Does XB360 make money yet? *spawn

[NRP]

OT and perhaps already discussed, but how close is the XBOX division from breaking even overall (XBOX + XBOX 360)? Do you guys think MS can pull it off this Gen?

Edit:
I'm on the fence about when I'd like to see NextBox launch. On one hand, playing BF3 on the 360 and PC (i7 2600 and AMD 5770) simultaneously really shows how dated the console hardware is. On the other hand, the longer MS waits to launch, the more capability they can pack into a given transistor budget/price point/etc.

 

[AlphaWolf]

OT and perhaps already discussed, but how close is the XBOX division from breaking even overall (XBOX + XBOX 360)? Do you guys think MS can pull it off this Gen?

There is just no way to math it out. There's way to much crap (like zune and kin) in E&D to get a real number. I'm sure you'll get lots of speculative responses from both directions, but the reality is you're going to get nothing more than wild guesses.

And of course it really depends on when this gen ends. If they make $1.3 billion or more this year (E&D however, not xbox) like they did last, and don't launch for 3 more years, they could erase any debt they had from xbox certainly. (This would certainly not play any part in when they launch, it's just not how you run a business, what's gone is gone, you direct your company to make the most in the future.)

 

[upnorthsox]

Can you point me to where MS claimed their hardware isn't currently profitable?

From Microsoft FY11:

Cost of revenue increased $1.8 billion or 49% primarily reflecting higher volumes of Xbox 360 consoles and Kinect sensors sold, and increased royalty costs resulting from increased sales of Xbox LIVE digital content.

IF the 360 isn't profitable I hate to think how much Sony is bleeding on their newly reduced PS3.

Irrelevant what's happenning at Sony.

You're not going to sell people 2 copies of a game, early adopters might buy a new console, but they still aren't going to buy 2 copies of COD.

Again, irrelevant. If they sell 6 mil COD's on x360 and 1 mil on x720 instead of 7 mil on x360 alone, that's still 7 mil sold that they collect royalties on.

It really depends on the hardware Nintendo releases. If it's not a step up from PS360 then its impact is going to be all that related to performance.

And for MS and Sony, that's a risk. Performance is the least worry, mindshare is much more important.

The biggest effect any new hardware is going to have is on their old hardware. And as has been mentioned before, software needs significant lead time, launching more powerful hardware with what amounts to ports isn't going to have a very positive effect.

This is always true so then if it's the overriding factor there will be no nextgen.

 

[zed]

OT and perhaps already discussed, but how close is the XBOX division from breaking even overall (XBOX + XBOX 360)? Do you guys think MS can pull it off this Gen?

still more than 6 billion in the red, so wont be in the black this gen, perhaps mid-end next genertaion

 

[Gerry]

From Microsoft FY11:

Cost of revenue increased $1.8 billion or 49% primarily reflecting higher volumes of Xbox 360 consoles and Kinect sensors sold, and increased royalty costs resulting from increased sales of Xbox LIVE digital content.

Surely "cost of revenue" is simply a metric on the costs associated with manufacturing and distribution of the goods you sell. You sell more, your costs of revenue go up proportionally. It isn't linked to profit in any way AFAIK.

 

[AlphaWolf]

From Microsoft FY11:

Cost of revenue increased $1.8 billion or 49% primarily reflecting higher volumes of Xbox 360 consoles and Kinect sensors sold, and increased royalty costs resulting from increased sales of Xbox LIVE digital content.

That doesn't mean what you think it means. Hardware is most certainly lower margin, it doesn't mean it's not profitable.

Again, irrelevant. If they sell 6 mil COD's on x360 and 1 mil on x720 instead of 7 mil on x360 alone, that's still 7 mil sold that they collect royalties on.

Exactly. So how does releasing a new box increase profitability?

And for MS and Sony, that's a risk. Performance is the least worry, mindshare is much more important.

Which suggests advertising dollars would be more useful than throwing out a new product.

This is always true so then if it's the overriding factor there will be no nextgen.

You launch a new product when doing so increases profits and/or market share. Nintendo is launching first in the wake of waning sales and consumer interest.

still more than 6 billion in the red, so wont be in the black this gen, perhaps mid-end next genertaion

I'd love to see your fuzzy math on that.

 

[upnorthsox]

That doesn't mean what you think it means. Hardware is most certainly lower margin, it doesn't mean it's not profitable.

I'll grant you that's open to interpretation. Now show me your proof that their hardware is profitable.

Exactly. So how does releasing a new box increase profitability?

I never said it would be, I said it might be possible. It depends where their new console buyers come from.
There's also the other possibility. Instead of selling 7 mil cod alone on the 360 they 6 mil because the other 1 mil bought it for their shiny Nintendo box, in 2013 they sell 3 mil alone on the 360 because 3 mil bought it on Nintendo and 1 mil bought it on their shiny new PS4. In 2014 it doesn't matter because the 360 is irrelevant and their shiny new 720 is late to the party with no market share. If you want, change the names and apply it to Sony.

