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Forums - Sales Discussion - Another price-cut for Microsoft? How much money are they losing with Xbox One?

smroadkill15 on 27 October 2014
Sentient_Nebula said:
smroadkill15 said:
Why does it matter? If any of the three companies can suffer from a loss, it's MS.
You make it sound like a price-cut is a bad thing? The only thing that could be bad about the situation was if MS wasn't being competitive.

Of course MS can take the loss. But they're not in the console business to "win". They're in it to make money. It doesn't matter if Xbox One sells 10 trillion copies if it won't make money.

Usually winning and making money go hand in hand. 



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Mr Puggsly on 27 October 2014
MoHasanie said:

Yup, and its more important than ever for Xbox to be profitable. More losses will make the shareholders angry. 

I think MS's response to shareholders is ignore the Xbox. Look at the other things that are profitable instead.

It not like Xbox is killing MS. They can take the risks and potentially make a profit down the road.



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Vasto on 27 October 2014

If they are losing money who here would even know how much?



prinz_valium on 27 October 2014
Playstation_prophet said:

I don't want to use the word "embarrassing" but didn't they just bundle a game with the system last month. I don't understand. Why not give it time? How much are they losing per console sold? Are they losing money per console sold? What do investors think about this?

 

What was the original price of WiiU? Price-cuts?

What was the original price of Dreamcast? How many price-cuts?


1. yes, but not for the first time. there was titanfall before and madden. or fifa in europe

2. dunno, how much they lose on a console sale. only ms knows. we just know how the xbox divsion is doing and it doenst make a loss

3. investors dont care much for xbox. and they care zero about a 50 bucks cheaper or more expensive xb1. they only care about the overall performance of xbox as whole

4. dunno about the wii stuff



brighat on 28 October 2014

Microsoft has to do something to get some momentum this Holiday season even if all previous attempts failed. If I were American, I would buy the XO Sunset Overdrive bundle at that price. However, I'm Canadian so I will have to wait. Regardless of them saying they won't give Canadians the $50 discount, I think they might change their mind or the retailers could match the U.S. price during Black Friday or Boxing Day.

Microsoft has been doing this all year, starting with Titanfall. I expect to see a Quantum Break bundle and a Rise Of The Tomb Raider bundle in 2015. Sony and Nintendo have been doing the same on occasion but it's the retailers who decide it in most cases. Sony does have the TLoU Remastered and Destiny bundles and Nintendo has Super Mario 3D World and New Super Mario Bros. U. Extra games on top of them are decided by the retailer.

It can be great for the people looking for a new console. I paid $200 for an 8 GB Wii U and got Mario Kart 8, NintendoLand and Skylanders with it.



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ICStats on 28 October 2014

Let's say they sell 4 million consoles with this promotion, so they lose $200 million. It's small compared to the hilarious $2.5 billion wasted on Minecraft.



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binary solo on 28 October 2014

This is a bit of a non-issue. If loss leading early in the gen has been a bit of an historical strategy then it's easy to rationalise losses this early in the cycle, even if the initial strategy was to try to break even from day 1. Arguably MS should have price matched with Ps4 with the packed in kinect from day 1 and taken the early gen losses with a view to mid to late gen gains from having a substantial user base actively buying games.



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Dr.Henry_Killinger on 28 October 2014
shikamaru317 said:

Last year the production cost of the system with Kinect was estimated at $471. $75 of that was for the Kinect, which was removed in June, it's now optional. That would put the production cost of the system at $397. However, system construction costs decrease over time, and given that nearly a year has passed since the initial cost breakdown, it's likely that production costs are around $350 now. So the only money they're losing is on the bundled game, and they've been bundling digital codes to cut costs on that front.

It's also worth noting that the estimated production costs for Xbox One accessories are low enough that they're making a nice premium on accessory sales, which offsets what they're losing on console sales. The standalone Kinect sells for $150 but costs $75 to make. The controllers sell for $50 but cost $15 to make. The play and charge kits sell for $25 but likely cost less than half of that to make.

Remember, selling a console at a loss isn't always a bad idea. The more consoles you sell earlier in the generation, the more software and accessories you sell throughout the generation. And console manufacturers get money for every game sold due to licensing costs, and even more for 1st party games. Anything they're losing now they'll make back later in the generation through increased game sales, increased accessory sales, and increased XBL subs.

Manufacturing costs do not drop that fast.



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DJEVOLVE on 28 October 2014
Dr.Henry_Killinger said:
shikamaru317 said:

Last year the production cost of the system with Kinect was estimated at $471. $75 of that was for the Kinect, which was removed in June, it's now optional. That would put the production cost of the system at $397. However, system construction costs decrease over time, and given that nearly a year has passed since the initial cost breakdown, it's likely that production costs are around $350 now. So the only money they're losing is on the bundled game, and they've been bundling digital codes to cut costs on that front.

It's also worth noting that the estimated production costs for Xbox One accessories are low enough that they're making a nice premium on accessory sales, which offsets what they're losing on console sales. The standalone Kinect sells for $150 but costs $75 to make. The controllers sell for $50 but cost $15 to make. The play and charge kits sell for $25 but likely cost less than half of that to make.

Remember, selling a console at a loss isn't always a bad idea. The more consoles you sell earlier in the generation, the more software and accessories you sell throughout the generation. And console manufacturers get money for every game sold due to licensing costs, and even more for 1st party games. Anything they're losing now they'll make back later in the generation through increased game sales, increased accessory sales, and increased XBL subs.

Manufacturing costs do not drop that fast.

I think he is pretty close, When you are selling millions of units.  Also what's you reason for stating this? Just a random thought?



crissindahouse on 28 October 2014

Sony said that PS4 is already profitable some time ago. XBO isn't that much cheaper now as for example a PS4 bundle with Destiny or so and PS4 has higher specs so that i doubt that MS is losing crazy money considering that this is a decision to increase the userbase which will have obviously also many positive effects for the financials.

Also don't forget that higher production numbers they will achieve with this will reduce production costs per unit. No idea how much but at least a little.