It's a well-known fact that when a new games console launches it's typically sold at a loss. With hardware revisions and mass production ramping up, the costs fall and the console should eventually becomes profitable. However, that's never happened for an Xbox console according to Microsoft.
As Protocol reports, Xbox business development vice president Lori Wright is a third-party witness in the Epic vs. Apple trial. Epic's lawyer Wes Earnhardt asked Wright "How much margin does Microsoft earn" when selling Xbox consoles, to which Wright responded, "We don't. We sell the consoles at a loss."
As VGC points out, Wright was also asked if there's ever been a profit generated from an Xbox console sale, which she confirmed has never happened. To put that in context, Microsoft has been selling Xbox consoles for nearly 20 years now, including the original Xbox, the Xbox 360, Xbox One, and now the Xbox Series X and Series S. In all that time, every single console sale cost Microsoft money.
The reason games consoles end up being profitable is through a combination of software, service, and accessory sales, but it's still surprising to find Microsoft has never achieved hardware profitability. Analyst
Hardware being unprofitable certainly played a bigger role in the late 90's and early 2000's (oh and PS3 era lol).
Both the PS5 and Series X/S are being sold at a loss right now, but will become profitable down the line most likely.
Nintendo is somewhat of an outlier.— Daniel Ahmad (@ZhugeEX) May 5, 2021
" alt="Daniel Ahmad confirmed">Daniel Ahmad confirmed that the PS4 eventually became profitable for Sony and that Nintendo developed the Switch to be profitable quickly, so Microsoft is the odd one out.
Breaking that trend with the Xbox Series X or Series S seems unlikely, not only due to the expensive components it relies on, but because of the ongoing shortage of components worldwide. Costs are not going to fall quickly and demand for the hardware remains high to the point where Microsoft can't produce them fast enough.