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Xbox Division Down $4 Billion
Forbes, in a long article about Microsoft's monetary situation, drops the news that the Xbox division is $4 Billion in the hole over the last four years. From commentary on C|Net: "That's a lot of money, even for Microsoft, which Forbes also says has a war chest of $40 billion in cash. Just before Thanksgiving, Microsoft will launch its next-generation console, the Xbox 360. The early word is that the 360 will also start its life as a loss leader, though Redmond insists the new box will soon be a moneymaker. Either way, it's got a long way to go to get back to even, and though Microsoft is a rich company, it surely doesn't want the Xbox 360 known as an albatross around its dividend-paying neck."
I'd just like to be the first to say that I hope the Xbox 360 is just as successful as the original Xbox.
GCHQ Quantum Insert installed. If only our tongues were made of glass, how much more careful we would be when we speak
Now might be a good time to point out the frequently bashed Nintendo, smallest of the 3 console makers -- is profitable.
Personally (I own both a GameCube and an Xbox) I always thought there was no contest in graphics quality between the GC and the Xbox. The antialiasing on the GC *destroys* the Xbox.
Hardware geeks constantly tell me that Xbox has fantastic antialiasing capabilities, but my answer is always: Show me.
Take SSX on the the GC vs. the Xbox: the Xbox version is full of jaggies. The GC version is smooooth.
Anyway
The point: GC was a fantastic console, wound up 3rd in overall sales -- but from a financial perspective was a clear winner.
------ The best brain training is now totally free : )
I think that microsoft expects nintendo and sony to just disappear after they take over the marketplace. They are trying to apply the same PC monopoly idea. However, it's not like that, the market is entirely different. There's room for multiple platforms at the top. So it's going to be interesting. Short term, the consumer should win due to the price wars. But long term, we might end up losing if it's just one company there.
Gonzo Granzeau
"Nothing the god of biomechanics wouldn't let you into heaven for.." -Roy Batty
Well, over the last two weeks, as friends have been looking ahead to figure out their finances for the next few months, one thing has started to hit all of them. They don't have $800 for a game system. All of them have 360 pre-orders, and yesterday the last one told us that he's going to go down and cash out his pre-order for the new williams collection release. This last friend was a surprise as he's what I consider a bleading edge adopter. He's the only guy I know that bought a 3DO when it came out at the full $700 price tag.
So, if my friends who are big XBox fan boys all have now decided that they don't have the money for a 360 bundle and bailing on their purchases (it's not that they don't want them, they just physically don't have the cash)... I have to seriously wonder who the hell is buying these systems?
Microsoft makes money EVERYWHERE BUT console division
Sony loses money EVERYWHERE BUT console division
I'm pretty similar to you, except that my console of choice for gaming is the PS2. My Xbox just sits on the side mostly playing audio CDs and the occasional DVD.
Both of us have in effect contributed to the $4 billion loss by not buying many (or any) Xbox games, beyond what was in the original bundle.
I'm happy with that. I suffered at the hands of MS for years (no choice of O/S at work), so in my small way, this is payback.
It is worth noting that virtually all game systems in the past have initially been sold at a loss whent hey first hit the market. Eventually via streamlining the manufacturing process, costs come down and the company can actually make a profit selling the hardware. But initially the goal is to A) create as large an installation base as possible encouraged by lower prices, and B) make up for the loss they take on selling consoles through liscence fees from game developers.
I am just speculating here, but I would be willing to bet that the XBox division would be a lot closer to being in the black if the XBox didn't tank in Japan.
Let us all not forget that the losses for the Home and Entertainment Division as a whole were $4 Billion USD. Not just Xbox. If anything, Xbox only accounted for about $1.5 Billion of those losses and was also responsible for the profit in Q404. Remember, The Home and Entertainment Division also encompesses the loss leading eHome team, DirectX group, Movie Maker, Windows Media Player, Windows Media Connect, Media Center Extender, IPTV, on and on. Out of all of those, Xbox is pretty much the only one generating any significant revenue and has a chance for any significant profit within the next 2 years.
