The legal dispute between Epic and Apple has provided some very interesting revelations, some of which are not necessarily related to the two companies involved in the lawsuit.
For example, the lawsuit has revealed some data about Microsoft's Xbox sales, confirming what some people have suggested before, but which was never confirmed by the company itself: the software giant is selling consoles at a loss, making no profit on them. In other words, Microsoft does not make money from selling Xbox consoles, and the hardware actually only plays a role in the company's long-term software and services strategy.
Xbox vice president of business development Lori Wright was one of the executives who testified in the lawsuit, telling Epic's lawyer Wes Earnhardt that Microsoft does not make money from consoles.
"What is the margin that Microsoft makes on the sale of Xbox consoles? "the lawyer reportedly asked. "We don't. We sell the consoles at a loss," the lawyer quickly replied. "Just to be clear, does Microsoft ever make a profit on the sale of an Xbox console? "Earnhardt continued. "No," Wright replied.
However, Microsoft was keen to point this out in a statement to The Verge just hours after Wright's testimony yesterday. "The gaming business is a profitable and high-growth business for Microsoft," says a Microsoft spokesperson. "The console gaming business has traditionally been a hardware subsidy model. Game companies sell consoles at a loss to attract new customers. Profits are generated from game sales and online subscriptions."
Is Sony also selling consoles at a loss?
In other words, the hardware is actually generating a loss for Microsoft in the games business, and according to analyst Daniel Ahmad, the same thing is happening for Sony. Nintendo is the only company that makes a profit from its consoles. "The fact that the hardware was not profitable certainly played a bigger role in the late 90s and early 2000s (oh and the PS3 era lol). The PS5 and X/S Series are both selling at a loss at the moment, but will probably become profitable in time. Nintendo is kind of an outlier," says the analyst.
For Microsoft, it makes sense, because the company is supposed to generate big profits from software and service sales, so the consoles are a way to attract customers.
The reason why all these costs are being discussed at the moment has a lot to do with the ongoing lawsuit between Epic and Apple. Epic is unhappy with Apple's 30% revenue cut on in-app purchases for Fortnite, but Apple argues that Epic should also object to an identical 30% cut at Microsoft or Sony. This has led to hours of testimony about whether the iPhone is closer to a PC or an Xbox, and a debate about open versus locked platforms. Microsoft clearly sees a difference between Xbox and PC, and has only reduced the amount it takes from the Windows side by 12%, while Xbox remains at 30%.
Source: Blog-nouvelles-technologies.fr
