Xbox lost Microsoft $4 billion over 4 years

[Magnum PI]

http://www.theinquirer.net/?article=26497

No, they didn't make it, they read it in Forbes:

http://www.forbes.com/home/technology/2005/09/12/microsoft-management-software_cz_vm_0913microsoft.html

reactions ?

[Carl B]

I thought it was more (closer to $5 billion), that's my reaction.

If anyone doesn't know about the losses Microsoft has been enduring this gen, they are really out of it.

[Acert93]

Holy repost Batman :!:

Year late on the news there. Actually, if it is only 4B that means they have done relatively good this last year :roll: This morning was slow on the forum, so I guess everyone wanted to spice things up with some old, yet controversial, posts. Yay forum! </sarcasm>

[EndR]

Sure, 4 billion IS a lot of money.. but one question: Could MS have done it cheaper during the circumstances?

What does it cost to establish a whole new console, specially considering the competitors. When MS came in, the PS-brand was stronger than ever and Nintendo "seemed" to be more aggressive. MS didn´t have the time to R&D their own stuff, like they did with 360, they had to buy it off the shelf and so on.

So the question is, could MS (or any other company) it cheaper?

[Carl B]

Well, I certainly think they could have done it for less. Leaving the structure of their contracts with Intel and NVidia out of it entirely, making the hard drive optional rather than standard would have certainly cut their losses in a big way. I'm not saying that you, the consumer, might have enjoyed the console as much as you did with the drive included, but then again that wasn't the question asked either.

Another question along the same lines would be: if the hard drive this generation had been optional, what would the hypothetical effect to MS' market penetration have been?

Whatever the case, Sony faced the indomitable Nintendo when they entered the market, and still managed to turn a great profit that same gen (there are of course reasons we could debate there as well) - so I don't think establishing marketshare beach-heads is automatically linked to losses.

But what's done is done. What we will see play out over the next ten, fifteen years is whether the losses endured the last four were worth it or not. So at this point it's the future that matters.

[Natoma]

$4 Billion in four years really needs to be put into perspective. MS generates $2 Billion in "excess" capital every month. That loss is nothing to them.

[Magnum PI]

So the question is, could MS (or any other company) it cheaper?

I don't know much company that would have been able to loose that much without going out of business.

I don't think a new competitor would have to lose that much to introduce a new console.

I just think that MS tried to move the battle to a ground that is more favorable to them, the economical one: you have the financial power of microsoft, you raise the economical stakes by throwing lots of money. Your competitors try to follow you, but they can't bleed money for long, so they leave the game and the market is yours. (the same tactic US used, with the race to weapons, in order to ruin the USSR). When you have lots of cash and money flowing at an insane rate it must sound so easy, much easier than to play it smart.

The 4 billion-thing may be a non-news be the forbes articles remains interesting.

[Carl B]

Excess capital isn't the same as profit. Their profit last year was $12 billion, the year before $9 billion, and the year before that $10 billion. So, certainly a couple of extra billion in there would have been nice. Obviously not crucial.

But remember that the purpose of business is to make money - Microsoft would be foolish, though they have the means no doubt, to simply plough more money into the console space going on into infinity. This gen there's going to be a serious focus on becoming profitable. I think they will achieve it, so no big deal, but if they did end up a loss again - wow.

Market share is only worth so much afterall. More market share = more 'better' is pre-Internet bubble thinking. If you can't monetize on it, better not to be involved at all.

[Acert93]

Whatever the case, Sony faced the indomitable Nintendo when they entered the market, and still managed to turn a great profit that same gen (there are of course reasons we could debate there as well) - so I don't think establishing marketshare beach-heads is automatically linked to losses. Not a very good example ;)

Expensive ROMs, cutting off developers, the fabled (and crappy) "Dream Team" etc... The N64 had a lot of killer games, but it did not have enough support and thus a diverse enough library. You had lulls in releases and it shipped late.

Nintendo would have been indomitable if they had capitolized on their strengths. Their exclusives were killer... but they made things expensive for devs and got "snotty" with who and what could be on their platform. (e.g. Blood in MortalKombat!)

