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Forums - Microsoft Discussion - How much does it cost to make the 360?

Comrade Tovya on 03 December 2008
Barozi said:
damndl0ser said:
Like others have said, M$ probably loses a small amount on the Arcade and makes money on the pro and even more on the Elite. I would guesstimate that they probably make a small profit overall ( all consoles added together ) but not much. The only way you can really tell is by going over their quarterly profits.

They only have a Entertainment and Devices division in their reports so you can't really see if the 360 makes a profit or not.

 

And more importantly, MS doesn't mind going in the red... they have the cash on hand to take massive losses, because their longterm goal is to make the XBOX brand take over the gaming world like they did the PC with Windows.

Of course, it won't happen, but that's their plan (and of course, no doubt Nintendo and Sony would love to be the only console choice as well).  It's just business.



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WiiStation360 on 03 December 2008
Barozi said:
damndl0ser said:
Like others have said, M$ probably loses a small amount on the Arcade and makes money on the pro and even more on the Elite. I would guesstimate that they probably make a small profit overall ( all consoles added together ) but not much. The only way you can really tell is by going over their quarterly profits.

They only have a Entertainment and Devices division in their reports so you can't really see if the 360 makes a profit or not.

This is true.  There is so much stuff in this division, is it almost impossible to seperate 360 revenue from everything else.  MS does not give a breakdown.

 



amirnetz on 03 December 2008

Does it really matter?

What matters is that the 360 business is very profitable these days. The the tune of about $1B/year.

Unlike Sony and Nitendo, Microsoft is able to get another $40/year on Xbox Live services from the majority of 360 owners. With a very nice attach rate Microsoft makes afrom 3rd party games sales royalties (about 3-4 games/year) another $30--$40 per console per year. Big 1st/2nd party games (Halo, Gears, Fable) bring in another $60/year from about 25% of the owners.

Altogether, Microsoft is probably making  about $90/year per console. If it chooses to lose a few bucks up front  on new sales in order to guaranty this kind of revenue stream then that's a valid business decision.



Prediction made on 11/1/2008:

Q4 2008: 27M xbox LTD, 20M PS3 LTD . 2009 sales: 11M xbox,  9M PS3

Blappo on 03 December 2008
TheBigFatJ said:

No one outside of MS knows for sure, but here is a likely scenario:

- They lose money on the Arcade unit (probably about $90)
- They approximately break even on the Premium 60GB unit
- They make money on the Elite unit (probably about $95)

However, these were closer to accurate estimates before the price drop. Microsoft could very well be losing money on each 360 sold on average.

The Arcade, Premium and Elite all cost about the same to manufacture.  The Premium has a hard drive, which is probably $10-$20 for MS to purchase, the Elite comes with a larger hard drive which likely costs exactly the same as the Premium's drive, and it comes with an HDMI cable which costs about 50 cents or a dollar for MS. 

So expect quite a loss on the $200 unit and quite a profit on the $400 unit.

The relative cost difference between a Arcade and a Pro is probably $60.  MS is getting good deals on HDD but for $20.  Online retailers with razor thin margins are selling the smallest 2.5" HDD for about $50.  MS cost is probably $35-40.  The Pro model also comes with a headset and network cable which may add $3 to the cost.

I agree that the cost of the Elite models are probably only $5-10 more than the Pro.  The Pro is probably near the break even point (+/- $10) but that is just a guess.

 



rhisc on 03 December 2008

Like others have said they are probably losing money on the Arcades and making money on the Pros and Elites.  It will even out since sales are about 50% Arcades.  MS is interested in market share as they know that the attach rate is high and there is a possibliltiy that you'll spend more money on Live or accessory sales.





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dbot on 03 December 2008

Forbes recently said that Nintendo makes $6 per console. If you believe Forbes, it is highly unlikely that Microsoft is profitable on the Arcade. It would be great to see Xbox sales by sku and the Entertainment Divisions financials without retail office, office Mac, and retail operating systems sales.



Thanks for the input, Jeff.