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MS: Xbox One will be break-even or profit-making from launch

MS: Xbox One will be break-even or profit-making from launch

Thu 05 Sep 2013 7:17am GMT / 3:17am EDT / 12:17am PDT
Hardware

And expect another 3 years and over 100 games from 360, says Mehdi

Microsoft's Yusuf Mehdi has revealed that each sale of an Xbox One will be a break even transaction for Microsoft at the very least, suggesting that the machine is to be sold at profit from day one - a feat normally reserved for Nintendo.

Speaking at the Citi Global Technology Conference on Tuesday, Mehdi told listeners that: "the strategy will continue which is that we're looking to be break even or low margin at worst on [Xbox One]," he explained, "and then make money selling additional games, the Xbox Live service and other capabilities on top.

"And as we can cost-reduce our box as we've done with 360, we'll do that to continue to price reduce and get even more competitive with our offering."

Mehdi also expanded on his employer's plans for the continuing support of the Xbox 360, that the machine will be receiving support for another three years - a period which he expects to see the release of over 100 games.

"You've seen us over the years constantly be focused on profitability and improving year over year," Mehdi explained when asked about the profitability of the Xbox business and how it would weather the launch of the One. "There are different points in the cycle when you invest in new hardware.

"If you look at 360 that platform lasted for seven to eight years and it's going to go for another three years. It's incredibly profitable now in the tail.

"Some of these things take some time in the launch year in which you invest, and then they they play out over time. We're going to continue to invest in Xbox 360, and the two devices can work in concert. So it's not like the day we ship Xbox One your 360 won't work. We'll continue to support it."

Answering more directly to the question of margins, Mehdi highlighted the importance of the revenue stream from XBL memberships as a growth factor - a subscription which Microsoft obviously hopes many customers will continue on its new machine.

"We've seen our Xbox Live subscription service continue to grow. We're up to 48 million members now. We're shipping more games than we've ever done before. Those are things I look to to say, 'hey we can grow not just top line revenue but also profitability.'"

2 Comments

Well, that explains the $500 US pricetag.

And as far as Xbox Live goes - I know of a few people who have dropped out of the paying service completely after the whole XBone thing was announced.

Lets see how it goes.

Posted:A year ago

#1

Nicholas Pantazis
Senior Editor

1,017 1,463 1.4
@ Michael Myself included. Once it was clear that I wasn't going to be using an Xbox One this generation I did not renew.

Posted:11 months ago

#2

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