Microsoft Posts Huge Xbox Losses

[marconelly!]

Eventually, the Xbox brand will be strong enough that it will be comparable in the minds of the mass market to Playstation. This might take until 2005 or even 2006, which is why Sony doesn't want to allow Xbox any more time to acquire brand power, but it will eventually happen.

I very much doubt it. Microsoft will never be a 'hip' company the way they are doing what they are doing.

This whole argument very much reminds me of Dreamcast vs PS2. "Dreamcast will be recognized given time, Sega will be back in their glory..."

The other thing is that as prices lower MS stands to gain more than Sony in the long run. Tons of gamers already have a PS2, but many PS2 owners are "interested" in an Xbox.

9X% (can't remember the exact number) of gamers always buys only one console. What you are seeing on the internet is extreme hardcore minority.

Multiplatform third party games, with a few exceptions, have a better attach rate on Xbox than PS2

Not to be Mr. obvious, but when the install base goes past those few million hardcore gamers that buy many games, the rest of the owners are those that buy just a few games a year. Of course those are going to make the attach rate smaller. I don't even see why anyone would really care about attach rates, it's the final sales that publishers care about.

MS is going to introduce a new smaller (cheaper to build) xbox at E3.

Do you know that as a fact? I would welcome that, actually, but why so soon?

2. If you really think nintendo is making so much mney on the gamecube, then why has their stock been steadily falling?

Because investors are more interested in Nintendo meeting their expectations than Nintendo acquiring more money.

 

[Johnny Awesome]

Multi-console ownership is increasing, mainly because MS and Sony are targetting the same demographic and hardware prices are falling. The other thing to remember is that only about 50% of the hardware has been sold this generation. That's a lot of market left to exploit.

Xbox has the potential to be just as cool as PS2, especially after a redesign. I find that some people are having a really hard time accepting the fact that brains and money can buy success for Xbox. Sony and Nintendo have no inherent right to success in the console market. They earned their success like anyone else. Microsoft will do the same over time with Xbox.

 

[Goldni]

First of all MS is "buying thier success" not "earning" it like Sony and Ninty. But I must say that Ms aint going anywhere folks. The XB brand is here to stay. The OS market is getting softer and the vid game buz is going up. MS knows this. Having said that, it WILL be a long time before XB is profitable. And it'll prolly be till about the 3 or 4th year of XB2. I've got a feeling though that all of these huge losses are what's keeping MS from buying anymore developers ie Vivendi. The investors would have a coo over that news if it took place. Remember while MS is rich they aint invincible and powerful investors get nervous over posting huge losses after huge losses.

ALso check this out: http://forums.xengamers.com/showthread.php?s=015f9a5e5aa6bce74dabe1d48043622f&threadid=69136

Teh xB0x iS d0oomed!!!

 

[Sonic]

Johnny, I'm pretty sure that less than half of this generation's hardware has been sold already. We still have a strong 30 months left in this generation and I'm sure at least 80 million more units are going to be sold.

 

[Glonk]

Good god, what is this horse manure: "simple rule of 1 console per person"?

Well, I'm trying to see where you're coming from. What on earth makes you think the market in the US is close to being saturated...

Yeah right, they're just going to modify chips off the banias production line and throw them into XBoxes.

Um...sorry, I don't follow this at all.
What does Banias have to do with Pentium IIIs? You were talking about how difficult and expensive it is to shrink Pentium IIIs. But the thing is -- they're already shrunk. 0.13 Pentium IIIs have been in production for quite a long time now, they're used mostly in the ultra-low voltage/heat market like dense servers and mobile chips and whatnot. It doesn't matter what they're used for, though. The design is there, it's already done, it doesn't cost more to shrink it like you said...

I now see there's no point in talking to you.

You wanna lay off the comments like that, man? It doesn't reflect well on the strength or your argument...

 

[V3]

Nah, MS will be fine, worst come to worst, they'll drop Xbox.

 

[randycat99]

"I now see there's no point in talking to you."

You wanna lay off the comments like that, man? It doesn't reflect well on the strength or your argument...

I think the intent of that comment (however well placed or not) alludes to the idea that it doesn't really matter what sort of dire premise Xbox is bringing to M$, you will find the "upside" to it and how that will allow M$ to own the market "one day". You can certainly imagine how tiring it can be to talk to someone who "appears" that way. Thus we end up with a comment like that.