Why does it seem that whenever the subject of Microsoft finances comes up, they always seem to have a warchest of $40 billion?
Is an old figure being reused, are they just breaking even, or do they spend anything over $40 billion on different projects?
It's currently pretty easy to develop code that compiles for both Windows and Pocket PC. I'd like to be greedy and ask for the same thing for the console.
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Too bad I don't have mod points, I think your post is funny.
But seriously, the Xbox was successful in a way. It drives down the profitability of those who wish to sell turing-complete devices that don't run a Microsoft OS, and to accomplish that 4 billion is a bargain. One significant threat to Microsoft is that someone might someday decide to sell a game console with vga or dvi output and a usb port, and that can run firefox, open office, and an email client. Suddenly, people find they can do 90% of what they do on their Windows PC on a cheap, low maintenance computing device without paying the Microsoft tax.
The real test of any model is what happens to it when pushed to the extremes. In the past, the console hardware has usually been a loss leader. The console manufacturer takes a loss on the hardware but makes it up on the royalties paid to them by game publishers on each copy of a game sold. But what are the limits of this? A large console loss means they have to ask for bigger royalties. Asking for larger royalties will scare off potential 3rd parties which is particularly bad if you are not the market leader. This is made worst by the reputedly much higher development cost associated with the next gen consoles like the 360. Finally, if all of these increased costs are passed on to the consumer, it usually means fewer sales. At some point, the gap simply cannot be filled and the console maker never sees a profit.
Right now, it looks like both Microsoft and Sony are in the same boat. Sony has an advantage being the current market leader. But Sony's manufacturing costs are likely similar to Microsoft's so I would guess that they will want a bigger cut from publishers who may balk at this. The old model seems strained in this bigger is better mode. It seems that Microsoft and Sony are being lured upon the rocks by the now ancient siren's song of the home media convergence device. They are hoping that people will buy their boxes for things other than games, like downloadable movies and online shopping, etc... Honestly, I just don't see this happening. But even that doesn't make any sense if you are selling the hardware at a loss. So maybe Nintendo really is on the right track by focusing on affordability and innovative gameplay that doesn't depend on pushing more and more polygons on the screen.
To the making of books there is no end, so let's get started
Haha, I love posts from people who think MS is being destroyed by open source. OSS hasn't made much of a dent yet. It might at some point, but Linux taking a big chunk of Windows market share is definitely a ways off and not a certainty. And omg, they don't dominate the market for online music. The market for that is still tiny compared to anything that Microsoft really cares about, and plus now Microsoft has a patent that they can use to get a cut out of every iPod sold.
Feel free to mod me "-1 - Angry Jerk".
They shouldn't have to spend this much money to get their foot in the door. This is just mismanagement, 25% of that four billion was spent on their 500 million marketing budget when the Xbox was first released and then the other 500 million was spent on Rareware. Did they not notice that most of Rare's talent went to form Free Radical and Zoonami? It didn't cost Sony near this much to enter the market, they didn't spend insane amounts of money on marketing and buying companies that stopped making good games years ago. They just attracted 3rd party developers with low licensing costs and by making the Playstation easy to develop for.
Business as usual for Microsoft. They cannot kill themselves with their stupidity and incompetence, because they always have the OS/Office gravy train.
In my opinion, Microsoft is a shameful example of the corruption of American business. A corruption which is perceived by many worldwide, and undermines the diplomatic messages of our country. I won't go into other examples of this corruption (RIAA/MPAA, software patents, etc.) My thesis is that this single example is damning on its own.
The collosal economic failure of the XBox is just one in a long line of Microsoft blunders. Microsoft Bob, Tablet PCs, terrible MMRPGs, MSNBC, MSN, etc., etc. Microsoft has tried to leverage their monopoly power in Office and Desktop OS software into about every direction imaginable, and have failed AGAIN and AGAIN. Massively. Few public corporations anywhere in the world have managed to stumble this many times and keep from exploding. It is obvious Microsoft has done little to innovate, and often fails to simply immitate. How do they survive?
