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."

Comments

Re:Best wishes!

[Minced]

I am sure stock holders don't view the X-box as a success, it is a financial nightmare.

Expected to lose $5B

[GoNINzo]

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. However, I did find this article about how they expected to get into the black in 2004. I wonder if investors will examine that when they only just now were profitable in Q4 of last year for the original xbox. And that's just for that quarter, not recouping the losses before that.

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.

Sell the Hardware at a Loss

[AcheronHades]

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.

Re:Sell the Hardware at a Loss

[Dan Ost]

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.

There's a tautology for you: "If they had sold more of it,
they would have made more money selling it"

Seriously, they never expected to make serious money with
the original XBox. The whole idea was to lose as little
money as possible while getting the mindshare to allow the
XBox successor (which turns out to be the 360) to make
serious money. The real question here is whether a
4-billion loss is a reasonable loss for what they've
accomplished, and we won't know that until we see how
successful the 360 is.

Looking Forward to the 360

[MiceHead]

I'm looking forward to the Xbox 360 for two reasons:

• Xbox 360 Live Arcade Mushroom Toaster Strudel - In theory, Arcade will allow more small-fry developers to create content for livingroom audiences. The greatest barrier to profitable indie development on the console at the moment seems to be that the only viable way to sell console games is through a retailer, (which often requires the clout and money of a big publisher). Remove that barrier, and -- for what it's worth -- smaller studios have a shot. I believe some indie games have already gone this route for Xbox Live Arcade. And MS has already courted one small studio to create content for X360LA.
• Windows 360 - The original Xbox was basically a stripped-down-Windows 2000 box running DirectX 8.1, making Windows desktop->Xbox console ports a relative snap. I've read that the 360 will function along the same lines, with XNA making that process even easier. This is great for small developers, because it means production for consoles will be within our reach.

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.
_________________________
www.dejobaan.com - Games and other games.

Nope...

[badasscat]

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.

Re:As an American, Microsoft is shameful

[AcheronHades]

"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.

The fact that they illegally used the success of the Windows OS to help them in the web browser market has nothing to do with the quality of their software. I agree they did wrong and I also agree that they got off lightly, but to say that they write lousy software because of that makes no sense.

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.

But what are you really trying to get at? That capitalism, or even the US is corrupt? Give me a fucking break. Corruption will always exist, regardless of the type of government or economy. Do we shoot every houshold dog in the country when one attacks it's owner? No, shit happens. And just because there are some companies in the United States that have behaved unethically is no reason to condem capitalism or the US.