For many years now, game consoles have been sold at a loss for the companies, which earn only through the sale of software and various equipment. The Epic Games vs. Apple trial only confirmed this fact: during interrogation, one of the vice presidents of the Xbox, Lori Wright, revealed that Microsoft has never made a profit from the sale of Xbox. Wright was questioned by lawyers as a "third party".
She stated that the company does not profit from the sale of the latest generation console. When the lawyer clarified whether Microsoft had ever made a profit on console sales in general, the vice president said: "No".
When asked about the company's revenues, she explained that Microsoft makes money from sales of gaming hardware and software for consoles and PC's. Despite this, Microsoft still receives a certain financial blow from the sale of each console - this is due to the fact that the prices of equipment, over time, decrease, which leads to a decrease in prices for the consoles themselves. It is worth noting that a similar situation occurs with the main competitors of Microsoft - Sony, as stated by one of the financial analysts at Niko Partners. The PlayStation 5 costs a pretty penny for Sony, although the developers are expecting higher profits in the console's later sales cycle.
Interestingly, only a few consoles have made any real profit to their creators this year. Among them is the PlayStation 4, which has become more attractive for purchase due to the price of $299, and this price has not changed for quite a long time. This, along with lower manufacturing costs, has provided Sony with good margins and consumer interest.
An exception is also the super popular Nintendo Switch, which has proven to be profitable from the very start of its release. Back then, the CEO of Nintendo said the console would be relevant and profitable at the same time.
As a reminder, this week brings us a lot of interesting details from Epic Games and Apple's litigation, including huge Fortnite profits, details about PlayStation's cross-platform play that could be illegal, and more.