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Microsoft Games Losses Down, Still Substantial
Even though sales are up on the operating system side of things, Microsoft's games division is still struggling. The Entertainment and Devices division lost $315 million, with sales slipping some 21 percent. That's 22 percent down from last year. The quarter overall saw $929 million, down 21 percent over last year during the same quarter. "Microsoft says the drop in sales came primarily because of decreases in the sale of Xbox 360s. During the quarter, the company shipped a half million consoles, as compared to 1.7 in the third quarter of 2006, that being the first full quarter in which Xbox 360s became available. Sales of Xbox and PC games decreased 44 percent over the company's first three quarters to $393 million, which the company puts hand in hand with the decrease in console sales."
Wii is "Creaming the Competition?"
Anything you say will be held against you.
Man, Japanese sales are really picking up!
At least they can look on the bright side... they aren't Sony... ;)
So, the branch that just released a new major product this year is reporting an increase in sales, and the branch that released a new major product last year is reporting a decrease? That's not news, it's common sense.
This console was released in November of 2005, so I'm really not sure how 3rd quarter of 2006 was the first full quarter they became available.
Is it normal for game divisions a year+ after their new console is released to still be in the red? Given Nintendo recently just reported record profits and Sony's Playstation division is still hemorraging money, it seems like Nintendo's on track to be the last man standing.
What's even more nuts to me is that with all the Live Gold subscribers they're still not making enough to offset losses. Are they still hedging all their bets on Halo 3?
Eggs in 1 basket much?
More Twoson than Cupertino
This is an interesting problem for Microsoft. Yes, we know - they can burn through this money and not lose it, they can take billion dollar losses every year on the Xbox and not care, blah, blah, blah - but sooner or later, profits *do* matter to your bottom line.
What I'm curious about is how the long run of Microsoft's console wars might end up hurting the company overall. It used to be that people stayed on Windows for 3 reasons:
1. It's what the office uses/proprietary apps I need
2. I need Microsoft Office
3. Games
Of all of these reasons, the #1 thing I heard from tech people for why they stayed on Windows - or at least kept a dual booting system - was for the games. Once consoles started on their rise, MS realized that this was a serious long term threat to the monopoly. Hence, the Xbox was born. This way, even if techie people go "Well, I stay with Windows for the games", at least MS would have a console of their own to ply.
Now, they're trying to tie in Windows into this gaming concept. Look at Vista, and the "won't run without an ESRB rating" issue some games have had a problem with - a "safety" issue says Microsoft, but a lock-in system says I. Now their Windows Live, which is the Xbox Live system on Windows - again, another method to try to tie in Windows and consoles, and establish a lock in. Or the "Halo 2 (a game made using Windows 2000 computer hardware level technology) can't run on your computer unless you run Vista with Windows Live", a move that I don't see a whole lot of gamers going "OOooo - I get to pay $200 for an OS to run a 3/4 year old game when I could buy the original Xbox version with a new Xbox from a store for the same price". It's an expensive move that so far, hasn't caught on. They're now trying to tie Vista in the Xbox, hoping to shore up both.
It seems a lot of money spent that, so far, is only costing them more. They lose more money with each Xbox sold. So how to make it up? Charge more on the Microtransactions, which leads to expensive "horse armor" and gamers who rebel against the cost of Guitar Hero II downloads for being way overpriced.
I can give credit to Microsoft for making a decent console (when it doesn't "red ring of death" on people - is that the equivalent of a blue screen of death?), but it seems like they're fighting for a Pyhrric victory. If this is their idea of success, then the rest of the Microsoft company had better hope that this brand of billion-dollar-per-year losing "success" doesn't infiltrate the rest of the company.
Of course, that's just my opinion. I could be wrong.
52 Weeks, 52 Religions with John Hummel
Doesn't the Entertainment and Devices division also include such wonderful money-sinks as the Zune, though? That can't be helping the overall figures.
"I Know You Are But What Am I?"
...one reason why the xbox 'sales' (shipments) are down is due to channel stuffing. They just had to force extra xbox 360s down the distributors' throats to meet that magic 10 million mark. Now there are still too many unsold xboxes in the tubes to justify re-filling the stock. I'd like to see the actual sales figures of the current gen consoles (Wii, PS3, Xbox) instead of those shipped to distributors figures. Wii might be closer catching up with 360 than the stuffed-up shipment figures indicate.
MS Games, IMO, has little to worry about. They have huge titles coming Q3 and Q4 of this year. I don't see how they could expect to be making money, they haven't released jack since Gears of War.
Several reasons MS doesn't have to worry (at least about game/console sales):
They haven't released any compelling games, so sales are down. If there aren't games, people don't want to buy the console. That's the biggest problem the PS3 is facing as well. But looking at their announced line-up, I'm really impressed. Well, and depressed at the same time knowing I'm sitting here with a bunch of worn out games until then.
How, in this day and age, can a website have such a short limit on the subject line for a post?
Anyway, nearly a year ago iSupply claimed that Microsoft were making a profit on each console sold. This figure has been repeated ever since then, especially in relation to the PS3's huge loss per console. Yet the figures were weird, the console hadn't changed, no cost reductions applied, and iSupply thought it had gone from a $150 loss per console to a $70 gain. But people were very happy to accept this figure.
Now Microsoft's gaming (and music) division has made a $300+m loss for 500k sold, and presumably they're getting profits from online use, the games themselves (the attach rate is rising), and add-ons. Of course the Zune and other products are dragging them down too, and there's wages and future developments and all that...
