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Microsoft Corp. will not make money selling Xbox One consoles, but will early by selling games for the platform. Nonetheless, the company does not want to lose a lot on the game system even initially, which is why the software giant will sell Xbox One for $499, a new high for the company. The company also does not expect to lose a lot on hardware.

“We are looking to be around break even or low margin, on the [Xbox One] hardware, […] so that we can get as broad distribution as possible. […] Then we make money selling additional games, the Xbox Live service, and other capabilities on top. As we can cost-reduce our box as we have done with 360, we will do that to continue to price reduce and get even more competitive with our offering,” said Yusuf Mehdi, corporate vice president of marketing and strategy of interactive entertainment business, at Citi Global Technology Conference..

Microsoft Xbox One will be priced at $499, which is $100 higher compared to the cost of its bitter rival, Sony Corp.’s PlayStation 4. However, the Xbox One will come bundled with the all-new Kinect motion sensor, which will open doors to new games as well as advanced voice and gesture controls functionality. The high-ranking executive from Microsoft believes that advanced graphics and physics technologies as well as second-generation Kinect will provide very high value for the $499 price-point.

“We wanted to have something to really differentiate, that lets you play games as if you are playing movies. We wanted to break the barrier of being able to voice control your television and so to do that we added a lot of capability. So, the view is that for $499, our price point, we think the value that we provide is a very good deal. Obviously different people will make their choices, but we feel that we have done the right balance. If you look at either the pre-orders that we have been sold out of for weeks, for the largest we ever built, or you do price-adjusted inflation on, say, the Xbox 360, if you look at the price, the price is actually pretty comparable,” said Mr. Mehdi.

At present it is unclear whether AMD will make any money on Xbox One hardware at launch or a little later, but the important thing is that the company does not expect to make losses, which may indicate that the system is already rather cost-efficient. With Xbox 360 Premium, Microsoft lost about $125 on every unit back in 2005, according to some market analysts.

Microsoft Xbox One is based on AMD Fusion custom-designed system-on-chip with eight x86 low-power/low-cost Jaguar cores, AMD Radeon HD graphics with GCN architecture (with 32MB ESRAM/EDRAM buffer) as well as 8GB of DDR3 system memory. The console features 500GB hard disk drive, Blu-ray disc drive, 802.11n Wi-Fi connectivity, Gigabit Ethernet, output of video with up to 4K resolution (3840*2160) using HDMI 1.4 as well as 7.1-channel audio. The new Xbox One comes with completely redesigned Kinect sensor that will feature 1920*1080 RGB camera, improved infrared sensor and enhanced voice controls. The console sports a number of functions, e.g. TV-cable pass-through that will seamlessly integrate it into the living room.

Tags: Microsoft, Xbox One, Xbox, Durango, Xbox Next, Business


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