Xbox Losses Double, Xbox Shrinks

seldo writes "According to ITWorld, losses in the last quarter at Microsoft's Home and Entertainment segment have doubled. From the article: 'The segment, which also includes Microsoft's TV platform and PC games, posted a quarterly operating loss of US$348 million, compared with $180 million in the same period a year ago.'" An anonymous reader points to similar coverage at news.com, pointing out that the company also reports "profits for Office, and one small note about an undisclosed presumably Japanese company that Microsoft if propping up. So, the big question on my mind is, who is Microsoft secretly holding above water, and why? The fact that they are presumably Japanese, seems to point towards an XBox partner. Could this explain the sudden flood of Sega exclusive games?" Another anonymous reader writes "Microsoft will be showing a smaller sized Xbox at E3 this May. In addition to the smaller size of the hardware, the Xbox Lite will also be integrated with Media2Go allowing Xbox users to download digital content such as music and movies. Wonder what this means for all the current Xbox Mod Chips?"

Comments

I suspect it's Sega

[BrerBear]

It would have been much cheaper for Microsoft to bundle some of their own games, like Halo, with the Xbox. Instead they chose to bundle two games which Sega made exclusive to Xbox, and which didn't sell very well in their own right: Sega GT and Jet Set Radio Future.

My guess is that Microsoft did this to appease Sega and boost sales of their titles, in order to keep Sega making Xbox exclusives.

Who is te JPN developer?

[GweeDo]

The only logical answer is Sega. There is no other developer out there that is giving the Xbox any kind of serious support in JPN. Xbox is only getting games from them that are on all three systems or nothing much at all. MS needs to figure something out with the JPN market if they hope to really fight in the Consoling gaming market. I don't see them getting any major head way though (but that doesn't upset me at all) due to these already tight partnerships: Nintendo has Capcom, Namco, Square, Sega (amusment vision) Sony has Square/Enix I know I am not listing all the JPN developers..but those are the big buys (for the most part)

Rare

[NixterAg]

MS bought Rare in late Sept. for $375 million. I wonder how much of the $348 million reported as losses can be attributed to that acquisition.

Like them or not, MS is in the console business for the long haul whether they turn a profit within the next 3 years or not.

Re:I'm wondering...

[NineNine]

It doesn't say XBox per se, but the division that makes XBox, along with other products is losing more money. For all we know, they're developing all kinds of crazy stuff, which is why losses are larger.

Microsoft's Home and Entertainment segment, which includes the Xbox, PC games and the company's TV products, posted an operating loss of $348 million in the quarter on revenue of $1.28 billion. A year earlier it had a loss of $180 million on revenue of $833 million.

This isn't really news.

[siphoncolder]

We've all known for a LONG TIME that MS isn't going to make money on the XBox for YEARS. How is this news now that they've posted a loss this far into it? Didn't we already KNOW that?

MS has a history of going long-term with high-profile products, and it's paid off for them. This venture was no different, and losses were expected. Maybe if this story was posted say, 3-4 years down the road, it'd be newsworthy, since that's when MS is expected to BREAK-EVEN with the Xbox.

This sounds like editor & zealot bait - fanning the flames of hate. Woo-hoo, MS is losing money?

Woo-diddley-hoo, they knew it before we did. Get a grip.

Re:This isn't really news.

[FatRatBastard]

MS has a history of going long-term with high-profile products, and it's paid off for them.

Except this time they're on the hook for hardware. BIG DIFFERENCE (at least for MS). MS's usual modus op. is to bring in HW vendors to flesh out their visions, that way their only on the hook for the software R&D. If the product tanks (every version of the MS tablet up to now, early PocketPC, etc) MS has only eaten R&D costs. HP, et al will have to eat their own R&D costs plus the hardware costs (manufacturing ramp up, shipping, etc) of the product that tanked.

Now, I'm not saying that the XBox will fail, or that MS aren't in it for the long haul. But being on the hook for hardware (and at a loss no less) is much more risky thank software only.

Still #2 And A Very Cool System

[mgmartin]

Coming from a big PS/2 background and advocate, I was converted to the Xbox from my brother. For the same price of a PS/2, I got Dolby 5.1 in all games, network adapter, built-in hard drive, etc. The Xbox is very cool, and from what I've read, the #2 console. So despite the current losses, I think there is a lot Sony has to live up to in its next gen console to even catch up to what the Xbox now offers. And #2 ain't bad for a 15 month console life span!

Re:So is this good or bad?

[Autonymous Toaster]

Not necessarily-- could be spending more on R&D.

I hope not.

While I am not one to engage in schadenfreude for its own sake and I certainly support people's efforts in the area of embedded technology in certain parts of the home, I think these losses are good news on the whole. It's not that Mr. Gates's presence in the video game console market is itself really that important in real life - it's that Microsoft has repeatedly exhibited expansionist tendencies, and it's been pointed out that the very name "Xbox" is intended to mean "Anything Box" (ie. the "X" is a cheeky metasyntactic variable).

