The Money Pit


Staggering numbers.

People keep asking "How could Microsoft possibly have lost 6 billion dollars selling the Xbox?" For starters, the box cost more to manufacture than it sold for, and that was just the cost of parts ... total losses were magnified by everything else from development fees to marketing budgets.

It's nice to see that this proud tradition continues, with the components of the new Xbox 360 checking in at $525. That is 126 bucks in the red for every unit sold, and that is before assembly costs, packaging, and shipping. Add in the start-up and selling costs noted above, subtract the retailers' cut from the $399 purchase price, and you are probably looking at a minimum loss of over 250 dollars for every box sold.

That is a best-case estimate, however, and things could spiral out of control in a hurry. It's worth noting that the original Xbox was assumed to lose about $2 billion, and to start selling at break-even point by 2005. The break-even never happened, the original machine still sells at a loss - moreso now that the price has been slashed to clear inventory to make room for the new box - and the losses have tripled in a mere three years.

Yikes.

Posted: Sat - November 26, 2005 at 06:13 AM        


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