Microsoft earning a profit on every console?

Written by Ryan Garside

November 21, 2006 | 12:28

Tags: #360 #40 #costs #manufacturing #percent #reduced

Companies: #microsoft

A research firm named iSuppli has concluded that Microsoft is actually making money when it sell its Xbox 360. A fact made all the more astounding by the amount of money Sony is losing with every Playstation sold.

Everybody knows that hardware manufacturers such as Sony, Microsoft and, to a lesser extent, Nintendo build its consoles with the intention of making money from the games sold and not the hardware. When Microsoft first released the 360 it was priced at $399. However, it was actually costing Microsoft around $525 to make the Premium edition console. iSuppli now reckons that the premium console is only costing $323 to produce, meaning every premium 360 sold is making around $70 profit.

Compare this to the Playstation 3 (see the picture below for the actual table). Retailing at $499 the console is actually costing Sony $805 to make. With every Playstation 3 bought Sony is losing roughly $306. This could potentially be slightly misleading – Sony could continue to make a loss on the actual product but as long the PS3 is popular and Sony dominates the market, it will be able to make up the lost revenue in gaming royalties.

There are however, other implications. Now that Microsoft is supposedly making a profit we may actually see the 360 take (another) drop in price. Perhaps that profit will subsidise the upcoming HD-DVD drive allowing consumers the chance to get their hands on some high definition cinema at a low price. Either way this news will certainly add a little extra spice to an already fiery console war.

Surprised by the money lost in the battle for gaming platform supremacy? Let us know your thoughts over in the forum.

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