Microsoft takes a $177M loss in 3 months on the Xbox

Discussion in 'Console Technology' started by Nite_Hawk, Nov 15, 2002.

  1. Johnny Awesome

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    The Xbox is good business. The short term losses are managable. The long term profits will be huge. :)
     
  2. randycat99

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    Where are these long term profits coming from? People keep mentioning it, but realistically when is this supposed to take effect? Even taking significant losses with each unit sold in this round, M$ has only made a limited incursion into the market. There's only so many games that can be sold to a limited userbase, so that source of revenue will continue to be limited unless they can grow market share considerably (and it seems a tough goal at this point). Will game developers continue to support a platform that has shown limited growth so far when they could instead jump into the huge userbase pool that which is PS2 (perhaps doubling or even tripling their take for a given game)? If the good games dwindle for Xbox because of this, that will make the future profits outlook even worse. Are people counting on M$ to release even more enticing hardware early in the form of Xbox2? Will they sell it at a loss again to grow marketshare? Again, that places "future profits" at further risk. ...Or do they sell it at cost because they are confident with their current marketshare volume? Would current Xbox customers be all right with an Xbox2 that cost $500? Could this future hardware be that good as to continue to make significant sales even at $500? Remember, this going to be state-the-art PC hardware at the time (that will unflinchingly blow away the competition for IQ and features, no matter what the skill level of the developer is), so doing that and being able to hit even a $500 pricepoint (at cost scenario) will be quite remarkable. Perhaps they play real rough and literally give away Xbox2's at $50 a piece to dramatically seed the market. If it fails, what will that say of M$'s product? If it succeeds, what kind of message will have been sent as to what M$ needed to do to sell a product (not to mention the severe losses it would incure)? They better have consistent attach rates of 5x just to break even. Could new game releases even keep pace with a phenomenon like that?

    ...or do we need to give notice to a more logical realization- Xbox hopefuls will continue to bandy the "future profits" incentive until the very day M$ gives up on the platform, despite successive and increasing losses in every year that M$ stuck to its guns? I'm not saying this is certainly going to happen, of course. Just trying to shed light that this "future profits" theme is getting a bit worn out in the course of Xbox's subdued fortunes so far.
     
  3. V3

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    It doesn't matter, MS just spreading the eggs. Xbox might not turn into profit for another 10 years and it would still be alright.
     
  4. randycat99

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    10 years? Well that would certainly set a precedent. :) Even that would send a message (Why even bother to do that for 10 years just to see a profit when Sony did it in 1? Surely there are more lucrative ventures to spend a decade.). An entirely new player in the industry could show up to take the market in that sort of time span (Sony wouldn't know what hit them and neither would M$ because they were gunning at Sony). As a noble goal, I would rather they spend that amount of time and money to make their OS utterly unimpregnable to hacking and exploits w/o utterly locking the user from his own machine and make a legitimate copy of M$ Office cost $125. :p

    Spreading eggs? Are the eggs even hatching (dramatically increasing/dominating market share) or are they merely eeking out a statically viable colony?
     
  5. cybamerc

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    Johnny Awesome:

    > The Xbox is good business.

    It clearly is not and repeatedly claiming otherwise won't change that.

    > The short term losses are managable. The long term profits will be
    > huge.

    Of course the losses are manageable. Losing a billion dollars a year (more if you include other businesses) is "manageable" when you have a 20+ billion dollar/year monopoly to fall back on. As for the long term there's a very real chance the Xbox won't break even much less become profitable.
     
  6. Johnny Awesome

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    :roll:

    You guys make me laugh. LOL!
     
  7. Vince

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    Johnny - Need I remind you of your past 'ideas' which are so far beyond explination, even if using the horribly annoying ":roll:" icon.

    You sir are no person to talk. Beyond this, however, Microsoft is getting ass-rammed by Sony. They're priced lower/bundled with software/spending just as much if not more on advertising and getting 1/2 to 1/3rds the sales. You can compare XBox sales with the Gamecube - but to what effect? Might as well compare it to Dreamcast - same end reult.

    In your 10 years, the whole idea of gaining a foothold in the livingroom via a console will be done with. Microsoft needs to pull a marginal victory this generation and a decisive victory next generation. I see neither - and within these 2 generations, well beyond the next decade's networking topography will be descided.

    You can stick to your "Microsoft" allways take 2 or 5 or 10 revisions to get it right - but the competition is already getting it right. Sony, even now, has the name identity and trust of the consumer to get it where it wants to go. I don't quite think Microsoft does.


    I've already said everything I need about this future.

    Their is an interesting read posted at GA Forums that pretty much said everything I've been saying about the future role of the game console and networking. See, I'm not just making this stuff up.

    http://ga.gamesquad.net/showthread.php?s=a56ff72a1ba692e3422b31b573388d7a&threadid=2957
     
  8. cybamerc

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    Johnny Awesome

    > You guys make me laugh. LOL!

    Well, how can I argue with that? Your reasoning is irrefutable. Kudos to you!
     
  9. PiNkY

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    I think Johnny is not too wrong here. The 177 Mio losses correspond to a quarter of drastic price cuts on the hardware. As a result they managed to increase their sell rate, something not uncommon in the console bussiness (profit from sw sales/licenses, not hw sales). The same happend to Sony with PS2 in their first year (within a then less competitive market), and they (MS) basically prepared for launch of the live service in that period (without it generating any income yet.). The first interesting quarter will propably be q2/2003 as live will then be online in europe as well. By then an upwards trend should be visible.
     
