Given all the recent Xbox hype, I thought that the following tidbit was pretty interesting… Microsoft apparently spends $552.27 to manufacture and test a ‘premium’ Xbox 360 (i.e., one with a hard drive), meaning that they lose a bit over $150 on each one that they sell (the MSRP is $399). Actually, they’re most likely losing a good bit more than that, as the wholesale price that they get for one of these must be somewhere well below the MSRP. The fact that they’re losing money on these isn’t a big surprise, though, as console makers typically subsidize manufacturing costs by producing and selling games, as well as through licensing fees collected from third party game makers. In terms of the console gaming market as a whole, Microsoft currently runs a distant second to Sony’s PlayStation franchise, although they’re hoping to change that with the Xbox 360. Microsoft will, however, get a run for their money in 2006, as Sony will be releasing the PlayStation 3 and Nintendo will be rolling out their ‘Revolution’ system. Regardless of who comes out on top when the dust settles, the real winner in all of this looks to be IBM, as their chips will power all three of the next-generation consoles.
Update: It looks like it might cost even more to build the Xbox 360. Moreover, some have argued that software sales/licensing may not be enough to offset these sorts of losses.
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