Xbox lost Microsoft $4 billion over 4 years

[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 Geezer]

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 Geezer]

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 Geezer]

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.