Microsoft takes a $100-$200 loss on all Xbox Series X|S sales

Helghan

Member
That's not the only reason. Its not like they planned to increase the price in the first place.
You don't decide those things on the weekend. Price increases are definitely planned beforehand. The reason why the hiked the price, was probably due to the development price increasing, but also here, they know such a thing before the price increase actually happens.

It's not like the chip manufacturer suddenly says, oh btw we are increasing our prices by 10% tomorrow.
 

PaintTinJr

Member
Xcloud isn't a console, what are you saying?
It was widely covered at the time, here on gaf, when Tom Warren tweeted that XsX were used in Xcloud and Geordiemp then analysed why the poor CU arangement in the XsX was done for XCloud rather than home console. I guess you missed all that, then?
 
Microsoft is bleeding money this generation...the bright side is that they can bleed money for 10 generations or even more....
What are you basing this assertion on? Regardless I'll always prefer to see a company take a loss to provide me a better value over them raising prices of their games and systems and having me eat that cost. I care about my bottom line not theirs.
 

PaintTinJr

Member
What makes you think Sony is turning a profit? They raised the price and made several revisions in a short time to cut down costs, and then there's the digital edition which Sony rarely talks about.
Have you read the thread - to see the quoted sources of their (Sony's/Jim's) statements and seen that when they increased the price their public accounts were about currency and lost margins?
 

PaintTinJr

Member
What are you basing this assertion on? Regardless I'll always prefer to see a company take a loss to provide me a better value over them raising prices of their games and systems and having me eat that cost. I care about my bottom line not theirs.
When they corner a market they get it all back and more for an inferior offer. Please tell me you understand that basic business premise, no?
 
It is an over estimation that was clear in my original post and clear in every response. Acting dumb doesn't change my over estimated upper limit to being unreasonable. You are just arguing in bad faith.

I'm not arguing anything, I'm waiting for you to tell me where you got a $50 loss from which you haven't mentioned to me once while you are avoiding the question in bad faith.

The post I first responded too only said "best-case scenario for Xbox" but none of your numbers are based on anything tangible.
 

Bernkastel

Ask me about my fanboy energy!
It was widely covered at the time, here on gaf, when Tom Warren tweeted that XsX were used in Xcloud and Geordiemp then analysed why the poor CU arangement in the XsX was done for XCloud rather than home console. I guess you missed all that, then?
Next you are gonna quote the Next Gen Spec Thread as your source.
 

Alebrije

Gold Member
What are you basing this assertion on? Regardless I'll always prefer to see a company take a loss to provide me a better value over them raising prices of their games and systems and having me eat that cost. I care about my bottom line not theirs.
Because they lost money on hardware, they spent money on Bethesda and Activision ,etc ..they are bleeding money...obviously they expect a return (ROI) but it can take years or even never get it.

Since Microsoft has tons of money ( they could buy Sony if were possible) they can bleed for generations if they want. But obviously they wont...
 
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You don't decide those things on the weekend. Price increases are definitely planned beforehand. The reason why the hiked the price, was probably due to the development price increasing, but also here, they know such a thing before the price increase actually happens.

It's not like the chip manufacturer suddenly says, oh btw we are increasing our prices by 10% tomorrow.

Not if you didn't anticipate the inflation. Pretty sure when Sony released the PS5 they didn't plan to increase the price after launch. On the contrary what they did plan was several redesigns of the systems hardware to help them reduce costs. As for development costs the console has already been released. No idea if your making a reference to the Pro model or the PS6. I don't think those R@D costs would affect the PS5.
 
Jim didn't confirm that. He confirmed that they were breaking even on the standard model. Jim Ryan actually said:

"I’m pleased to say that the PS5 standard edition will break even from next month’s production," Ryan revealed. "From then on, we project that it will gradually become increasingly profitable."

