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Thursday, December 29, 2005

360 actually costs $715 to make?

The rumortree is branching out over at GamersHell, where they report that the Xbox 360 might cost a good bit more than some have previously guessed:

A high ranking friend at IBM, one that worked on the Xbox 360 chip design, tipped us regarding the real expenses involved in manufacturing the Xbox 360, and when we mentioned the $126 Microsoft loss, he said:

“$126? It costs Microsoft approximately $715 to make, the manufacturing costs are still too high, another reason why they’re producing relatively small quantities, Microsoft can take it though”
-- Xbox 360 Costs $715 to Make!

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September Catfish said...

This is pure idiocy based on wild speculation.

Josh said...

Well, I don't use the term rumortree lightly.

And while it's definately speculation, it's not pure idiocy. No more so than reports proclaiming virtually any other number for loss. Considering some of these estimates are based on what it would cost for someone to buy components off the shelf and manufacture a single item or completely ignore the 1,000 nontangible costs associated with creating a consumer device, $715 really just as wild of a number as $425.

What's probably true is this: Microsoft lost a bundle on the first Xbox, and partially because it was quite likely the most subsidized console in history. It's not planning on doing it a second time, so the 360 probably has a slimmer margin. Course, some would say it's also not as impressive as the Xbox on it's launch either.

Whatever the numbers are ... Microsoft is going to try and slide it's way to make their Xbox divisions into the black.

Patrick said...

I plan on porting all my future titles to the next Nintendo console. I don't want to sound like a flaming crank, but I think interactive storyworlds (what I'll be making in the near future) will be a big deal commercially, and Nintendo's controller lends itself to that sort of gameplay. I would feel some satisfaction to see Microsoft give up on games due to its tremendous losses.

Josh said...

Please, flaming cranks are some of my best friends. And half of those are family...

Still, MS isn't going to back out soon because of entrenched losses. I know they said recently that they plan on making the 360 profitable by the end of next year, but even if they fail that they're on target for making the third iteration of the platform make cash.

The only thing that might make the Xbox platform collapse is market share. It's not worth MS's money if they aren't burning into the market. That's probably unlikely unless Nintendo and Sony throw some serious curveballs their way.

Still, in some ways it's good that way. Nintendo doesn't know how to fight "big". They were probably going to start losing shares to Sony during the GameCube's release anyway. Microsoft at least gives Sony a competitor with equally deep pockets.

Nintendo, all the while, keeps making a profit despite what Microsoft and Sony put in their boxes.