NPD December 2011

Well it was a serious question, there is a lot of stuff in EDD, but not a lot of revenue generators. I admit it's even more skewed than I had thought it might be, but the only thing I could think might generate any serious revenue is windows phone and it hasn't been doing all that well from reports.

 

Xbox revenues rose by $322M or 9% YOY. Figure it out yourself.
Even if at the moment WP7 is not generating a lot of money and generating losses, they won't be giving it up anytime soon - it's too tied to their core business that they could not give it another go. Microsoft has no cash flow problems, they can afford and justify pumping money into phone/tablet software and online services. Altough better management with vision to do more than catch up to what competition is already doing. Some innovation would be welcome, that's what won the console audience over.

Besides WP7 is a solid product, I like it more than Android based phones, it should be successful enough eventually.

Q3 shipments were lower than in 2010, it's possible that they had to restock more early in the last quarter than the year before and probably retail ordered a lot more consoles after the fantastic Black Friday. I doubt there's any significant overabundance of 360s in stores and things will be rolling out as usual in 2012.

 

According to Geekwire:

Last year a lot of the software sales were Kinect titles published by Microsoft, and developed by Microsoft owned studios. Much higher profit margin on those...

 

Aselto seems to be pulling information from this (http://forum.beyond3d.com/newreply.php?do=newreply&p=1613825 ) which doesn't match MS' quarterly statement in anyway.

Code:

Division            - MS    - Article
Windows + Live      - 4.73B - 5.05B
EDD                 - 4.24B - 3.90B 

The quote in question

The 3.9B is clearly for EDD. I haven't got a clue where Engadget are pulling their numbers from. Likewise their combined revenue (19.95B) doesn't match the MS statement (20.89B) either. At least their profit number matches the net income number.

[edit] OK, I found where Endgadget screwed up. They didn't. Aselto did by referencing an article about FY 2011 Q2 instead of FY 2012 Q2. Bah I wasted all that time typing all that stuff. Shame on me for not looking at the date of the article before writing all that.

Yeah, I've noticed that while Hardware has grown a fair bit, software hasn't followed suite. But I think there's a few things influencing that. Some of the big Kinect titles being sold for ~25 USD for a bit surely didn't help the revenue or income line. Likewise, with the economy the way it is, I suspect more used software was purchased this holiday season than last.

I still think some underperforming product lines are pulling down EDD income, but either way it's still impressive numbers overall. The Nokia associated costs could be lumped in with that as it was a move to bolster flagging WP7 sales.

Regards,
SB

 

I don't understand anything from your rant, but I did not screw anything up. I took the number from just released financial report:

So yeah, it's $3.9B for Xbox in the last quarter
http://www.microsoft.com/global/investor/RenderingAssets/Downloads/FY12/Q2/MSFT_FY12Q2_10Q.docx.

 

Yep aselto's math is solid.

$322M is 9% of $3578M and $3578M+$322M is $3.9B

$322M was specified as 360 platform growth so all the pieces are there.

 

Who are they paying royalties to?

 

I figured they had to pay for the hundreds of TV Shows I purchase.

 

That'd only work if they were losing money on the TV shows you bought AFAIK. Are they paying game companies when people use Xbox Live or something such as Call of Duty?

 

Wow.

Yeah, MS probably caved to Kotick. It is hard to imagine a game series being as dominant as COD has been and continues to be, but here it is years later and the train keeps on chugging and building steam (no pun intended).

Hopefully long-term agreements haven't taken place.

Fads come and go.

 

DLC first on 360… You paid for that.

 

Well there's been much in the news about netflix being squeezed for higher royalties by the content companies lately. Maybe it's the same type of deal.

 

Ah, gotcha.

Eh? No. There are royalties associated with many things. Perhaps the share of revenue generated from the sale and rental of video's through Xbox Live has gone up. Revenue remains the same but operating income goes down at that point. Doesn't mean they are losing money on those shows, just means they are making less profit at the same revenue number.

Some of the Xbox Gold features also carried an associated royalty cost. We don't know how much, if any, royalties MS is paying to Hulu, HBO, ESPN, Bravo, Dailymotion, FiOS TV, etc. I'm assuming if the Gold membership service also requires paid service from those providers that it probably doesn't require royalty payments from MS, but it's hard to say.

It's certainly within their rights to require MS to pay them some sort of royalty to use their service on the Xbox Live service, especially if they are big enough that they don't need MS to advertise their service (HBO or ESPN for example). Whether they do or not is up to each individual company. And MS pays for that through revenue generated by the Gold membership fee.

Others are obviously royalty free (BBC public broadcast for example) as they are on the Silver membership level.

Regards,
SB

 

No, it works if the profit margin is lower, but still positive.

 

I would also imagine now that Music Videos are included in Zune Pass that the royalties each time one is played has probably driven some of that...depending how many people even use the feature.

 

I was told it's the payment to 3rd party publishers or developers if the game is published by MS. MS doesn't just add up the net profit as revenue, they count all the money earned from a digital sale as one total, and record the portion for 3rd parties as royalties.

 

Microsoft is paying money to at least some publishers whose games are popular on Xbox Live like Activision.

 

This certainly makes sense for things like Games on Demand and XBLA but I certainly believe their media offerings are similar and nothing has grown like entertainment media options/offerings.

 

Why?

I would imagine that this applies to every digital item sold on Live (movies/TV, games, avatar items, etc).

Unless I'm misunderstanding your post here...

 

Because they have a product that generates lot's of money to MS through game royalties and Live subscriptions and they know this. Activision has plenty of leverage due to this.

http://www.joystiq.com/2010/11/12/bobby-kotick-on-the-business-of-call-of-duty-dlc-treyarch-inf/

"modest" to them probably amounts to quite a bit of money.