NEWS - Wednesday, November 23, 2005

Microsoft Losing $126 On Every Sold Xbox 360

Microsoft’s newest gaming console marks an improvement on the earlier version in some decisive ways. To name a few, the pricier Xbox 360 is sleeker and more powerful (see BW Online, 11/22/05, "Xbox: How It’s Designed to Thrill"). And unlike its predecessor, the Xbox 360 is being released months ahead of the comparable next-generation console from Microsoft’s chief gaming rival, Sony. But when it comes to profitability, the new machine won’t change anything. Microsoft will carry on its tradition of taking a loss on the console, according to a preliminary analysis by market researcher iSuppli. An up-close look at the components and other materials used in the high-end version of the Xbox 360, which contains a hard drive, found that the materials inside the unit cost Microsoft $470 before assembly. The console sells at retail for $399, meaning a loss of $71 per unit -- and that is just the start. Other items packaged with the console -- including the power supply, cables, and controllers -- add another $55 to Microsoft’s cost, pushing the loss per unit to $126. These estimates include assumptions that Microsoft is getting a discount on many components.


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