So Nintendo had devs LOOKING for another cash cow. Of course Nintendo sold 34M units and made a TON of money (along with a few devs with good relations) but they were not the monster they should have been. They key was developers, and Nintendo stuck their nose up and said, "We don't need them to make money!" And they were right--but at the cost of market leadership.

Sega? 32-Rex. Sega-CD. People did not have confidence... and Sega had decent support up front with some great titles (VF, Daytona, etc) but again--dev costs, difficulties with the hardware, a hesitant consumer base, etc...

So Sony had it easy in many respects. They still had to work at it, but developers found them a financially viable alternative and it turned into a mad success. Sony's marketing helped too! Good games + Good marketing + Unwise competition.

MS had to face the Sony monster and a more appealing Nintendo (who just absolutely controls their customers minds!) And MS did it the hard way with off the shelf parts.

The price of admission was NOT cheap. But MS is now the firm #2 in the market. Even more they have a TON of dev support. Xbox1 was, "Wait and see" from devs. Now? Everyone is jumping on board to support it. Well over 160 titles in development before launch... that is impressive. And consumers know they are about gaming on the Xbox now.

So I would expect a big turn around this gen. Smarter system design, consumer acceptance (consumer fan base!), large dev support.

I don't expect MS to lose 4B this gen. Actually, I would be shocked if in 5 years they have not at least broken even on Xbox 360. That is my expectation. 50-55M units and breaking even. Sony 90M. Nintendo? Depends on their games... about a solid 2nd console for those with money or a primary console for children or those wanting something offbeat.

[Azrael]

Sony has been finacially in the red for awhile. If Microsoft was willing to spend the dough, they could probably bankrupt Sony this gen.

[Carl B]

I agree with you 100% Acert - your post was basically what I was eluding to in my parenthesis comment, except that you wrote it all out. :)

[Carl B]

Sony has been finacially in the red for awhile. If Microsoft was willing to spend the dough, they could probably bankrupt Sony this gen.

Azrael show me something that indicates they're in the red - for 'a while now' especially. ;)

I think you've been caught up in some Internet rumors my friend. I'd check their yearly financial statements before replying.

[RancidLunchmeat]

This gen there's going to be a serious focus on becoming profitable. I think they will achieve it, so no big deal, but if they did end up a loss again - wow.

I don't think so. I think they used the Xbox to establish a market name and identity, and they will use the X360 to establish market share. Have there been any reports at all that MS was shocked, worried, surprised, upset about losing $4B over 4 years? The industry seems surprised, and analysts seem upset, but how about MS themselves?

In fact, as far as an emphasis on profitability goes, the evidence points to the contrary. They are reducing licensing fees (or possibility eliminating them altogether for some) for developers to enlarge their library. They've already announced that planned price reductions for the console is part of their strategy for this generation. How is that possible if they are already selling the X360 at launch at a loss? Surely manufacturing cost reductions will not out-pace their already planned price reductions.

I think MS is fine with the $1B per year loss on the Xbox division, and while they'd probably like to lower that loss, I don't think they plan on turning a profit with the divsion even this generation.


Market share is only worth so much afterall. More market share = more 'better' is pre-Internet bubble thinking. If you can't monetize on it, better not to be involved at all.

You're either forgetting, or overlooking the fact that MS doesn't want to make money selling a game console. MS wants to make money by taking over the living room, and by extension, the entire house.

I think the fact that X360 is actually less of a media player, all-purpose device, points to the conclusion that they aren't planning on this generation as being the profitable one. The entire Xbox division is a Trojan Horse. But where are the soldiers in the belly of the beast? They still aren't here yet.

MS used the Xbox to get their foot in the door. They are using the X360 to get their feet in even more doors. It won't be until the next generation that MS kicks the door open and jumps into your living room. That will be the generation that they want to be profitable.

[Carl B]

Rancid you've totally lost me. I don't want you running any businesses of mine, that's for sure. ;)

If I am to believe that in fact Microsoft never wants to make a profit on XBox - then please tell me how 'dominating the living room' generates money for them? Because it seems to me you're saying they're willing to subsidize a digital lifestyle for their customers.

