Xbox One to sell at a profit

Microsoft plans to sell the Xbox One at a slight profit at launch, suggest comments made by Yusuf Mehdi.

This is an ambitious plan, as most console manufacturers aside from Nintendo sell machines at a loss, making up for the deficit with licenses and other fees.

This could be a long-term boon for Microsoft, who is launching its console at a higher price tag than its rival, but might be able to lower the cost to consumers to more competitive rates faster without hurting its bottom line.

“The strategy will continue which is that we’re looking to be break even or low margin at worst on [Xbox One] and then make money selling additional games, the Xbox Live service and other capabilities on top,” Mehdi told an audience at the Citi Global Technology Conference on Tuesday, as reported by GamesIndustry International.

"And as we can cost-reduce our box as we’ve done with 360, we’ll do that to continue to price reduce and get even more competitive with our offering."

If Microsoft breaks even at launch from console boxes alone, then all licensing, Xbox Live, and Xbox Marketplace sales will add up to a second profitable ecosystem in operation even as the Xbox 360 nears the end of its long and prosperous tail.

Assuming the Xbox One takes a similar turn towards increased profits later in its life cycle, Microsoft will be doing very well indeed.

“If you look at 360 that platform lasted for seven to eight years and it’s going to go for another three years. It’s incredibly profitable now in the tail,” said Mehdi.

"Some of these things take some time in the launch year in which you invest, and then they they play out over time. We’re going to continue to invest in Xbox 360, and the two devices can work in concert. So it’s not like the day we ship Xbox One your 360 won’t work. We’ll continue to support it."