Slashdot Mirror

← Back to Stories (view on slashdot.org)

Microsoft Loses $126 Per Unit on XBox 360

Posted by CmdrTaco on from the so-we-should-buy-more-right dept.

ahess247 writes "BusinessWeek has taken a look at the insides of the XBox 360 and with the a little help from market researcher iSuppli determined that Microsoft is continuing its tradition to taking a big loss on the console in hopes of making a profit on games. From the article: "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."

6 of 725 comments (clear)

  1. Re:Selling The Hook by gormanly · · Score: 5, Interesting

    The whole Xbox division of MS loses money - $391m last financial year, on sales of $3.2b.

    They're not selling a hook, they're burning money in an attempt to beat everyone else out of the market and pwnz0r your home entertainment forever...

  2. Please don't say buy more.. by bakreule · · Score: 4, Interesting
    I have so many friends who bought the first XBox, who are also not fans of M$. They say: "Hahaha! Microsoft loses money! Everybody buy an xbox!" MS doesn't give a **** about making money on the xbox, or the games. They just want an xbox in every household, and they're willing to put a lot of money into acheiving that. Once they have an xbox in every household, and Sony and Nintendo are has-beens, they can start making the Xbox into the household entertainment center that controls everything. This isn't a conspiracy theory, it's their stated plan. In fact, the only thing preventing them from giving the damn things away is the howls of conspiracy theorists, anti-trust lawyers and people's distrust of things that are free.

    Don't like Microsoft? Just don't buy the damn thing....

    --

    Buses stop at a bus station
    Trains stop at a train station
    On my desk there's a workstation....

  3. Microsoft ethernet cable is 30 euro (35 us dollar) by Bram+Stolk · · Score: 4, Interesting

    Don't underestimate m$ pricing. E.g. see what a
    ethernet cable
    costs in Europe. That is 30 euros, mister!
    And for the Americans: that is 35 US dollar, for an ethernet cable.
    Damn! That is a profit margin of at least 10000 percent.

        Bram

    --
    Bram Stolk http://stolk.org/tlctc/
  4. Re:Current Prices by Libby+Liberal · · Score: 5, Interesting

    Except you can buy an Xbox for $140 new now because the prices on the hardware have to naturally fall to stay competetive as well.

    All game machines start out at several hundreds of dollars until the sucker market is exhausted and you have to start targetting people who are only willing to pay $200, then the ones who will only pay $150, then the ones who will only pay $100.

    The machine's price will fall at a faster rate than the cost will.

    --
    I voted for Bob Dole once. That was the smartest thing I ever did since he lost.
  5. Sony and Nintendo sell boxes at a profit by Animats · · Score: 4, Interesting
    Sony and Nintendo make at least a small profit on each unit. While it's the conventional wisdom that Sony loses money on each PS2, their financial statements indicate they don't. Only Microsoft seems to lose money on every unit.

    That's not too surprising. The original xBox is, after all, an x86 PC, but sells for less than one. The PS2 is a low-end MIPS processor and some wierd vector units, hard to program but cheap to make. The xBox 360 is a new architecture, but not, apparently, a cheaper one.

    In the end, Microsoft stockholders would be better off if Microsoft got out of the game console business. It's a money drain.

  6. numbers suspect by portscan · · Score: 4, Interesting

    I was skeptical of this report before reading the article in depth, but now I am assuming they are just flat out wrong on some points. Namely:

    20GB hard drive for $53 and DVD-ROM drive for $21. I can get better prices than this. Me. On one unit. Microsoft is talking about millions of units. I know that these are thin margin markets, but the exclusive contract from Microsoft is a huge win for any supplier.

    So the per-unit loss on each console is probably between 50% and 70% of what they reported. At the very least, you can probably remove $20-$30 for those two drive components alone.

    don't forget that if they succeed in knocking sony out, then they will be a monopoly in video game consoles, too, and can jack up the prices even more on the next round (like windows--$200-$300 retail--and office--$400-$500 retail). that way, they can profit on hardware and software.