Now instead of consistently reinforcing that "always an upside" lean, you could break the chain and actually lay out what sort of losses or situations you can imagine would actually signify "trouble" for the Xbox. Can you do that? Surely there must be a point where even you can agree that something isn't going work. So what is it?

 

[Glonk]

I think the intent of that comment (however well placed or not) alludes to the idea that it doesn't really matter what sort of dire premise Xbox is bringing to M$, you will find the "upside" to it and how that will allow M$ to own the market "one day". You can certainly imagine how tiring it can be to talk to someone who "appears" that way. Thus we end up with a comment like that.

I've never asserted that it will allow MS to own the market at any time, it's merely not a "huge" loss to a company like MS and is certainly nothing unexpected...

Now instead of consistently reinforcing that "always an upside" lean, you could break the chain and actually lay out what sort of losses or situations you can imagine would actually signify "trouble" for the Xbox. Can you do that? Surely there must be a point where even you can agree that something isn't going work. So what is it?

If the Xbox sales don't continue to grow faster than the Gamecube's it'll be in trouble.

To be honest there's not much that could trouble the Xbox with a company like MS behind it. While you may use that as an excuse to dismiss my arguments because they aren't very negative towards the Xbox or MS, keep in mind that MS is an arrogant company that has deeper pockets than any of its competitors...the Xbox isn't in any trouble, and I don't see it ever being in any trouble.

Whether it "owns" the market is entirely up to debate. I don't think it'll ever happen, I think it'll be a larger player in the US/Euro markets than Nintendo and I think a sizable marketshare is all MS needs...

 

[randycat99]

I see. Well it's rather unfortunate for the case you are trying to make then. We have absolutely no way to distinguish between if you have utterly lost all objectivity over what M$ can accomplish with Xbox or Xbox is indeed imminently invincible. The stories are the same. So if someone says they have gone blue in the face for trying to convince you otherwise, that is a perfectly valid statement.

I would have thought you would tie some "billionish" sort of numbers into how much is too much to loose, but nothing?... It's just an impossibility?

 

[Glonk]

The reasons I don't give numbers is because I just don't see any possible way for the Xbox to lose any more money than it did in its first year.

The worst is over as far as the financials are concerned...

Lower hardware costs, more familiar brand name recognition, far higher software sales, I just don't see how they could lose more money in that type of market compared to the year where the costs were the highest, the prices dropped quickly, software sales were pretty low, and they had to fight very hard to surpass Nintendo. Now it's riding on momentum too...

 

[Magnum PI]

The reasons I don't give numbers is because I just don't see any possible way for the Xbox to lose any more money than it did in its first year.

The worst is over as far as the financials are concerned...

Lower hardware costs

surely. but not the same way sony can lower the hardware costs of the PS2
and they told they would cut the xbox price whenever sony lowers the PS2 price. so despite lowering hardware costs they could end losing as much if not higher on each xbox.

more familiar brand name recognition, far higher software sales

i don't know about far higher software sales.. we'll see. given the number of games they gave.. will consumers buy as much games as if MS didn't give so much games w/ the console..

, I just don't see how they could lose more money in that type of market compared to the year where the costs were the highest, the prices dropped quickly, software sales were pretty low, and they had to fight very hard to surpass Nintendo.

they didn't surpass nintendo. in fact it's too ealy to say that.

 

[DVFtaxman]

First of all MS is "buying thier success" not "earning" it like Sony and Ninty.

If anyone ever bought their success then it was SONY!

 

[cybamerc]

Johnny Awesome:

> $1 billion it is

Where are you getting that exact number?

> MS is doing fine.

Yes... but not because of Xbox.

> MS forced the industry to drop pricing by $50 US per unit.

Except Sony dropped the price of the PS2 before M$ announced its Xbox pricedrop.

Run along now child.



Glonk:

> They can keep posting tiny profits ...

Your ignorance amazes me.

> selling the hardware at a loss initially ... If they do, kiss their tidy little
> profit goodbye for the Gamecube unit.

They did that and it was still profitable. In fact, fiscal 2002 was a record year for Nintendo in spite of two product launches and decreasing software sales.



Qroach:

> 2. If you really think nintendo is making so much mney on the
> gamecube, then why has their stock been steadily falling?

Because investors are fickle.

> The majority of revenue nintendo has coming in is from the sale of GBA.

Yes... but how do you explain their stock value dropping because of low Cube profits then? If it isn't important to the bottomline why should investors care? I'd love to get an explanation.



