MICROSOFT NOW SELLING XBOX 360 AT A PROFIT?
For those that don't know, most consoles are at least initially produced at a net loss (The Wii being a notable exception) with the idea being that you'll try to make the money back on software and accessories until production prices drop to a level where the hardware is no longer costing you money for every unit sold. Further, you take the loss in hopes of dominating the market so that you can maximize the profit coming in from your games and accessories. It's the old maxim of selling the razor cheap and then making your money back on razor blades brought into the modern age.
Now then, if ArsTechinca is right and the Xbox 360 has already gotten to a point where Microsoft makes roughly $75 on every console sold, I'm genuinely shocked that it happened so fast. Unlike the PS2 or Gamecube (or Wii for that matter) the original Xbox never turned the corner and was consistently a loss leader for it's entire lifespan - and the Xbox 360 was supposedly going to be much the same story.
"It's a gloomy picture, but there is light at the end of the tunnel. When iSuppli tore down an Xbox 360 around this time last year, the firm estimated that Microsoft was losing $126 on each 360 sold. Microsoft is whistling a much happier tune now. Revised component costs for the Xbox 360 indicate that costs have dropped to the point where each $399 Xbox 360 sold costs $323.30 to make—leaving Microsoft $75.70 in the black on each system, before marketing and other costs are figured into the equation.
The two biggest points of contrast between the PS3 and Xbox 360 in terms of component costs are what iSuppli calls the "motherboard"—CPU, GPU, memory, controllers, etc.—and the optical drive. The PS3's "motherboard" costs $500 for Sony, while the Xbox 360 motherboard is only $200—down from a $370 figure at launch. The Xbox 360's vanilla DVD optical drive is only $19.45, over $100 cheaper than the Blu-ray's price tag.
As we said in May, Sony's decision to use the PS3 to gain a Blu-ray beachhead is an expensive one. If the PS3 sells like gangbusters once the supply constraints evaporate sometime in the first half of 2007 and Blu-ray wins the battle against HD DVD, the decision will have been worth it." -ArsTechnica
If Microsoft is actually now seeing a profit on every Xbox 360 sold, it makes you wonder whether they'll use the additional funds to further the 360's lead over it's competitors. For more information on both the 360's production costs as well as an estimate on how much Sony is currently spending to produce the PlayStation 3, check out the ArsTechnica article at this link.
Posted by nylatenite
at 1:10 AM EST