And indeed, there have been rumblings within Micrososft reported by the press that they are actively seeking profitability this gen.

[Acert93]

And indeed, there have been rumblings within Micrososft reported by the press that they are actively seeking profitability this gen. Correct.

I just hope they do not become stupid in a rush to profitability. Breaking even in 2007, as stated, is too soon IMO. Market base produces profitability. MS would be better served with a goal of making money in years 3,4,and 5 than aiming at year 2 for this gen break even point.

Of course so far their moves have been fairly reasonable. The accessories are expensive, but I think most people will get sticker shocked after the fact on that. The only bummer is the HDD is not 40GB for the price. But overall if cost is their concern I think they are on the right path.

Less not tieing up developers as exclusives. Letting Bizarre get tied up with Sega was dumb. MS needs to tie up Bizarre and other teams like that. They cannot be cheap in that regards. They need their own killer line up all exclusive. They cannot live on Halo alone--which they are not, but they need to keep their value up with quality exclusives. Right now it seems they are going the "PC port" way. Yeah, D3, FarCry, HL2, Pirates!, etc are all nice ports, but you cannot lose out on PGR type games.

[RancidLunchmeat]

If I am to believe that in fact Microsoft never wants to make a profit on XBox - then please tell me how 'dominating the living room' generates money for them? Because it seems to me you're saying they're willing to subsidize a digital lifestyle for their customers.

Yet, that's not what I said. I said MS had no plans to ever make money on a gaming console.


And indeed, there have been rumblings within Micrososft reported by the press that they re actively seeking profitability this gen.

There have been reports that they'd like to do better, (Ie: Lose less) this division than last, which lead to some of the manufacturing decisions in the X360.

And yet, their strategy points away from being worried about profitability this generation. As I've said, how do you explain the already decided and announced price reductions? How do you explain the decreased or eliminated licensing fees?

Both of those tactics point strictly to an emphasis on increasing market share at the expense of profitability.

If profitability were their priority, those things wouldn't done. They certainly wouldn't be pre-planned before the console even launches!

In fact, Acert's message gives all the reasons why MS wouldn't have to do either of those things this generation and would still expect to gain market share over last generation.

However, while Acert and yourself see those reasons as "proof" of why MS is focusing on profitability, I see those reasons combined with lower/non-existence licensing fees and planned price-reductions as evidence that MS is focusing a great deal more on market share this generation than on profitability.

How do you think MS is going to achieve this profitability? Console manufacturers make their profits through licensing of software and to a lesser extent selling their console. MS has essentially already announced they are giving away both of those profit centers to either the developers themselves or to the consumer through price cuts.

Does MS believe they can do all that and still be profitable just due to their insanely priced peripherals? :lol:

[Carl B]

The licensing fee reduction (and a link was never provided, unfortunately) I believe was linked towards an effort by Microsoft to gain traction with Japanese devs. I don't believe they were targeted towards the Western devs that form MS' base at the moment. That simply indicates to me you are willing to earn $0 vs earning $0 in order to bring your market share in a certain market from 0% to something other than 0%.

Indeed yes, accessory prices can make up for a massive chunk of console losses. Faceplates? That's got to be $3 worth of expense at most. If they were willing to toss everything and the kitchen sink at market penetration simply for the sake of market penetration, they would have made the HD standard again, included an HD-DVD drive, be charging $10 less across the board for every single one of their peripherals, and make Live free to boot.

[Alpha_Spartan]

http://www.theinquirer.net/?article=26497

No, they didn't make it, they read it in Forbes:

http://www.forbes.com/home/technology/2005/09/12/microsoft-management-software_cz_vm_0913microsoft.html

reactions ?
Those articles are BS. I mean, it's negative news about Microsoft so it has to be fake. Plus it's the Inquirer, yes, so it has to be fake. </Xbox_junkie_imitating_Playstation_junkie>

[Lysander]

Sony is in red no doubt. The head ceo (some aussie) said (on CNN) that he would fire more people (than 10000) but he can not `cause of japan culture or something.