He projected that it would gradually become increasingly profitable. I was not able to confirm whether he said it actually did become profitable but I have to imagine that with the change in global economics and the resultant price increases in many markets that gains in profitability had declined. That's sort of backed up by the sharp drop in operating income this past quarter despite record revenue.
As I posted in my other comment, Jim said this around June and in August Sony's CFO confirmed that they are indeed selling PS5s at a profit.

After the inflation, Sony raised the price in most regions. And considering they never had to update their investors whether PS5 is in the red again, it is safe to assume that PS5 is still profitable. There is no evidence to believe the contrary at the moment, unless Sony hints at it or updates their investors.
 

adamsapple

Or is it just one of Phil's balls in my throat?
After the inflation, Sony raised the price in most regions. And considering they never had to update their investors whether PS5 is in the red again, it is safe to assume that PS5 is still profitable. There is no evidence to believe the contrary at the moment, unless Sony hints at it or updates their investors.

The topic of raising prices wouldn't come up if it was continuously being profitable, second I don't know how much they would need to tell the investors about that, even the first comment about it being profitable came from an interview or discussion *after* an earnings report, via bloomberg, it wasn't a part *of* an earnings report if I'm not mistaken.

I think it's a more safer bet that just about everything costs more to produce and ship now than it did at the time of that article/source, because of a worse global situation.
 
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PaintTinJr

Member
I'm not arguing anything, I'm waiting for you to tell me where you got a $50 loss from which you haven't mentioned to me once while you are avoiding the question in bad faith.

The post I first responded too only said "best-case scenario for Xbox" but none of your numbers are based on anything tangible.
I'm struggling to see the angle in which you take issue with the number - as they probably turned a profit before that, meaning the loss I was going with in Xbox's favour based on next-gen thread predictions from a Forbes or Bloomberg article is actually to Xbox's advantage.

If we said it was a differential of closer to $150 per unit loss for Xbox then that equates to even more first party PlayStation games at the same spend. I'm lost at to you taking issue with my Xbox favourable maths :)
 
The topic of raising prices wouldn't come up if it was continuously being profitable, second I don't know how much they would need to tell the investors about that, even the first comment about it being profitable came from an interview or discussion *after* an earnings report, via bloomberg, it wasn't a part *of* an earnings report if I'm not mistaken.

I think it's a more safer bet that just about everything costs more to produce and ship now than it did at the time of that article/source, because of a worse global situation.
It does; the cost of production has gone up. But so has the PS5 price to adjust the increase in production costs.
 
It does; the cost of production has gone up. But so has the PS5 price to adjust the increase in production costs.

They were already making a profit before. Part of their cost reduction was due to their redesigns. Now since costs went up they increased the price to maintain a profit.

I know people are confused as why it isn't this way with Microsoft but their costs can be very different when compared to Sony. They also haven't redesigned the system to my knowledge so their BOM didn't decrease like Sonys.

I'm not trying to console war with this but its what I believed has happened. Which isn't abnormal to be honest.
 
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Bo_Hazem

Gold Dealer
 

DaGwaphics

Member
I thought it did. But I read that it isn't as powerful as the one in the PS5. The reason for this is because Kraken needed a more powerful decompressor than ZLIB which is what I believe Microsoft is using.

It does, the series consoles have two dedicated general + texture decompression engines capable of greater than 6GB/s output. They are part of the block that contains their crypto and hash functions. Supposed to offset 2 full zen2 cores worth of work. They went over this at hotchips.
 
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adamsapple

Or is it just one of Phil's balls in my throat?
It does; the cost of production has gone up. But so has the PS5 price to adjust the increase in production costs.

Yes, and we can't say unless officially confirmed whether it's still selling for a profit or not, despite the increase.

The DE was selling at a loss even then, would be nice to know if that is also still selling at a loss.

More like bad business decisions, bad project management, bad costs management… the list could go on and on… at this point in the gen, they shouldn’t be losing money per console sold.