Geeforcer:

> in light of the fact that GCs software and hardware sales are below
> expectations.

So are Xbox' so what exactly is your point?

 

[Johnny Awesome]

Cybamerc is an ass, but I'll respond anyway.

It's a well known truth that MS forced the pre-E3 price drop on Sony, as evidenced by the fact that none of the major retailers had ad copy ready to advertise the Sony drop for two weeks after the drop, but had Xbox copy ready to go.

Of course, you already know this, but purposefully choose to ignore it, because you're a troll.

I literally can't wait until MS posts HUGE Xbox success and makes you look like the fool that you are Cybamerc. I'm getting goose bumps just thinking about it. 8)

Every mature market that MS has ever entered as been a success for them. They'll do what they have to.

 

[Magnum PI]

Every mature market that MS has ever entered as been a success for them. They'll do what they have to.

wrong !

just look at MSN...

 

[CaptainHowdy]

Every mature market that MS has ever entered as been a success for them. They'll do what they have to.

wrong !

just look at MSN...

awww, come on, two is better than one, everyone wants to be able to surf the web with a friend dont they? and that is only on MSN....

 

[archie4oz]

Multi-console ownership is increasing, mainly because MS and Sony are targetting the same demographic and hardware prices are falling.

Actually I don't believe it's changed much at all. The market itself has grown and thus the # of multi-console owning people of course is larger. However with the level of cross-platform development has probably actually reduced that as there's less reason to buy more that one system these days than there was in previous years.

Also Sony's following the same path they did with the PSX and at this timeframe and market share their demographic is much more broad and diverse than what MS is targetting. In fact if MS wants to gain anymore significant share, it's going to need to do the same thing...

wrong !

just look at MSN...

UltimateTV hasn't exactly been tearing things up either...

 

[cybamerc]

Johnny Awesome:

> It's a well known truth that MS forced the pre-E3 price drop on Sony

They didn't force jack shit although they might've instigated it... we'll never know because they were too damn slow however.

> I literally can't wait until MS posts HUGE Xbox success

Define success. If you mean profits you're gonna have to wait a while.

> I'm getting goose bumps just thinking about it.

You do that while I take another look at the pathetic numbers that are actually at hand.

> Every mature market that MS has ever entered as been a success for
> them.

M$ consists of 7 business segments of which only three are profitable. Spend more time studying and less time annoying the adults on the internet sonny.

 

[Johnny Awesome]

I said "Mature" market. UltimateTV doesn't count since set-top boxes are not a mature market. MSN is turning profitable. Microsoft tries a lot of new strategies and some of them don't pan out, but I'll be EXTREMELY surprised if they don't permanently capture at least 25% of the console market by 2006. On a run-rate basis they're already ahead of Nintendo.

I realize that some of you are pretty sore about the fact that Mario, Starfox, Metroid, and a lower price point couldn't keep Nintendo in the #2 spot, but times are changing. Nintendo will do fine, because they will sell a lot of 1st party games, but they are practically guaranteed to finish in third place, which is not something I would have predicted (I've always thought the split would be something like 55/25/20 for Sony/Nin/MS).

 

[Magnum PI]

I said "Mature" market. UltimateTV doesn't count since set-top boxes are not a mature market. MSN is turning profitable.

a 157 million USD loss the last quarter...
that's what you call turning profitable ?

source:
http://money.cnn.com/2003/01/31/technology/bc.tech.microsoft.reut/

also last quarter they lost 348 million on Microsoft's Home and Entertainment segment which includes xbox, pc games and TV products.
the same quarter of last year the same unit 'only' lost 180 million.

that's what i call widening losses.

and when they lose 348 millions on the unit, xbox losses may be bigger than that with pc games sales recovering some of the losses.

Microsoft tries a lot of new strategies and some of them don't pan out, but I'll be EXTREMELY surprised if they don't permanently capture at least 25% of the console market by 2006. On a run-rate basis they're already ahead of Nintendo.

wrong they're behind.

I realize that some of you are pretty sore about the fact that Mario, Starfox, Metroid, and a lower price point couldn't keep Nintendo in the #2 spot, but times are changing. Nintendo will do fine, because they will sell a lot of 1st party games, but they are practically guaranteed to finish in third place.

what makes you so sure except your faith ?

frankly except having mediumnic talent i think tha no one is able to know exactly what will happen.