Also 500k sold in a quarter, albeit a quiet quarter, is appalling at this stage in the game. You would think that if Microsoft COULD drop the price, they would have, to stimulate demand. But they didn't.
So in conclusion, I suspect Microsoft are still making losses on the 360 console, probably in the $100 per console ballpark. 65nm shrinks are really required - cheaper chips, cheaper cooling, cheaper power supply. I expect the 65nm introduction to coincide with a $50 pricedrop, and a static loss/console rate.
Even if Microsoft were to fail this generation I doubt it would be the end of the XBox. They would most probably sell the games division to another company such as EA. Even if it wasn't profitable for Microsoft XBox is still a major name in the industry and can be profitable in the hands of someone else.
they lost less money this quarter than the previous quarter. The bad news is that the losses were lower because the sales were lower. Doh!
The 360 is supposed to be making a profit. If the estimates for the frequency they would need replacing had been correct. It's that, and the lower-than-expected sales numbers that caused the problem for the machine.
But yes, a dead-in-the-water Zune and associated marketplace are a big factor, too.
"I Know You Are But What Am I?"
Jesus Christ, how much is Sony paying you fucking people to troll forum posts like this? I dislike Microsoft as much as the next guy, but come on now.
Microsoft is embattled in a war for the entertainment market. They've won the office, but they're getting their asses handed to them in the living room and bedrooms of the world. Companies like Sony, Nintendo and Apple are vying for a huge chunk of change that's spent on music, movies and games. A chunk Microsoft wants a piece of.
The XBox is their foot in the door. It's not going to make Microsoft the dominant force in our living rooms, but with consoles taking on a more PC-esque feel they have every indication that their being left behind in a big way. If they don't do something, anything, to get themselves into the market now then when the tide turns and the choice for a home computer isn't between Dell or HP but a PS3 or a AppleTV, Microsoft needs to have their chips in place to have any stake at all in the new landscape.
And for that, they're willing to lose the few hundred million a quarter in the short term.
I thought MS (and Sony) always take a loss when they sell a console. If that's true, then less 360s sold this year would mean less loss wouldn't it? Do they actually turn a profit on the systems, and if so, were they always turning a profit (however minute), even last year?
Come on, politicians! It's clear Microsoft is abusing it's privleged place in the market to sustain huge losses year after year to build market share -- something smaller corporations cannot afford to do!
This is unfair, and they should be stopped.
Some brave politician should order the stop of the X-Box series of games given it's unfair advantages over the competition.*
* Before you knee-jerks start downmodding as "outfuckingrageous", realize this type of thought process was largely killed off by the Reagan revolution. It is realistic for its time, which is to say, pre-1980's, is not an exaggeration, and can be resurrected if the next generation lets its guard down.
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
They might have lost 300m on 500k sold due to them producing more. They could have made 1mil only sold half and had a 300m loss for the time.
"There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy."
Yeah
Add in the fact that Best Buy (and other merchants) ring up replacements under their extended warranty as "new sales" and it really makes me wonder what the XBox 360 sales numbers ACTUALLY look like.
Actually, Microsoft is still taking a loss on making Xbox 360s. The reason why the losses decreased in this fiscal year is because Microsoft has manufactured LESS Xbox 360s (shipped only half a million). Less 360s to manufacture meant less money lost.
Xbox 360 is completely dead in Japan. It has a non-existant presence throughout all of Europe except for the UK where it is doing OK. While it is common to mock the Playstation 3, the PS3, like the Gamecube of last generation, is at least selling more evenly throughout the world. For whatever reason, Microsoft cannot sell the Xbox and Xbox 360 to non-English markets. Why this is, I have no idea.
Nope. That couldn't have happened. If they did that they'd have those extra 500k consoles on hand as an asset instead of simply having the manufacturing costs deducted from their overall revenue.
Why are people so unwilling to accept as fact that Microsoft is still losing money on these things?
I'm perfectly willing to do so. The hardware is somewhat on par with the PS3 in a lot of ways varying much only in the DVD drive and CPU. The CPU is likely cheaper then the PS3 but not that much cheaper and the Drive is not that much either. The xbox was aloss almost through out it's entire lifespan. But the loss is somewhat large compared to the numbers sold, I wouldn't imagien they take that much of a bath on them.
"There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy."
PS. I am not a Ms fanboy. i own a wii and PS3. But I don't think MS is stupid enough to take a serious loss on each unit.
"There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy."
1,700,000 down to 500,000 - that's almost a 2/3 decline in sales. So much for the "people will buy a Wii and an xbox" bullshit. People are obviously leaving the xbox in the shop in droves. In any other business, a decline of this magnitude would be called a crash.
Assorted stuff I do sometimes: Lemuria.org
I don't think they are either. They clearly designed this generation to keep costs as low as possible. However I don't think they have any intention of ever turning a profit on the hardware. After all, their goal is marketshare for their DRM and digital distribution channel, not to be a profitable hardware vendor. Once they get the manufacturing costs down, they'll just drop the price. I think they thought they would have gotten there by now, and the Elite is evidence of that. It probably costs about $1.40 more to manufacture than the old model, but instead of keeping the price the same or dropping it, something that could have seriously hurt Sony, they raised the price $80....
The high percentage of defective consoles is cutting their bottom line. With each defective console, Microsoft needs to put money into support, shipping, and technical work. With users reporting 3-4 defectice Xbox360s, the cost required to fix the 4 consoles effectively caused Microsoft to lose all the money gained from a few hardware sales.