Even this fantasy booking doesn't change the fact that they're eating the cost instead of putting it on the consumer 🤷‍♂️
 
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When they corner a market they get it all back and more for an inferior offer. Please tell me you understand that basic business premise, no?
If that company no longer offers a good value I don't have to support it. Why should I miss out on a great value because of a hypothetical? Real prices hikes are worse than imagainry ones every time. The market only gets cornered when the companies in that market stop competing for my business.
 
Because they lost money on hardware, they spent money on Bethesda and Activision ,etc ..they are bleeding money...obviously they expect a return (ROI) but it can take years or even never get it.

Since Microsoft has tons of money ( they could buy Sony if were possible) they can bleed for generations if they want. But obviously they wont...
You realize when a company purchases an asset it is not marked down a loss right? MS buying Bethesda and Activision added to the value of MS not lowered.
 

PaintTinJr

Member
So you looked at forum posters predictions based on articles that don't mention any data, and then randomly got $50 losses for the PS5?
No.

The article (from one of those outlets) calculated the BOM for the PS5 from experts, and others in the next-gen thread took that number and chipped in with knowledgeable info about shipping logistics and IIRC the general consensus at the time - post launch - was that the PS5 was either breaking even or "losing less than $50 per unit" to sell through.

recaps of info stated by Sony since launch confirming the PS5 has gone from losing money to now making money fit with the info discussed IMO. It just feels you wanted to derail the point that with the hardware subsidy Xbox is eating Sony could have paid for 2-4 AAA first party games at the same running cost. Meaning if Xbox sold hardware they could sell at cost then more games could be getting funded.
 
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PaintTinJr

Member
If that company no longer offers a good value I don't have to support it. Why should I miss out on a great value because of a hypothetical? Real prices hikes are worse than imagainry ones every time. The market only gets cornered when the companies in that market stop competing for my business.
It isn't value if the product can't pay its way. It is a paradox that you only get that from Xbox while they are the runner up, so it is self-defeating to support their product to succeed ahead of others - that can pay their way and make a better product, cheaper and fund more games development into the process from the same amount of consumer money.

Your balance sheet for how this works is so messed up if you think they are offering "value" by temporarily burning money in a market that can offer profit for better product offerings from better run platforms,
 

PaintTinJr

Member
There is no way to spin this. How many billions in the hole is XBox lifetime?
Well, they've sold probably aound 140m-160m consoles over two decades and have stated in court they lose money every generation.

In their first gen the internet places the platform loss - excluding devs being shutdown that they bought - between $2b-$4b for 20m units sold, which again is a $100 to $200 loss range. The 360 was by far their most expensive hardware after them double the RAM on Epic's advice, and they sold the arcade models cheaper than any, since, so even saying they average $100 loss across all 160m sold, gives a loss in the $15b range, excluding the cost of RRoD.
 

Banjo64

cumsessed
What are you basing this assertion on? Regardless I'll always prefer to see a company take a loss to provide me a better value over them raising prices of their games and systems and having me eat that cost. I care about my bottom line not theirs.
Agree with that. If they won’t eat the cost I’d rather they tried to instead produce and sell a cheaper to manufacture console. 8tf PS5 for £399? why not.
 

feynoob

Member
This speaks volume for how well designed the PS5 is. Imagine if they decided not to take a ~100-200 loss on a Series S, that puts it in the range of a console with over twice the theoretical power (PS5).
Except the XSS does play the same games as ps5, just lower power.
XSS parts are just more expensive. Which attributes to the higher price.

If MS didnt go with that SD card, they could have made a cheaper XSS.
 

metaverse

Member
Except the XSS does play the same games as ps5, just lower power.
XSS parts are just more expensive. Which attributes to the higher price.

If MS didnt go with that SD card, they could have made a cheaper XSS.
Literally what I just said.......could have would have but didn't. The reality is, the PS5 is the more cost effective design while providing more theoretical power.
 