[Magnum PI]

Someone suggested that, given the context of Sony domination, and if Sony makes no mistake Ã* la Nintendo, you may have to loose billions to enter the market. So this only a few rich companies can enter.

So, if this context evolves, if Microsoft becomes the new leader, will it be possible to a newcomer to enter the market at all ?

If Microsoft happens to earn somewhat of a monopoly, what will prevent them from milking the customers and the publishers ? (after all, they'll want to recoup their initial investment and make much more money, they didn't bet as much as 4 billions if they are not willing to make much more than you bet).

[Carl B]

Sony is in red no doubt. The head ceo (some aussie) said (on CNN) that he would fire more people (than 10000) but he can not `cause of japan culture or something.

Ok, well my friend I guess you decided to post without taking the advice of looking up Sony's financials. ;)

Anyway here you are:

Link (http://hoovers.com/sony/--ID__41885,period__A--/free-co-fin-income.xhtml)

Profit year after year - this year will be the first in a while that they will be 'red,' and that will be due to the implementaion of the cost-reducing measures you are alluding to. Some people don't seem to know that cutting costs costs money to begin with. It does my friends, it does. But if they weren't restructuring, then they would have made a profit this year - see how that works?

Sony's predicament of late has been an unprofitable consumer electronics division and diminished margins. What Stringers mission is is to put that back on track (if he can).

[Carl B]

Someone suggested that, given the context of Sony domination, and if Sony makes no mistake Ã* la Nintendo, you may have to loose billions to enter the market. So this only a few rich companies can enter.

So, if this context evolves, if Microsoft becomes the new leader, will it be possible to a newcomer to enter the market at all ?

If Microsoft happens to earn somewhat of a monopoly, what will prevent them from milking the customers and the publishers ? (after all, they'll want to recoup their initial investment and make much more money, they didn't bet as much as 4 billions if they are not willing to make much more than you bet).


I think Samsung, if they ever chose to, would make a great console competitor.

A little more far out - but a company with plenty of billions to toss around - ExxonMobile. How about that for a dark horse! :razz:

[Lysander]

Sony is in red because of cost cutting? I thought they did not even start with laying off.

[Carl B]

Sony is in red because of cost cutting? I thought they did not even start with laying off.

Lysander I swear dude - did you even read the articles you are referencing? Sony estmated a $90 million profit this year. Now, since they will commence restructuring, they are estimating a $90 million loss. It's all estimates right now. Nothing's actually been done and no one's lost their job. Who knows, Sony could make a profit anyway or end up losing much more. Sony's fiscal year ends in March so this is what will be happening between now and March 2006.

[Lysander]

report does not separate between entertainment and eletronic device section, sony is covering loss of eletronic section with profit from enertainment section (movies, music)

[Carl B]

report does not separate between entertainment and eletronic device section, sony is covering loss of eletronic section with profit from enertainment section (movies, music)

What are we talking about here? I'm talking about Sony group - the umbrella corporate body of which Sir Howard Stringer is CEO. Are you talking about the electronics division alone? Yes, the electronics division has been a drag on earnings for a while now. Is that what you meant when you said 'Sony is definitely in the red,' because Sony as in 'Sony' is *not* in the red. If you meant their electronics division, you should have specified. And Stringer isn't Australian by the way, he's Welsh.

So we're clear, the electronics division doesn't report earnings separate from that of Sony itself - Sony breaks down for investors how it's different divisions are performing during it's investor day. Also, these restructuring moves effect the whole company - it's not limited to electronics, even if they were the original inspiration.

[Lysander]

cool down destroyer, no harm done :smile:

[Vince]

cool down destroyer, no harm done :smile:

In his defense it is extremely annoying when someone repeatedly posts wrongful information because they are too lazy to do the proper 'due diligence,' if you will, necessary to enter the topic. This is universally applicable, although it seems to happen alot more in this forum.

[Carl B]

cool down destroyer, no harm done :smile:

LOL, indeed. ;)

Vince does echo my thoughts though.