...

You launch a new product when doing so increases profits and/or market share.

Exactly my point.

 

[homerdog]

still more than 6 billion in the red, so wont be in the black this gen, perhaps mid-end next genertaion

Source? I would like to know how they managed to lose that much money.

 

[AlphaWolf]

I'll grant you that's open to interpretation. Now show me your proof that their hardware is profitable.

It really isn't open to interpretation. It just doesn't mean what you thought it did.

 

[zed]

Source? I would like to know how they managed to lose that much money.

from MSs financial reports, I had the numbers on my PC on a spreadsheet (Im on the mac ATM)
I can dig them out if you wish, IIRC by the start of the xbox360 they were about 5bilion in the red and then lost over 3 billion in the next couple of years (RROD etc) true the division is quite profitable ATM (last quarter $352m) but even at that rate its gonna require quite a few years to pay off 6 billion. Which answers AlphaWolf's 'fuzzzy math' question. Of course next gen anything could happen, they could repeat this gen, if so they wont pay it offf or the next machine could sell like the wii (paid off in a couple of years). My 'fuzzy math' is just a 'reasonable assumption'

 

[AlphaWolf]

except MS has never reported xbox financial numbers they report e&d which includes a dozen other things.

 

[Acert93]

except MS has never reported xbox financial numbers they report e&d which includes a dozen other things.

Correct. Throwing in phone and Zune in there at various times makes it difficult as those were clearly big losses in the division as well.

And I always thought the org. Xbox lost 4B, not the 5B Zed is now proposing. It seems Forbes put, in 9/2005, the loses at 4B for the division which, at that time, would surely have included 360 R&D). RRoD was $1.15B iirc.

MS has lost billions on things like Bing and MS Online in the past. The fact the Xbox is slowly inching its way toward black... slowly... and a) the 360 has a nice window for continued sales even into the next gen and b) can offset some losses of a new platform with the current one is a good sign of it not being axed. It is possibly the most high profile MS brand to the general consumer populace and it has generated a lot of worthwhile buzz like Kinect and Live which can be said to be extremely valuable.

Then again, depending on who is ahead of the division and what limitations are being put on them, MS may be looking to exploit the brand and chase the proverbial tail of an "Apple" model.

 

[bgassassin]

Correct. Throwing in phone and Zune in there at various times makes it difficult as those were clearly big losses in the division as well.

And I always thought the org. Xbox lost 4B, not the 5B Zed is now proposing. It seems Forbes put, in 9/2005, the loses at 4B for the division which, at that time, would surely have included 360 R&D). RRoD was $1.15B iirc.

MS has lost billions on things like Bing and MS Online in the past. The fact the Xbox is slowly inching its way toward black... slowly... and a) the 360 has a nice window for continued sales even into the next gen and b) can offset some losses of a new platform with the current one is a good sign of it not being axed. It is possibly the most high profile MS brand to the general consumer populace and it has generated a lot of worthwhile buzz like Kinect and Live which can be said to be extremely valuable.

Then again, depending on who is ahead of the division and what limitations are being put on them, MS may be looking to exploit the brand and chase the proverbial tail of an "Apple" model.

From what I remember reading MS lost about $3B early on in 360's life which included the $1+B from the RROD incident.

 

[NRP]

Man, that just seems like a staggering amount of money, but I guess it's all relative to their long term goals.

On a related note, in my first engineering job out of college I recall having "sticker shock" authorizing purchase orders for US$100k. LOL! I did eventually get over it though.

 

[bkilian]

From Microsoft FY11:

Cost of revenue increased $1.8 billion or 49% primarily reflecting higher volumes of Xbox 360 consoles and Kinect sensors sold, and increased royalty costs resulting from increased sales of Xbox LIVE digital content.

Cost of revenue is purely the costs associated with the sales (BOM, shipping, service, etc) MS did not report revenue from xbox sales, so there is no way to come to any conclusions given only one of the numbers. The division as a whole is profitable, but that, again, does not prove anything about the hardware. The only indication is if you look at profits/volume. If the profits increase with greater sales volume, then the hardware is profitable, if the profits decrease with greater sales volume, then the hardware is margin negative. This was easily shown with Sony early on. When they shipped more, their profits dipped. Not so easy with E&D, since it's buffered by so many other products.

Personally I have no idea what the BOM of the XBox is, but considering our profits increased a lot last december when we sold a huge number of consoles, I'm betting we're revenue neutral on BOM at the least.

