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."

Comments

War of Attrition

[Applekid]

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?

So do people still think MS sells the 360 4profit?

[bestinshow]

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.

Re:It's not about the money - except when it is

[Frag-A-Muffin]

since the "living room PC" is still a mostly unconquered market waiting for somebody to take it.

Who says there is a market? Small niche market so far, what happens if it stays that way? HP has already stopped making their "living room PC". Maybe they have better foresight than others? I know from an anecdotal stand point, there's no market for such a device in my home :) I want appliances that just do their thing, and do it well, and for a reasonable cost. There's a reason why so many people have DVD players. a) It's cheap and accessible. b) it's dead simple to use. c) There's easily accessible content that can be purchased or rented