[Lysander]

what wrongful info did I post vince

[Carl B]

I think it's best at this point for us to just walk away from this wholething. Besides being derailed (though the tangent is related), it's just turning into one of those back-and-forth things.

Lysander, the 'Sony in the red' info was your 'wrong info,' and the frustrating lack of clarification given in your ensuing posts didn't help. Also if English is your first language, I would ask that you please write in complete sentences. It's kind of like the dress code for 'Club B3D' as it were. ;) (refer to 'posting rules' for more info)

Anyway I admit maybe I was overly worked up/hard on you. 'Corporate America' being my background I just tend to get worked up about 'fast-and-loose' posting when it comes to matters financial.

[expletive]

I don't expect MS to lose 4B this gen. Actually, I would be shocked if in 5 years they have not at least broken even on Xbox 360. That is my expectation. 50-55M units and breaking even. Sony 90M. Nintendo? Depends on their games... about a solid 2nd console for those with money or a primary console for children or those wanting something offbeat.

MS said they plan to be breaking even ont he hardware within 2 years. Once you start doing that, profitibaility shouldnt be far behind. Whether they can be profitiable overall for this this gen, i'm not sure but by 2007 they should be showing a profit on a quarterly basis.

How do these console sales numbers compare to this Gen? Based on the numbers here it seems like you have the 360 at about 30%?

If you expect the revolution to be 3rd, i'm going to put them at 30M units.
Given those Numbers:

PS3 = 51%
360 = 31%
Revo = 17%

How do these compare to this current gen?

J

[Lysander]

Ok,destroyer, mea culpa :oops: and peace!

[Shifty Geezer]

And Stringer isn't Australian by the way, he's Welsh.Though he is dual nationality US too.

totaly off topic it's interesting hearing people talk of people's nationalities. I remember an American mentioned to me that the American's invented the telephone. To which I say no, it was Alexander Graham Bell. And they respond that yes it was, and he was American. But over here we're taught he was Scottish with kids educational programmes showing him in Scotland with his experiments and thick scottish accent. All pointlessly lopsided takes on the same facts; Mr. Bell was Scottish born and bred and emigrated to the US. And besides the telephone was first invented by an Italian.

We now return you to your normal programme scheduling...

[Tahir2]

Imagine what you could do with $4 billion dollars...

People talk about how that money doesn't mean anything to MS or how MS make that much in a second but come on.. $4 billion smackeroonies would do me alright.

[NRP]

Though he is dual nationality US too.

totaly off topic it's interesting hearing people talk of people's nationalities. I remember an American mentioned to me that the American's invented the telephone. To which I say no, it was Alexander Graham Bell. And they respond that yes it was, and he was American. But over here we're taught he was Scottish with kids educational programmes showing him in Scotland with his experiments and thick scottish accent. All pointlessly lopsided takes on the same facts; Mr. Bell was Scottish born and bred and emigrated to the US. And besides the telephone was first invented by an Italian.

We now return you to your normal programme scheduling...
"American" isn't a nationality. It's a citizenship. We are multinational.

[wildcardx]

Sure the xbox division has cost MS 4 billion dollars, but have they lost that much? If I recall correctly, they spent almost half of that on there xboxlive service. I would think they have at least come away with assests which could be used in other divisions if the xbox turned out to be a failure for MS. I find it silly that people equate the the cost of making the xbox to throwing 4 billion dollars down the drain.

[BTOA]

MS has a OS monopoly, they can bleed as much money as they want because $4 Billion is nothing to them.

[Acert93]

Sure the xbox division has cost MS 4 billion dollars, but have they lost that much? If I recall correctly, they spent almost half of that on there xboxlive service. I would think they have at least come away with assests which could be used in other divisions if the xbox turned out to be a failure for MS. I find it silly that people equate the the cost of making the xbox to throwing 4 billion dollars down the drain. True. One thing I see MS doing is really creating a PC<>360 bridge. This is especially important to developers. For PC-centric devs this gives them an outlet to get additional sales. Having 20M console units dedicated to gaming is nice. For console developers this means getting a leg up on new technologies (thus gen shifts are not as tough). Similar it means the continued development of GPU technology and new game engines (like UE3).

