Microsoft CEO Sayta Nadella has insisted that Xbox is not a ‘core part’ of the business, but have Microsoft undervalued the Xbox net worth?
Shortly after taking over as CEO of Microsoft, Satya Nadella insisted that the Xbox division isn’t his priority. As a man with a background in cloud-based technology, that is his focus. Gaming is merely a side project.
“I want us to be comfortable to be proud of Xbox, to give it the air cover of Microsoft, but at the same time not confuse it with our core,” Nadella said.
However, given that the gaming division generated $8.7 billion in 2016, which equates to approximately 10% of the company’s overall revenue, Microsoft may be undervaluing Xbox.
How does Xbox generate revenue?
Microsoft have sold 26 million Xbox One consoles so far, which retailed at $499 upon release. That equates to more than $11 billion in revenue since the console launched in late 2013.
Yet, surprisingly enough, consoles are not a great source of revenue for Microsoft. In total, it costs $471 to make the system, meaning Microsoft made just $28 on initial sales.
Although, the price of an Xbox One has now dropped below $250 through some retailers. As a result, Microsoft takes a significant loss on each console sold.
However, it isn’t all doom and gloom. Despite the initial loss, Microsoft covers the hit with their Xbox Live service. Gamers must pay $40 annually in order to gain access to many of the console’s online features. With 48 million active subscribers, that is $1.92 billion in Microsoft’s pocket each year.
Likewise, this is supplemented by further sales through the service’s digital marketplace. The Xbox Store allows users to purchase games, music, movies and in-game cash and items. The virtual goods industry is worth $15 billion alone. Microsoft is taking its fair share of that sum.
Despite disappointing console revenue, CFO Amy Hood has insisted that Xbox is a multi-billion dollar business that turns a profit every year.
What would the Xbox net worth be without Microsoft?
Xbox is part of the Microsoft Corporation, which has a current value of $571.25 billion. Microsoft has never released exact figures for the Xbox division. Therefore, it is very difficult to estimate the Xbox net worth.
Yet, if Microsoft were to sell their popular gaming brand, experts believe that Xbox could cost as much as $23 billion.