Not to be a conspiracist, but to me this implies that they have much more on their minds than video games. Imagine if their intention is to further expand beyond the digital media space they've so far occupied and on into real-world objects? Imagine if they make something that could be used to (mis)create toast? I find these prospects very alarming, and thus the news of the Xbox's impending failure can't help but be a little bit of a relief.

Re:how to sell an xbox

[Tom Courtenay]

Are you kidding me? If MS legalizes the mod chips then the Linux folk would completely abandon interest. They're only into it because they think they're thwarting "The Man".

This isn't a troll either-it's the truth. I hope the system succeeds (I think it has, to a large degree) well into the next generation.

As much as people love to hate on MS, they've changed the console world forever. There won't be any more consoles released without a hard drive-it changes everything once you've used it. The same thing applies to the network jack-plug it in and you're off and running.

I know it's been said time and time again, but we play the games. Not the consoles.

Smugly fanning the flames.

[Matey-O]

Slashdot LOVES articles that cast the Xbox in a poor light.

Here's my take:

Let's just say they 'cut bait' and stop production on the Xbox. What happens?

My 8-10 games continue to function.

The 6-8 games I'd like but don't yet own get CHEAP. (we have an Atari 2600 and 80 odd carts that we bought for pennies on the dollar in garage sales)

My Xbox still makes a killer DVD player.

I dunno 'bout you, but I feel I got my money's worth. On a dollar per hour basis, it's been a pretty good purchase.

And yet, I doubt it's future is in jeopardy less than 4 months after announceing Xbox Live.

Re:Smugly fanning the flames.

[Jason Earl]

Yes, as an XBox gamer I have to admit that the XBox is a neat system, and it should be with the amount of money that Microsoft is spending per customer. When you plunk down your $200 for an Xbox you are actually getting hardware worth quite a bit more than what you pay. However, as a Microsoft investor, I happen to think that the XBox is the stupidest thing Microsoft has ever done.

Microsoft simply loses too much money per customer to be able to turn a profit before Sony and Nintendo come out with their next gen consoles. The only reason that Microsoft hasn't pulled the plug is that they know how important the Wall Street analysts think XBox is for Microsoft's future. Microsoft has to come up with a new growth market if they want to justify their high Price/Earnings ratio, and right now the only real possibility is the XBox. If Microsoft dropped the XBox, then their stock price would drop. Since all of Microsoft's management are heavily invested in MSFT they would much rather have Microsoft waste money on the XBox then have the stock price drop.

Re:So is this good or bad?

[killmenow]

Help, tell me what to think!!!

You know, all jokes aside, I find this quite telling. On a site where (I presume) most readers/posters consider themselves free-thinkers, there still tends to be "group think" and the ideal of individualism gets swallowed up by our need to belong to a group. I think it says a lot about the human condition.

Oh, yeah (almost forgot)...Micro$haft SUCKS!

This *is* big news.

[badasscat]

I'm sorry, but this is more than $500 million MS has lost so far on Xbox, and that is big news no matter how you slice it. Does anyone honestly think MS got into this business in order to lose money? What would be the point? There are two possible reasons for MS to have gotten into the video game business, and only two:

1. To make profits. This is self explanatory.
2. To use the system to leverage their Windows business somehow, selling the system at a loss in order to eventually put some modified version of Media Center in your living room.

They're failing at #1, and as far a I know, #2 would be illegal - it's basically exactly what they were found guilty of in court already.

No company can continue to lose money at something forever. I'm sorry, but this is a publicly traded company and if I were holding MS shares there's not really anything MS could do at this point to convince me that getting into this business has been a good idea. Sony's profitable, Nintendo's profitable, MS is losing *large* amounts of money. What's wrong with this picture?

Almost lost in this story is that MS is now saying they're barely going to hit the low end of their sales forecasts. You think they expected to lose $384 million? They probably wouldn't have if they'd sold as many consoles as they'd hoped - this means less software sold, and fewer royalty payments. The fact is the Xbox is not doing well, however MS wants to spin it.

And regarding this Japanese company they're "propping up" - I would honestly doubt it's Sega, though it's possible. However, all of Sega's recently-released Xbox games were announced over a year ago (at the E3 prior to the Xbox's launch), and the only recent Xbox game I can recall being announced by Sega is Virtua Cop 3. That's honestly not a lot of support. More likely, the investment is in Tecmo - which has been devoting almost exclusive support to Xbox ever since its release, and which has two of the highest-profile titles ever released for the console - Dead or Alive 3 and Dead or Alive Extreme Beach Volleyball, not to mention the recently announced Dead or Alive: Code Cronus and the hinted-at Dead or Alive 4. All Xbox-exclusive. Sega, by contrast, hasn't released any million-sellers for Xbox, not even close, and hasn't announced much for the system lately.