 

[bgassassin]

I don't know if these are the original articles I read awhile back, but they do have the same info.

http://www.gamespot.com/news/bach-gaming-to-turn-a-profit-for-microsoft-in-fiscal--6154809

Microsoft's gaming division has a history of red ink. For fiscal year 2005, it posted a loss of $485 million. For fiscal year 2006 (which ended June 30, 2006, and included the launch of the Xbox 360), it lost $1.26 billion.

http://www.bit-tech.net/news/gaming/2007/07/20/xbox_division_loses_2_billion_this_year/1

The results are in for Microsoft's fiscal year ending June 30th and the results for the Xbox line aren't good. In fact, the division to which the Xbox console belongs has posted a massively staggering loss of $1.9 billion.

The 1.9B included the RROD cost. So even without the RROD there would have been about $2B in losses from that division

 

[AlphaWolf]

Again as people keep repeating, that division has a number of other product lines within it. You're not getting numbers for xbox alone. Zune or windows phones (and a bunch of other products) could have made or lost billions making those numbers not all that meaningful in terms of the profitability of the xbox product line on its own.

 

[zed]

Correct. Throwing in phone and Zune in there at various times makes it difficult as those were clearly big losses in the division as well.

I do find it starnge how Zune (2nd biggest selling mp3 player) could of lost all this money yet, ipod made billions and billions for Apple, based on the fact both cost a similar amount to buy and would cost a similar amount to produce (both million sellers), i.e. I dont believe MS are as incompetent as some ppl think.
dont forget in E+D theres peripherals (MS are 2nd biggest worldwide in this profitable division) also theres the 'very profitable' mac software i.e Office, oddly the rise of E+D profits coincide with the growth of mac shipments the last 3-4 years, coincidence? I'll let you be the judge (*)
Of course MS will never credit mac software, though its strange to say the least that this is not included with the windows Office software. If I was a certain member of these forums I'ld be screaming 'conspiracy'

(*) you may be shocked to see in top 10 best sellers of business software at amazon.com, wierd since windows PCs outnumber apple PC's by ~7:1 in the US
1. Windows Microsoft Office Home & Student 2010 - 3PC/1User (Disc Version)
3. Mac Office Home & Student 2011 - 1 Pack
6. Windows Microsoft Office Home & Student 2010 - 3PC/1User [Download]
8. Mac Office 2011 Home & Student -Family Pack
9. Mac Office Home and Student 2011 - Family Pack (1 User/3 Installs) [Download]

 

[Dominik D]

The reasons for iPod being successful and Zune not are simple. One: brand recognition. Two: market saturation.

 

[Silent_Buddha]

I do find it starnge how Zune (2nd biggest selling mp3 player) could of lost all this money yet, ipod made billions and billions for Apple, based on the fact both cost a similar amount to buy and would cost a similar amount to produce (both million sellers), i.e. I dont believe MS are as incompetent as some ppl think.
dont forget in E+D theres peripherals (MS are 2nd biggest worldwide in this profitable division) also theres the 'very profitable' mac software i.e Office, oddly the rise of E+D profits coincide with the growth of mac shipments the last 3-4 years, coincidence? I'll let you be the judge (*)
Of course MS will never credit mac software, though its strange to say the least that this is not included with the windows Office software. If I was a certain member of these forums I'ld be screaming 'conspiracy'

(*) you may be shocked to see in top 10 best sellers of business software at amazon.com, wierd since windows PCs outnumber apple PC's by ~7:1 in the US
1. Windows Microsoft Office Home & Student 2010 - 3PC/1User (Disc Version)
3. Mac Office Home & Student 2011 - 1 Pack
6. Windows Microsoft Office Home & Student 2010 - 3PC/1User [Download]
8. Mac Office 2011 Home & Student -Family Pack
9. Mac Office Home and Student 2011 - Family Pack (1 User/3 Installs) [Download]

It also includes failed and ongoing projects and intiatives like Kin (failed huge), the Courier project (rumors have it that investment is ongoing althoug the name might be different), Surface (continued heavy investment), Windows Phone (no way to know if that's remotely profitable yet), online servies and games (limited revenue from things like AoE Online while investment in Bing is still probably greater than revenue generated), and other things we may or may not have heard about. The point here is that all of these endeavors are currently losses for MS as they hope continued investment turns them into profitable business ventures like the Xbox division.

As well Microsoft Office (PC) is currently under the Business division while Microsoft Office (MAC) is in EDD. Amazon "should" have a greater preponderance of Mac software as Mac software isn't as prevalent in either online stores or more importantly brick and mortar retail locations. So that list doesn't say a whole lot, IMO.

Heck, MS is STILL running MSN TV despite them no longer selling the hardware for it. And this happens to be EDD as well. Granted it's likely a small continuing cost of operation but it's still a cost generating little to no revenue.

It also includes any hardware that MS makes. Considering there's no advertising going into that and investment and R&D are limited, this is probably the one other division within EDD that is profitable other than Mac Office and Xbox.

And as mentioned before we have absolutely no numbers for any of these various division. But I'd be willing to bet revenue from the Xbox division absolutely dwarfs all the others including the Mac Office revenue.

Regards,
SB