  10. randycat99

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    Even that future is not so clear. Since you have to subscribe to the service, it is not unlike the typical "add-on" for a console with associated market penetration difficulties. ...and when has an add-on significantly turned the tides for a flailing console? It could also be a wild success (it is online action, after all), and Xbox will be all the better for having pulled out this card at the 11th hour. Who knows? The only thing left is to rely on the "next big event" to save the day (it should be evident that this ploy has been called upon numerous times already; how many times you can cry wolf and be attended to remains to be seen)...
     
  11. zurich

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    I wouldn't so much call the Xbox a failing console, rather the PS2 a blistering success.
     
  12. randycat99

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    I did say "f-l-a-i-l-i-n-g", not failing. If that is not a word, I apologize. I tend to make up words that sound like they fit. :lol:
     
  13. BenSkywalker

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    Sony racks up ~$400Million in losses to launch a console with no real competition replacing the previous generation's hands down leader while MS racks up ~$700Million in losses to enter an entirely new market where they have never had any presence along with facing two long established market leaders and Sony is genius while MS is moronic..... why am I not seeing the logic here?

    Console gaming is a ~$20Billion a year industry and growing in the double digit rate year over year(already considerably larger then the PC OS market in terms of dollar value). As of right now MS is making a very strong showing in the US, they will likely be in the ~5Million range by the time they have one year on market, are doing fairly well in Europe with Japan being the only glaring weakness they have.

    Already MS has gained significantly more respect in the console market its first year then Sony did(the XBox has significantly outpaced the global sales of the PSX for first year). Nintendo made a lot of money off of the N64, MS doesn't need to be the market leader to have a very profitable console, they simply need a solid user base which they are on track to reach. Less then 1/3 of this generation's consoles have been sold and already people are stating that it is over in terms of their being a viable market for MS, I'm not seeing the logic there.
     
  14. randycat99

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    Up to this point, it has been a pretty calm discussion. Was it really necessary for you to add the "Sony is genius/M$ is moronic" assertion? Who here said anything about M$'s intellectual state prior to your post, honestly?
     
  15. BenSkywalker

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    Randy-

    These are not stating that the XBox business model is stupid? Since prior to the launch people inside and outside of MS have been stating that the Box won't turn profitable until late '03 at the earliest, now all of the sudden that isn't viable because the exact same thing has been stated for well over a year?

    Calling the XBox bad business implies that MS is being stupid. Given that they are pretty much on track with their goals it certainly indicates that the poster considers MS to be moronic in this venture.

    I made no slams against any posters, nor did I stoop to the lowbrow level of saying anything like "$ony" is a genius which would clearly indicate a blinding bias and inability to objectively look at the situation :)
     
  16. randycat99

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    You are taking the final leap to go from my quotes to me saying that M$ is moronic. M$ can go and do whatever it feels like doing. It's not up for me to judge whether they are moronic or not for doing it. My comments were soley alluding to the premise that people could be mindlessly chanting "profits are on the way" over and over w/o ever considering that may be they are not. That is all. It's what M$ originally stated, it is what they want you to believe, it is their way to put a sort of blinder on their customers in the face of considerable losses over a sustained period of time ("...everything is fine, nothing to see here, move along, buy some Xbox games..."). It's fine and all if you wish to wholeheartedly believe what M$ feeds out as PR, but who is to say that a little counterpoint every now and again can't be healthy? After all, there is always some "industry analyst" saying Apple is doomed for one reason or other in virtually every year since their inception- yet the gone-out-of-business sign has yet to come to fruition.
     
  17. marconelly!

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    Just as you said - different times, different markets. So why even bother comparing them?

    Well, if you consider lowering the goals from 6 to 4-4.5 million, and missing even that, to be on track, then OK, they are on track...
     
  18. bukima

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    Your logic is seriously flawed. Sonys investment in chip producing factories is a an actual investment. They are still there, and they are still producing everything Sony wants them too. And they will be there for the next generation = true long term investment.

    MS bought a truckload of chips, end of story. That's not an investment, that's a purchase.
     
  19. Magnum PI

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    as bukima said, sony invested while MS just spent..
    and sony flooded the market while MS...

    MS spent a with little results.

    [quotze]Already MS has gained significantly more respect in the console market its first year then Sony did(the XBox has significantly outpaced the global sales of the PSX for first year).[/quote]

    you can't compare the sales of xbox and psx, as it wasn't at the same period. the market was very different (like a lot smaller) when PSX was launched.

    to be profitable they don't even need gazillions of users, they just need to recover their expenses. seeing how much they spent (and not invest, like someone else pointed), how many games would they have to sell to break even ? how many years of live subscribtion ?

    i don't know the future but signs are not encouraging.

    total disaster in japan, japanese developpers disaffection ...
    despite it launched a month later in europe, it surely sold less than other consoles.(perhaps the sega bundle changed that..)

    i think we'll see this winter how MS and the others perform.. i'm afraid MS don't have the most appealing software line-up for this christmas season..
     
  20. aaaaa00

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