Microsoft actually makes money on the Xbox

I am sick and tired of people (mostly script kiddies) saying that M$ would make money on the Xbox even if they sold it at $100.00. I saw a post on this just today (posted 25June04 on XS). That people can't seem to accept a company would sell something cheaper than it cost to make in order to gain market share for their games astounds me. Even when faced with relatively sane numbers and logical arguments they hold on to their flawed beliefs. Further pressure produces hostility.

I'm going to present a series of quotes from a discussion and see how it plays out

Quote: some user (lets call him Mr. Conspiracy):

I now know of alot of people through research that there is growing suspicion that microsoft are sending data to xbox machines when going live. This data is alleged to be designed to reduce your pride and joy to no more then that of a large paper weight, what has been said is that basically when you go live, Microsoft know the version of your xbox and also know if it is out of warranty. So the outcome is you got alot of games lets say 30-40 each with no xbox to play them on, only one thing to do really and that is to buy another. Sales go up.
Now we do know that if you have a modified unit and you are silly enough to go on-line then you ask for all you get, but the research that i have done has involved the use of units which have not even had a single rubber foot removed never mind the bolt underneath. My research has also covered people that have contacted Microsoft to front them about what may be wrong with there machine and what parts may be needed, this has only basically been followed by long pauses and a reference to terms and conditions that under no circumstances should the unit be opened and if so then you have lost every right to having them repair your unit in or out of warranty.

Your feed back on this issue would be greatly appreciated.

I think this only adds to the needs of forums like this and for us people in the know of things, to help the innocents and newbies out there.

Brothers & sisters united we can conquer!.

Quote from another user (voice of reason #1):

The idea that M$ would "break" your box when it reaches it's warranty limit, makes absolutely no sense. It is widely known that M$ looses approx. $100 on the sale of every Xbox console. It would make more sense for them to Extend their warranty and increase the length of time you own it, thus increasing the number of games you would purchase, which is the sole way M$ makes their money off of Xbox.

;) :rolleyes:

Mr. Conspiracy:

Ok lets look at your response. M$ is not a multi million dollar company but a multi billion as we all know but who tells us that they loose $100 per unit and who can really say that this is true, and also if financially a good move why has M$ got no real good extension to warranty. Lets look at the maths:- M$ multi billion dollar company and a games console made in Aisa, now open your xbox and you see a simple motherboard, dvd drive and a small hard drive and all powered by a simple power pack.
Taking nothing away from how good they are but it seems kind of hard to see how the manufacture cost can be a half of $100 never mind a loss of that.

Thanks for your feed back.

Voice of Reason #2

yeah they actualy loose from 40~80 bucks on consoles. the only way there making money is with the % on video games that they make. im not sure what the exact amount is but looking around 20 bucks on 50 dollar titles. heard from some smart people that there is really know doubt that they will make money on x2. So how is M$ doing this. a db with eeprom serials all that stuff? i realy doubt that m$ would purposly do this unless it was a test. (which is kinda dumb) matching up cc# on live with a new xbox that was bought after the old one was broken. :confused: if m$ would do anything of the sort it would have things targeting moders more than old warranties. checking the voltage on the lpc bus and scan every drive letter on the hd for unknown xbes instead of targeting old warrenties.


so what does m$ do to these non warrentied xboxs??ever did a hd swap on them?? if you can shpw proof then you can actually make some damage but you will have to compare lots of these xboxs and also compare the varius things in each file. if your right lots of people need there money back.

and although the xbox stuff may look simple. the different parts add up pretty high in price. morph is way right money is lost on consoles and and only made on selling rights to have games on the xbox. and their share to each game. then the warranty is also a bad idea because of the horribly balanced stability with so many many things that could go wrong. just waiting for that green and black screen of death with japanese writing to consume my xbox.

My analysis of the costs involved in making an xbox:

Quote Mr. Conspiracy:

Taking nothing away from how good they are but it seems kind of hard to see how the manufacture cost can be a half of $100 never mind a loss of that.

Thanks for your feed back.

Custom P3 CPU: $65
Mainboard (W/o nVidia, Intel, or ram): $40
nVidia video chipset: $45
nVidia MCPx: $25
Ram: $25
HDD: $30
Custom DVD rom: $50
PSU: $25
IDE cable: $1
DVD "yellow" cable: $3
Assembly by people who get paid 5 cents a day: $2
Shipping across the ocean: $.50 / unit
Amortizing development costs: $1 / unit
Advertising: $.25 /unit
Power cable: $.25
Video cable: $1.00
Box (cardboard with 4 color gloss printing): $1
Styro loaf: $.25
Rubber feet: $.75
Total estimated cost: $316.00 per unit

I tried to be as accurate with my guesses as I could based on my experience. It looks like I am a little high, but even then they are loosing money. If you really think it only costs $50.00 to build one of these I have real estate on Mars and a 2 for 1 deal on bridges for you. :lol:


Oh and as to "how good they are built" that's why their breaking. 'cause their built as cheaply as possible.
-nB

Mr. Conspiracy:

When commenting on the build price of an xbox i was not litrally saying that they were $50 to build, im saying that really no way will M$ manufacture a unit at a loss. Not asking for silly comments from networkmuppet and lets face it you would have to be a muppet to quote nearly 40 for a P3.
However i am from the U.K and prices charged for retail xboxes here do not add up. When the first xbox was released it was about 300.00 which doubled you get your conversion to dollars. There has been only really been small reductions taking 3yrs, and now at present price for a retail unit is 150, so prices are probably still in M$ balance even if its true for what we are led to believe about a price loss per unit.
So the UK by comparison is a small easily controllable market where its feasable, especially when the PS2 is far outselling xbox.

Just to give you an idea on prices here:

xbox unit 150 each = 261.20196 United States Dollars
games 40 each = 69.65850 United States Dollars

Would you pay this for an xbox and games? Still think theres a loss?

At this point its all degraded into a flame war.

Me (relating to the networkMuppet reference and overall tone of the response):

bite me

Me (responding to the CPU comment):

make the cpu free and it's still a loss. the cpu is not off the shelf [...]. I highly doubt that was given away for free.
-nB (or nM if you prefer, LeicsChick)

edit: your conspiracy theory is bunk as well. but hey, it's your brain cells to fry dwelling on it :wink: :lol:
-nB

Love them insults:

Mr. Conspiracy:

Hey muppet no matter how much wet dreaming you do over xboxes and M$ these units aint made at a loss, and certainly not by UK prices.

His next comment was censored by the Moderators (myself and others) of the forum this occurred on. It was abusive enough to be deemed necessary to remove. The thread was locked shortly thereafter.

What it really all comes down to is the simple fact that M$ really does lose money on each and every console they make. They don't do this to be nice, they do it in an attempt to take away some of the market share from Sony, the current undisputed king of consoles.