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Microsoft's Revenues Up Except for Games Division
Gamasutra reports on Microsoft's announcement that their revenues are up, but the games division has seen a sharp decrease in profitability. From the article: "Microsoft's Home and Entertainment division, which overall includes the Microsoft Xbox video game console system, PC games, the Home Products Division, and TV platform products for the interactive television industry, saw revenue of $1.56 billion in the 3 months to the end of December and a significant loss of $293 million, compared to $1.37 billion revenues and a small profit of $55 million in the same period last year."
They report though that the XBOX 360 is a large part of their increased revenue. MSNBC Article Now this doesnt make sense one bit since they lowered the prediction on unit sales for 360 and they loose over $100 per unit. I am slightly confused by their numbers.
30% Troll, 50% Underrated, 10% Interesting
Score:5, Troll
...when you sell your next-gen, multi-million-shipping unit at a loss.
It's sorta funny, the only Microsoft product I like is xbox and that seems to be the one they're always having financial trouble with.
I'm now a happy apple user, I don't have to deal with windows anymore, but I still have to use the horrible MS Office for Mac so that my windows-based colleagues and I can exchange work.
Unline the other MS products I've used, i've always found the xbox experience to be easy and user-friendly.
"damnit, trolley I want in your signature." - Elburrito
...except for game division?
FTA: Microsoft's Home and Entertainment division, which overall includes the Microsoft Xbox video game console system, PC games, the Home Products Division, and TV platform products for the interactive television industry, saw revenue of $1.56 billion in the 3 months to the end of December and a significant loss of $293 million, compared to $1.37 billion revenues and a small profit of $55 million in the same period last year.
Grrr, the headline made it sound like revenue for the game division was down, but it was up, too. Please keep the headlines accurate for those of us who don't want to read the synopsis, let alone the actual article!
-THE END-
So you don't want to read the synopsis... or the actual articles... but you're quick to post a comment.
:)
Typical Slashdot.
Developers: We can use your help.
I'm guessing that's what we're seeing: the startup costs for the Xbox 360 and its launch publicity. So even though revenues were up, the increased operations costs turned it into a net loss, for now at least.
I would expect the 360 to be profitable for them in the long run, though.
Jon Acheson
All opinions expressed herein are my own, and not those of my employers, who are appalled.
TO put it more simply, Microsoft's total income from games, XBOX and, Home PC is higher by around $190 million, and profit is down by about $230 million from last year. That's only around a $40 million net difference from last year, and I expect a lot of that is the cost of launching a new console.
Well, if they would find a way to not take such a huge loss on making the 360 vs. selling it, then im sure they wouldnt lose as much.
But then again, who wants to pay for a more expensive 360 or a lesser "quality" 360?
I guess let microsoft take the shaft for this one, they can take the hit.
"I guess let microsoft take the shaft for this one, they can take the hit."
Boggle.
No, they can't.
The only reason Microsoft's stock didn't tank today is due to the poor sales of the 360. Something shareholders and wallstreet didn't miss.
Seeing their 4 billion loss on xbox 1, I wouldn't bet on it.
I still have more fans than freaks. WTF is wrong with you people?
"...a small profit of $55 million..."
Maybe I'll go work for the Microsoft Games Division and ask for a small salary :)
What? Like the original was?
What do you think, the things grow on trees?
Hoo ah. Tough crowd. OK, here's my Jimmy Stewart.... "Zuzu's petals! I'm alive! Maaaaary!"
You don't think they learned a thing or two from Xbox 1? For example, Microsoft didn't have the rights to fabricate the Xbox 1 CPU or GPU themselves (this also hurt them with backwards compatibility, because they couldn't build an Xbox-on-a-chip like Sony did with the PSOne and PSTwo (where the PSOne was the miniaturized PS1 and also embedded in the PS2 for BC, and the PSTwo is the miniaturized PS2 that will most likely be the source of BC in PS3)). Now they do for 360, which means that future consolidation onto a single chip may eventually be possible. They're now in control of their own supply chain, rather than relying on off-the-shelf parts that aren't even publicly available after a year (I wonder what it cost to keep Intel making 733MHz Celerons in 2005, or to get 10GB drives from Seagate and WD). The Xbox used off-the-shelf parts because the whole goal was to get it to market as quickly as possible. The 360 uses custom-designed parts for which Microsoft owns the IP (yes, IBM built the CPU, but they did so at Microsoft's request and licensed the rights to Microsoft as part of the deal; this is illustrated best by looking at the chips in the Xbox and Xbox 360 -- in the original Xbox, the chips were marked with Intel and nVidia, while the 360 chips are marked with Microsoft). Microsoft never claimed that the Xbox 1 would ever be profitable without relying on software and accessory sales. They've suggested the 360 should be profitable on its own (ie, not counting attach rate or accessories) in a year or two.
Comparing HED's Q2 FY05 to Q2 FY06 is not really fair, either, without taking a closer look at the circumstances. In Q2 FY05, there was no new console but there was Halo 2. In fact, it has been claimed (not necessarily by Microsoft) that Halo 2 was the sole reason HED was profitable in that quarter. Fast-forward a year later, and now you have a brand new console with all of the cost around launching and marketing that, and you don't even have a blockbuster game like Halo 2 to bring in the cash. PGR3, PDZ, and Kameo have done decently well, but they sold nowhere near the level of Halo 2 (in part because we're talking about 20 million Xbox owners vs. 1.5 million 360 owners worldwide).
Microsoft will probably have to relaunch the product at a lower price point, and lose even more money per unit.
How much longer will Microsoft's stockholders put up with this money drain? Microsoft lost money on every original XBox, so, hoping to make some money in round two, they increased the price for the XBox 360. But the customers aren't buying.
Last year at this time, Halo 2 was selling like hot cakes. US$125 million in sales within the first 24 hours when it launched Nov. 9, 2004. By January, it had sold 6.4 million copies (* US$50 = US$320 million). No doubt this also spurred sales of the Xbox Live online service. Last year was an exceptionally profitable time for MS's gaming division.
This year, not only have Halo 2 sales slowed down, but they also went through the expense of launching a new console, which includes not just the cost of the console itself being sold at a loss, but also the costs in marketing, distribution, etc.
Couple those two things together and it's no surprise that the games division is down from last year.
If you watch the XBox 360 core system auctions on eBay, anything priced over $350 just does not sell. The auctions with high reserves just scroll off, unsold. You can usually get $300, and you might be able to get $325. Above that, forget it. If you've got a garage full of the things, it's time to take what you can get.
>I would expect the 360 to be profitable for them in the long run, though.
you're very optimistic.
even the MS Xbox team doesn't expect the 360 to be profitable, and they don't expect the Xbox line to become profitable overall for 5-10 years.
You got that wrong. MS announced their XBox division won't be profitable until 2007 but after that they expect profits.
Justice is the sheep getting arrested while an impartial judge declares the vote void.
why pay the hassle of ebaying when you can get it cheaper at walmart? No S&H, no paypal, no dealing with slow shippers or fraudsters.
WalMart has been getting stocks fo Core systems, it's the premium that is hard to find and sought after but even then it's really a matter of just looking for it.
Ebay is hardly the value of the market