"People buy their OSs! Their stuff is simple and works! Office is awesome!" the fan boys will shout. Guess what fan boys, Microsoft's cash cows, Windows and Office, were shown by the DOJ as *illegally maintained.* Microsoft lost in court. Whether or not their products ended up becoming decent after 10 years of reworking, Microsoft was proven, in court, to have illegally used their monopoly status to buy themselves the time to get where they are today. In other words, they were allowed to cheat so long that they eventually had enough time to put something decent together.
Strangely, no serious punishments were handed out; Microsoft basically continues as "business as usual", except you can be sure they have a different attitude to emailing around smoking-gun emails.
Why does this shame America in the world? Because we claim to be the land of freedom, justice, free enterprise. Except, of course, we aren't. Microsoft is a stunning example of that. They were convicted of very serious crimes, crimes which impacted most of the techies reading this site, and yet none of them went to jail. They weren't forced to reorganize significantly. Their stock price didn't go to hell like their competitors that they cheated out of revenue.
So now, we get to read a story like this, of a $4 billion blunder, and we are so numb from the state of the world that its like "d'oh, silly Microsoft!" Those silly crooks; let's give them their own version of Sopranos, and coddle them even more. Crime pays! Ain't that America.
... lamest troll ever.
Congratulations, stillbirth.
my scheme of buying a new console and used games has paid off
d =13669888
http://yro.slashdot.org/comments.pl?sid=163693&ci
"The 360 is not going to break Dreamcast installed base numbers."
Hey... hold on now, didn't Dreamcast struggle to break two million? That statement is WAY too bold.
Yeah, I'm right. When PS2 came out, Dreamcast had a 1.5 million install base (at 15 months). PS2 beat that in a month.
And now, for a sig that's a complete copout.
I seem to recall a news article back in the day that said that Microsoft was going to risk five billion dollars on it's entry into the marketplace, but I can't find it anymore.
Not sure what you were reading, but the figure I saw repeatedly was "as much as" $2 billion, such as in this article here.
$2 billion was already a chunk of change. Now it's double that, and they never did get into the black. Clearly something is not right at that division, and it really does make you wonder about the financial prospects of the Xbox 360. (Note that that's different from marketplace prospects; obviously, MS could keep this money-losing charade up basically forever, though at some point you'd think investors would expect some real returns.)
No doubt they learned some things from their Xbox experience, but we'll see if any of that actually translates to profits. Which is all that really matters in business, in the end.
The Dreamcast ended up with about 12 million units worldwide before it was killed off.
The Xbox has about 21 million units worldwide and it has been killed of - MS is basically just clearing out inventory right now with the ones still on store shelves.
The Xbox installed base is primarily made up of:
1) The bulk of the former Dreamcast istalled base
2) x86 pc gamers
3) People who want to own the most powerful system - regardless of the fact that the Xbox wasn't or at best was only in the case of multi-texturing
The vast majority of 1) will stick with MS because they have a burning hatred for Sony for 'killing the Dreamcast with hype' or whatever.
2) is looking questionable for MS and the 360. We are already seeing current gen pc games having to be trimmed down to run on the weaker 360 hardware. The original Xbox had a least a six month or so window where it could still outperform top end home computers
3) Looks like the majority of these folks have long since abandoned MS. The various devkit excuses or other damage control for the horrible looking 360 titles was only able to keep these people onboard for a while. The MGS4 realtime demo looks like it put to rest any question where these folks are going, PS3.
What the actual installed base for the 360 will be after four to five years is unknown but anything greater than 20 million just isn't going to happen. The numbers just aren't there. 10-15 million sounds reasonable. Maybe 17. Or even 18...
I'm not sure if you're serious, but you're definitely wrong. The Xbox is superior to the gamecube in several categories - for example, it can play DVDs. But definitely not "in every measurable sense" (whatever a "measurable sense" actually is). We can argue graphics, but frankly, it's pointless. The Xbox may be faster in theory, but with games like Resident Evil 4 or Metroid Prime on the Gamecube, the point is moot. The Cube's best-looking games are at least as pretty as the Xbox's best-looking games.
