xboxone

Note: Story updated since original post to correct reference to timing of profits.

Microsoft has spent billions on its Xbox business over the years, and seen its share of red ink, but the company says it’s very focused on profitability for its upcoming Xbox One.

Speaking at the Citi Global Technology Conference, Xbox chief marketing officer Yusef Mehdi said he expects to “break even or be low margin at worse,” with the Xbox One hardware over time, and then make money on additional games, Xbox Live and other capabilities.

“The strategy will be the same as in the past,” he said. “As we can cost-reduce our box as we’ve done with the Xbox 360, we’ll do that [with the Xbox One] to continue to price-reduce and get even more competitive with our offering,” Mehdi said.

He made it clear that the focus for the Xbox One, which is priced at $499 for launch, is “very much on profitability.”

“If you look at the Xbox 360, that platform has lasted seven to eight years and will go on for another three years,” he explained. “It’s incredibly profitable now in the tail. Some of these things take time in the launch year in which you invest and then they play out a bit over time.”

Mehdi said that his team always has priced its products “super competitive” in terms of being close to break even or low margin in order to have broader distribution. For the Xbox One, he said, Microsoft made a couple “big bets.”

“We wanted something to really differentiate that lets you play games as if you’re playing movies and we wanted to break the barrier of being able to voice control your television,” Mehdi explained. “So to do that, we added a lot of capability. For $499, we think the value we provide for that is a very good deal. We feel that we’ve done the right balance. And if you look either the pre-orders that we’ve been sold out for weeks, or do price-adjusted inflation on the 360, it’s actually pretty comparable.”

Comments

  • Gust

    “The strategy will be the same as in the past,”

    Which effectively negates the contention that focus on is “very much on profitability”. This is just more empty posturing ahead of the upcoming shareholders meeting because they know many investors and analysts want MS to divest this business, which has produced a negative return over thirteen years.

    • Matthew Bryant

      While it’s true that their onine and entertainment division is bleeding money, and every other division in Microsoft that isn’t focused around Windows and business, XBox is actually profitable. Zune, however, is not. Neither is Bing. The two make it look like XBox is causing Microsoft to lose money. It is not. XBox is one of the only products outside of Windows and Office that actually DOES make money. Still, Microsoft need to kill most of their products and just cut their losses. Bing will never be relevant. Ever.

      • Guest

        Producing a negative return over thirteen years != not profitable currently.

        • Matthew Bryant

          So we’re going to look at XBox from the very beginning when it was bleeding money, and ignore the fact that currently it’s making them a hefty sum every year? Your argument makes no sense. XBox IS currently making Microsoft a considerable amount of money. 10 years ago that was not true. However, for the last 5 years it very much is true. I’ll agree that their investment in the game console industry has yet to break even, but there’s a big difference between the XBox being profitable year over year and being profitable since its creation. It IS profitable now.

  • Sir Louie

    Everybody does this for money!! What’s the point?? These people don’t put together consoles cause they love us… Ooohhh nnnoo it’s about a profit!! Money makes us act funny and as people we know this already.. And as people we have options.. And that is stick with what you have.. Or support the Xbone or the hackstation.. The ball is in your court..

    • a

      UR STUPID did you read “The strategy will be the same as in the past,” he said. “As we can
      cost-reduce our box as we’ve done with the Xbox 360, we’ll do that [with
      the Xbox One] to continue to price-reduce and get even more competitive
      with our offering,” Mehdi said.

  • Matthew Bryant

    I lol’d. I won’t even lie. Sure, we’re used to the statements telling us whether the console will be sold at a profit from launch, but does Microsoft REALLY need to make this statement? At a time where Microsoft is being crucified once again for their lack of focus on power and the gaming experience in general, why would they make a PR statement about how their console is all about making money? We already know this. Everyone already knows this. Shareholders already know this, but you have an illusion to maintain Microsoft. It’s not like we actually expect the illusion to be true, or even that we really think you care about gamers personally, but your PR statement should be “We’re committed to providing the best possible gaming experience to our loyal userbase and maintaining a profit allowing us to reduce the cost of our console for the consumer over time.” Is that really so hard? Instead you come off just as cold and uncaring as you normally do. Are there any humans that work at Microsoft, or is everyone a corporate robot?

  • Sir Louie

    Who fucking cares is my point!! “Stupid ass” however they contract their business is their business.. Now I know a lot of people are saying it’s way to much I will wait till the price go down.. That’s a choice you have.. So Mr stupid everybody know the price will drop one day duh!! So stupid!! Lol!!

  • Jonathan George Anaya

    After reading all the comments in this section: Apparently, fanboys don’t know realize that the Xbox division at MS makes TREMENDOUS profits. The Live subscriptions alone pull billions back into MS; as well as the Royalty fees and MS produced games. Hell, even the Hardware division now squeaks out profits due to the aging technology behind it that continues to be manufactured in high quantities and sold at large markups

    • Matthew Bryant

      A lot less than you think, but yes it does make a considerable profit.

  • fuckyou

    how does it make money if its not yet released? and if the rumors are true that you cannot share games with other consoles, then I will never buy one. Personally, I like to try a game before I buy it. also If thats true, how the fuck are we going to be able to rent games? or are they downloads? this console sounds fucking retarded. all you need to do is add a couple of perks to the 360 and call it good. Go to hell with the xbox one.

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