There is significant over lap, but where they are different those strengths can be pushed to benefit both markets. Obviously MS's efforts into Xbox Live can help with future versions of Windows, PC gaming, and interactice marketplaces. If you put your mind to it you can see a lot of different ways they can benefit eachother (e.g. video conferencing and VoIP, set top boxes, etc).

[ondaedg]

Though he is dual nationality US too.

totaly off topic it's interesting hearing people talk of people's nationalities. I remember an American mentioned to me that the American's invented the telephone. To which I say no, it was Alexander Graham Bell. And they respond that yes it was, and he was American. But over here we're taught he was Scottish with kids educational programmes showing him in Scotland with his experiments and thick scottish accent. All pointlessly lopsided takes on the same facts; Mr. Bell was Scottish born and bred and emigrated to the US. And besides the telephone was first invented by an Italian.

We now return you to your normal programme scheduling...

All your inventions are belong to us!

:wink:

[Johnny Awesome]

IMO MS lost $2 billion because they had to and $2 billion due to misteps on things like the hard drive, not securing enough content to drive quicker adoption, backing some poor software, and signing terrible deals with NVidia and Intel. All in all it was probably money well spent. They'll probably make half of that back this generation and become a serious threat to Sony next-generation.

[deathstar121]

IMO MS lost $2 billion because they had to and $2 billion due to misteps on things like the hard drive, not securing enough content to drive quicker adoption, backing some poor software, and signing terrible deals with NVidia and Intel. All in all it was probably money well spent. They'll probably make half of that back this generation and become a serious threat to Sony next-generation.


Nah it's more like a $1 billion, there's the Mistep with the HDD and Nividia, then there's the fact that they had a $500 million ad campaign for the launch of xbox, then there's the reported $2 billion to get Xbox live up and running, take away those and it might be under $1 billion.

[Bobbler]

Nah it's more like a $1 billion, there's the Mistep with the HDD and Nividia, then there's the fact that they had a $500 million ad campaign for the launch of xbox, then there's the reported $2 billion to get Xbox live up and running, take away those and it might be under $1 billion.


If it took 2 billion to get live up and running I'd be very surprised. That is getting into the US government's territory in poor spending -- No way in hell Live! cost 2 billion to develop and run. The games are hosted on Xboxes. There isn't a lot on Live! at the moment (in terms of things outside of a match making service and a friends list) and that could be created by a team of MS coders very quickly. It seems to me the biggest problem was Xbox wasn't made with any sort of design choices around cheapness -- none of the things in there were made to reduce in cost over time (their original cost probably wasn't any more than PS2s, really -- but PS2's got cheap to produce pretty quick, while Xbox's were mostly licensed property which they had little to no control over).

MS has to be losing a substantial amount on hardware to have lost so much. None of the other things add up unless they were spending US government style and paying 500 dollars for a toilet seat.

[Ty]

What kind of spin is that where 'signed bad deals = money well spent'?

[ecliptic]

"American" isn't a nationality. It's a citizenship. We are multinational.

What in the world are you talking about? Amercians refer to citizens of the USA which is a nation.

na·tion·al·i·ty Audio pronunciation of "nationality" ( P ) Pronunciation Key (nsh-nl-t, nsh-nl-)
n. pl. na·tion·al·i·ties

1. The status of belonging to a particular nation by origin, birth, or naturalization.
2. A people having common origins or traditions and often constituting a nation.
3. Existence as a politically autonomous entity; national independence.
4. National character.
5. Nationalism.

[bRoNx]

I think M$'s main goal with the XBOX was to establish a brand name more than anything else. You can't hope to break into the console industry (or any other industry for that matter) by hoping to make money. They were well aware of this, and I personally think they've done pretty well. Any lesser company would definately have either folded, or would've existed the console game...but seeing as M$ prints $$ in their basement...;)

Their main goal now (IMO) seems to be "profit", as evident by the high prices of the peripherals, the non-standard HDD, no HD optical drive (although this was probably more of a "let's wait and see") etc. Even though they're reducing royalty fees, that's just another effort to gain more support...which is probably costing them about the same as paying the dev's to be exclusive (just guessing here).

