Xbox 360 finally positioned to make money

The production cost of Xbox 360 consoles falls below retail price

November 27, 2006

Since its launch in November, 2005, Microsoft has been losing money on every Xbox 360 system sold. Last week, technology analyst iSuppli estimated that that the Microsoft Xbox 360 Premium system, which includes a hard drive, costs $75 U.S. less to produce than its current retail price.

Although iSuppli's estimates do not account for marketing or sales costs, such as packaging, these estimates suggest that Microsoft is now in a position to at least break even on Xbox 360 sales.

This comes after the Xbox 360 was in the red for about a year, with Microsoft willing to take a hit just to get its consoles out the door. In gaming hardware, most companies are willing to take a significant loss in order to speed up the adoption rate of their hardware. After all, the real money is in software licensing rather than in the actual hardware sales.

iSuppli also estimated that Sony could be losing as much as $300 U.S. on sales of its PlayStation 3 which already trembles under a significantly higher price point than the Xbox 360 or the Nintendo Wii.

Although Sony may be taking huge hits to get its PS3 out, Nintendo is already making money off the Wii. Nintendo of Canada's Pierre-Paul Trépanier told GamesIndustry.biz, "Unlike our competitors, we don’t have ulterior motives; we’re not in it to sell HD TVs, or to become the operating system in the living room or anything like that … We are making money from day one on the Wii."

Microsoft has denied plans to lower the price of its Xbox 360 this year.