft’s console business works: Instead of making money on the console itself, the company makes money from games sales through its digital storefront, from subscription services like Xbox Game Pass, and from sales of accessories like gamepads.

Microsoft, like other console makers, takes a cut of every sale on its digital storefront.

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That cut is usually about 30%, which has become a standard in the video game distribution market. Apple also takes a similar cut from games sold on its iOS App Store, which is part of what Epic is contesting in its court case against Apple.

Microsoft’s latest Xbox consoles, the Xbox Series S and Xbox Series X, launched in November 2020. Microsoft hasn’t said how many of each have been sold, but both have been hard to find since launch. 

“The gaming business is a profitable and high-growth business for Microsoft,” a Microsoft representative told The Verge. “The console gaming business is traditionally a hardware subsidy model. Game companies sell consoles at a loss to attract new customers. Profits are generated in game sales and online service subscriptions.”

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