If people really think that M$ can afford to bleed more $$$ this gen, then tell me why they haven't made the HDD standard, or why they haven't made the wireless controllers standard. These scream "save $$$" to me!

That's my $0.05 cents - keep the change ;)

[bRoNx]

What in the world are you talking about? Amercians refer to citizens of the USA which is a nation.

na·tion·al·i·ty Audio pronunciation of "nationality" ( P ) Pronunciation Key (nsh-nl-t, nsh-nl-)
n. pl. na·tion·al·i·ties

1. The status of belonging to a particular nation by origin, birth, or naturalization.
2. A people having common origins or traditions and often constituting a nation.
3. Existence as a politically autonomous entity; national independence.
4. National character.
5. Nationalism.
Sorry to derail this thread further, but I just wanted to point out that "Americans refer to the citizens of the USA" is a popular misconception.

America refers to the two continents, North and South. Saying that you are an "American" is generally excepted as meaning "citizen of USA", but all that's really saying is that you're from the continent of America. It doesn't distinquish which part of "America" you're from.

That's like me saying I'm a Polynesian...but that's just a group of islands.

Back to the topic now, please...

[Nick Laslett]

The arcane art of corporate accounting. Not a simple thing to understand and large Corporate's have many leavers to pull to massage their numbers.

MS has spent $12 Billion approx on the Xbox1 project to date. The Home Division made a loss of $4 billion over 4 years. The actual loses on the Xbox project are more like $5 - 8 billion. This is very hard to define exactly because of all the other things the Home Division does. Some of the Xbox spend isn't even accounted for in the $12 billion number.

The main beneficiary of MS's generosity has been the consumer. Hurray for Us!

Let's hope that once MS has crushed the opposition, they continue to be so generous!

[Tim]

If people really think that M$ can afford to bleed more $$$ this gen, then tell me why they haven't made the HDD standard, or why they haven't made the wireless controllers standard. These scream "save $$$" to me!

Ofcause Microsoft can afford to bleed $$$ this gen, they just don´t want to.

[Shifty Geezer]

I'd like to see the numbers, but if I remember right XB's typically seen a loss of c. $500 million per quarter. Over four years that'd be $8 billion. $1 billion straight away went on marketting and buying Rare, so only $3 billion lost in four years on console sales doesn't tally with the $8 billion expected from quarterly results that appeared on gaming websites.

I'm more inclined to believe the higher figure is being disguised as Nick suggests, which adds extra impetus to MS trying to be profitable. Though people say MS have money to lose without worry, as a public company they must appease their sahreholders and MS shares have been static for a long time. Losing several billion on gaming doesn't help.

[bRoNx]

Ofcause Microsoft can afford to bleed $$$ this gen, they just don´t want to.
I partly agree with this...

Look, SONY & Nintendo (sorry to bring them into this) both have wireless controllers as a standard next gen AFAIK. Now, you mean to tell me that M$, who's bigger than these two combined, just "don't want to" make their controllers standard? C'mon, I think it's more than just "We've got the $$$ in the bank, but we just don't feel like it". As Shifty said, maybe the shareholders aren't too pleased with the way this new XBOX Division bled $$$ this current gen., and are probably wanting/asking for things to change.

OTOH, they've achieved what they set out to do with the XBOX...establish a successful brand name (at all costs!?). Now it's time for them to show that this newly established "brand" is profitable. It makes perfect sense.

[Phil]

What you need to factor in is that Microsoft has a very different break-even point than Sony, as is their sale projection. A company that is betting to sell 50 million of something can take a few more risks and play with different numbers than one that's projecting to sell half of that over a set period of time.

[london-boy]

The problem is that Sony don't have a product like Windows, which is something that gets MS a LOT of money, for a proportionally inexistant cost.