Even ignoring graphics, there are several metrics where the Cube soundly beats the Xbox. Size, for example. The box which the Cube comes in has about the same volume as the Xbox itself. What about sound? The Xbox is definitely a lot noisier than the Cube.
And then there are the games. It's debatable whether this is measurable, but I'm pretty sure the Cube has more original titles and more A-List titles than the Xbox.
Yeah, the Xbox is big and black and bad, but it's hardly the better console "in every measurable sense".
Nintendo is dying!
The US Army: promoting democracy through unquestioned obedience
I'll buy one, but not the ripoff $800 bundle (created by the retailer, BTW, *not* Microsoft, to address a frequent error I see here on Slashdot.) I'll go to the local Target or Fred Meyer early on the day of release and pick one up for $400, along with Kameo and maybe Elder Scrolls 4 if it's out.
Do you seriously wonder who the hell is buying these systems, BTW? I mean, come on! Just because three of your buddies made a $800 pre-order that they can't pay for, that means *everybody* who did the same pre-order isn't going to buy it? Why don't you come to the conclusion that your buddies can't keep track of their finances or plan ahead when making a pre-order? That seems like a more reasonable conclusion to me.
Comment of the year
Question: What do you call Microsoft being down $4 billion? Answer: A good start!
Want to find other gamers to play board and role playing game
As of the past few quarters, SCE has been losing money too. (SCE being Sony Computer Entertainment for you neophytes)
Microsoft probably circulates its money around different divisions for different purposes. The 'warchest of $40 billion' is probably just 'in the event of an emergency' money. That and its probably 'if people start looking at the financials, distract them with this money.'
Yep, a lot of ex-Dreamcasters are Xboxer's now. The frickin controller probably attracts them too. When I first saw the Xbox controller and MS said their focus groups helped them with the design I thought: "What, were they all Dreamcast owners?" Perhaps MS got access to Sega focus groups and testers as part of their WinCE for Dreamcast deal.
Which explains all the FPS's, but yes the Xbos is the console of choice for PC gamers who do console. I don't know why, since they all complain about analog sticks. Seems like they should have gone with the console with USB ports for their mice and keyboards.
Free Software didn't put much of a dent in MS's userbase but it put quite a big dent in its growth in the server space.
Where it not for Linux a lot more servers would have gone from Unix to Windows but instead went from Unix to Linux (cheap hardware like Windows, closer environment to Unix than Windows).
It might not threaten MS in the hort run but I don't think they are happy about that as it makes it more difficult to lock the Internet in a MS proprietary platform than if they owned both the Desktop and the Server space.
If it means protecting and extending the Windows monopoly. Microsoft is not so stupid as many of the posters have claimed in pursuing this strategy. Their goal is quite simple - to protect and expand their monopoly.
They've succeeded already with PDAs (look at Palm using Windows in its latest Treo), are working hard on mobile phones, and can't afford to miss the console market as the whole 'home entertainment system' could well be the next big growth area and they can't risk missing out on a chance to extend their monopoly into this area as well.
$4 billion Microsoft can more than afford. Losing their monopoly and letting in the competition, whatever the market, they can't.
...they are trying to dominate a market in which creativity should prevail with nothing more than an astronomic marketing budget and bribe money to developers. Microsoft is a corporation that has as its only objective to make money, not good games, and this means pandering to the lowest common denominator.
The Xbox has nothing special (well *maybe* Xbox live, but if I wanted to play FPS's on the internet I would use a computer instead) and the 360 is just another boring computer too (only distinguishing feature is that it has 3 processors). All of its games are either rehashed pieces of garbage or ports.
Just think about it, when was the last time a field was improved by Microsoft's presence? They are the kind of corporation that shouldn't be made, one that cares nothing about what it does or how it does it as long as it makes money.
I would like the Nintendo Revolution and PS3 to bury the Xbox 360 and end M$'s unwelcome foray into the videogame console world.
(Note: Sony may be a bad corporation too, but I think the effects of its competition are good. I have greatly enjoyed the PS1 and 2. Third party support is what makes them good and they actually deserved it during the PS1 era.)