Microsoft has usually gone to great pains to protect the finer details of Xbox console retail performance. The company doesn’t discuss specific sales numbers and also doesn’t reveal specific revenue from hardware. Instead, Xbox One, Xbox Series X, and Xbox Series S are bundled under a wider More Personal Computing division.

During Epic Games v. Apple, a legal battle over revenue frameworks on the iOS App Store, Microsoft has been dragged into the battle. The company’s VP of Xbox business development, Lori Wright, took the stand this week.

When asked a rather simple question – have Xbox consoles ever made a profit – Lori was forced to reveal something Microsoft never talks about. Her answer was simple enough… “No”.

Microsoft still sells Xbox consoles and a lot of them. Since the first Xbox launched nearly 20 years ago, the company has shifted hundreds of millions of units. During that time and those units, Microsoft has never made a profit on the hardware. So, why does the company persist in making new Xbox consoles each generation.

What’s the Point?

The answer is simple, or at least simpler than it once was… it’s because of software. Whether it’s Microsoft’s own games, Xbox Live (Xbox Network these days), or Xbox Game Pass, it’s the software that drives revenue for the company’s gaming division.

When the Xbox brand was new in the early 2000s, there was persistent talk Microsoft would sell the division. It’s clear to see why, the hardware was making no money and in those days software services and first-party titles were in a nascent state. Since, software has made up for a lack of profit from hardware.

Microsoft has often tried to dress up Xbox console revenue, but the reality has always been hardware makes little money for the company. One of the more humorous attempts to make Xbox consoles profitable was Microsoft paying itself a Windows license fee for each console sold. It’s unclear if the company still does that.

It’s not much of a secret, with most people who follow Xbox knowing the division is not a money spinner from a hardware perspective. Of course, the launch of the Xbox One at $100 more than the PS4 didn’t help, Microsoft for some reason deciding to pack on the dying Kinect onto the console.

Tip of the day:

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