Sony makes hardware, each unit they sell cost them money, either it's a TV or an MP3 player or a PS3. They need to pay for R&D and for the materials in every single unit, plus manufacturing costs and lots of patents i suppose.

MS sells Windows and other programs at stupidly high prices, considering how much it costs them to sell one unit. After the cost of R&D for developing the programs and OS's, the only cost they incurr is the packaging, and i don't need to explain how cheap a box and a DVD (sometimes a CD!) is. And sometimes they get multiple times the same licensing fee from the SAME box anyway (like for offices, you only need one copy of Office, but need to pay a license for every computer you install it on).

That's the big difference between a hardware company and a software company. That's why MS can afford to bleed much more than anyone else, they will always have Wondows/Office to feed the black hole.
Sony only have their profit margins from their very overpriced electronics, which haven't been selling like hotcakes lately anyway - apart from PS2, which doesn't have much of a profit margin anyway.

[Shifty Geezer]

Which is why Sony (and MS) want to get into digital content delivery, which is even more profitable then boxed software!

[london-boy]

Which is why Sony (and MS) want to get into digital content delivery, which is even more profitable then boxed software!

Yep but until then, Sony (or anyone else) still don't have a thing like Windows. Which i personally consider something like a constant lottery jackpot for MS. When you think about it, it's money they get for doing nothing. And it's a lot of money.

[c0_re]

The problem is that Sony don't have a product like Windows, which is something that gets MS a LOT of money, for a proportionally inexistant cost.

Sony makes hardware, each unit they sell cost them money, either it's a TV or an MP3 player or a PS3. They need to pay for R&D and for the materials in every single unit, plus manufacturing costs and lots of patents i suppose.

MS sells Windows and other programs at stupidly high prices, considering how much it costs them to sell one unit. After the cost of R&D for developing the programs and OS's, the only cost they incurr is the packaging, and i don't need to explain how cheap a box and a DVD (sometimes a CD!) is. And sometimes they get multiple times the same licensing fee from the SAME box anyway (like for offices, you only need one copy of Office, but need to pay a license for every computer you install it on).

That's the big difference between a hardware company and a software company. That's why MS can afford to bleed much more than anyone else, they will always have Wondows/Office to feed the black hole.
Sony only have their profit margins from their very overpriced electronics, which haven't been selling like hotcakes lately anyway - apart from PS2, which doesn't have much of a profit margin anyway.


Thats nothing you should see the corporate costs, we pay 30,000$ a year for 5 copies(1 5 node cluster) of Server 2003 Enterprise. I mean we buy and use Cisco load balancers just so we can avoid the cost of buying the high end M$ products but most times you just have no choice.

[london-boy]

Thats nothing you should see the corporate costs, we pay 30,000$ a year for 5 copies(1 5 node cluster) of Server 2003 Enterprise. I mean we buy and use Cisco load balancers just so we can avoid the cost of buying the high end M$ products but most times you just have no choice.

I know, i find it outrageous. But in the end, these big corporations will have that kind of money and more so i shouldn't complain.

[Carl B]

The arcane art of corporate accounting. Not a simple thing to understand and large Corporate's have many leavers to pull to massage their numbers.

MS has spent $12 Billion approx on the Xbox1 project to date. The Home Division made a loss of $4 billion over 4 years. The actual loses on the Xbox project are more like $5 - 8 billion. This is very hard to define exactly because of all the other things the Home Division does. Some of the Xbox spend isn't even accounted for in the $12 billion number.

The main beneficiary of MS's generosity has been the consumer. Hurray for Us!

Let's hope that once MS has crushed the opposition, they continue to be so generous!

Nick great point - I recall the XBox isolated losses being ~$8 billion as well, as indicated in something I read last several months ago. Truly, I've been wondering how the losses Microsoft hints at can keep diminishing as time goes on with their limited blips of profitability. But indeed, it's because it's not XBox itself, but the Home&Entertainment division reporting the earnings - providing a first layer of obscuring mist to the XBox's financial performance before the whole of it eventually becomes subsumed in the financial statements of the parent company.