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It isn't value if the product can't pay its way. It is a paradox that you only get that from Xbox while they are the runner up, so it is self-defeating to support their product to succeed ahead of others - that can pay their way and make a better product, cheaper and fund more games development into the process from the same amount of consumer money.

Your balance sheet for how this works is so messed up if you think they are offering "value" by temporarily burning money in a market that can offer profit for better product offerings from better run platforms,
I disagree. A product making money for a company doesn't matter to me at all. I want the company to save ME money and offer a great value. You seem to be completely unaware of how consoles have been since the 80s. Companies regularly took losses on hardware so they could make that money back on software and services. Perhaps you are looking at this all messed up.

Although now you mention it, there was lots of talk about Game pass and if that was bleeding MS dry and it turns out it was profitable for them. It's great to see it be possible for a company to offer a superior product at a fair price and still make money. Kudos to MS on that one.

Agree with that. If they won’t eat the cost I’d rather they tried to instead produce and sell a cheaper to manufacture console. 8tf PS5 for £399? why not.
Good point. I'll also add that perhaps it wasn't as easy for MS to simply add more RAM to the XSS if they were already taking a loss on the hardware. There is an excellent chance that the XSS already offered a pretty good bang for the buck.

Literally what I just said.......could have would have but didn't. The reality is, the PS5 is the more cost effective design while providing more theoretical power.
It's also a fraction of systems they manufacture, forces customers to buy their digital software only from Sony and if I'm not mistaken didn't the price of the digital PS5 go up with the disc version further increasing the price disparity between the XSS and PS5 DE? At $150 more a customer could easily get Game pass and/or a few normal retail games. Some significant cons there not mentioned. XSS still appears to be the superior value proposition and that's the whole point of the system.
 

adamsapple

Or is it just one of Phil's balls in my throat?
I know we say these silly things in jest, but how much off a cut would Microsoft actually get? As it's Seagate that makes the devices right?

Well, considering that Seagate has an exclusive deal with MS for the proprietary 'cards', unlike PS5 where any brand would work, I gotta imagine it may be close to a 50/50 split
 
They were already making a profit before. Part of their cost reduction was due to their redesigns. Now since costs went up they increased the price to maintain a profit.

I know people are confused as why it isn't this way with Microsoft but their costs can be very different when compared to Sony. They also haven't redesigned the system to my knowledge so their BOM didn't decrease like Sonys.

GOW - 'War'
True. The logical reasoning should be to stick with the latest official update, i.e., PS5 is profitable.

But here some people are twisting it and saying (without any logic) that we should assume that PS5 suddenly became unprofitable, and unless Sony confirms (again!) it's profitable, we should start believing that PS5 is making a loss all of sudden.
 

Tams

Member
The 20 tflops 6800xt was just $550 last week. I posted a link in the PC thread.

The 13 tflops 6700xt was down to $350 on Sunday. The 10.7 tflops 6600xt was around $250 a couple of weeks ago.

The PCIE Gen 4 SSDs which launched for $250-300 last year have crashed to around a $100 this year. Hell, i picked one up for $150 earlier this year and that model is down to $100 already. I purchased a bunch of PC parts last year around August and they were expensive. They are all half off. Especially RAM and CPUs.

I really dont know what to say here. Consoles dont cost that much to make. MS isnt even using expensive SSDs like Sony is. $50 loss I can understand if you include distribution and shipment costs which have gone up but also come back down since the pandemic ended. Dont fall for these misleading statements. This man was just saying how gamepass was the future a few months ago and now, he's saying he maxed out the console userbase? What? Nothing about that interview makes sense. Just ask yourself, why would he still have a job if he was losing $200 per console (worse than the PS3 at this point in the gen), and was no longer able to sell gamepass to his console users?
Most of what you listed is existing stock. The cost of making it is already spent.

Microsoft and Sony are having to continue to make consoles, at higher cost.
 
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