I wrote a post about the dynamics that play into console pricing and why Microsoft might have done this: https://www.stevenbuccini.com/console-wars

It's clever sales strategy: sell a weapon for $1, sell the ammunition for $1000.

Most commonly known as the razors and blades model.

Slightly modified, since microsoft is the sole gatekeeper of which software can be run on their heavily subsidized (anti competitive) hardware.

Have you tried putting a 3rd party razor head on your Gillette razor handle?

On some models, it actually works fine. (I talk of the traditional single blade gilette Stirling)

I remember seeing the COGS for Xbox One and it was the same as retail prices. There was no profit from COGS and then you have shipping and associated costs to get the consoles out. So there is an inherent loss. it’s likely too that advertising comes under this cost per unit too.

Xbox games take 10 to 15 USD per title sold, so there is a big push for games to sell. Xbox 360 had the highest at the time games sold at console sale it was like 2.5 or 3.5 games per console sold and I think that is likely still a record.

Consoles take time to make a profit, but subscription models with multiplayer really help. Honestly I think this is how it should remain, at least with lowering the cost of entry to home consoles vs desktop computers.

Hasn't this been how Xbox has operated for 2 decades now?

Or every console until it reaches a certain maturity.

Except for Switch.

By this metric (vs. component and manufacturing cost) PS5 (both models) became profitable less than a year after launch.

Of course Apple's gaming devices (iPhone, Apple TV, etc.) are always profitable.

Selling products at a loss should be illegal, it's an anti-competitive practice

In fact, it is illegal, at least in some European countries, as usual, why is it ok for Microsoft?

https://europa.eu/youreurope/business/selling-in-eu/competit...

There's also laws like that in the US, and in most places. However, it seems this is being overlooked because it's not really for the purpose of creating a monopoly, as everyone is doing this, as it's actually just to get consumers' feet in the door to the ecosystem/platform.

3 console maker: Microsoft, Sony, Nintendo

Nintendo doesn't sell the switch at a loss [1]

Sony no longer sell the PS5 at a loss, (sold at a loss for 9months) [2]

Microsoft still selling at a loss is anti-competitive, since they are able to sell their console cheaper than the competition, they are a billion dollar company btw

Another example is the Steam Deck, sold at a loss, as a result, competition can no longer compete, read about "Deck vs GPD"

[1] - https://venturebeat.com/games/nintendo-wont-sell-switch-at-a...

[2] - https://www.gamesradar.com/ps5-is-no-longer-selling-at-a-los...

It's just how this market works.

https://www.forbes.com/sites/paultassi/2021/02/03/ps5-is-bei...

Sony is no longer selling the PS5 at a loss [1], they sold at a loss for just 9 months

[1] - https://www.gamesradar.com/ps5-is-no-longer-selling-at-a-los...

Correct. Still, it's how this industry works. PS3 has been sold at a loss for around 4 years.