Xbox 360 To Profit Next Year, Says Bach

An anonymous reader writes "Robbie Bach, president of Microsoft's entertainment and devices division, has stated he expects the company's console business to finally break even some time in 2008. After years of losses from the games division, this would be a significant breakthrough for Microsoft's efforts in the games industry. '"Xbox is the hardest piece of consumer electronics hardware to produce in the world, no debate," he said, admitting that "costs are a little higher than we'd like." Microsoft doesn't expect to make a profit on hardware alone, but "we'll probably be gross margin neutral on that over the life cycle of the product, and try to break even on that."'"

Comments

Disapointing

[HappySqurriel]

Should it be news that a company is going to break even or start making money on a product line?

I understand the loss leader strategy, but it seems a little insane that a company has to wait several years before they can start making money on a product.

Re:Disapointing

[Quila]

Long-term vision is so rare these days that people are surprised when they see it.

Short-term Wall Street thinking wouldn't have allowed this. They'd say the XBox division was running a loss for 12 quarters straight and demand they stop the cash drain.

Re:Disapointing

[HappySqurriel]

Long-term vision is so rare these days that people are surprised when they see it.

Short-term Wall Street thinking wouldn't have allowed this. They'd say the XBox division was running a loss for 12 quarters straight and demand they stop the cash drain.

Long term vision is not what I would call the XBox or XBox 360 ... A vision does not take 7 years to finally break even on a yearly basis after you have lost $6 Billion. As far as a return on investmet, the XBox brand may finally break even as a whole after 10 years making their profit 0% after 10 years (a pretty awful return) so investors would be right to be angry at Microsoft.

Re:Disapointing

[frakfrakfrak]

Long term vision is not what I would call the XBox or XBox 360 ... A vision does not take 7 years to finally break even on a yearly basis after you have lost $6 Billion. As far as a return on investmet, the XBox brand may finally break even as a whole after 10 years making their profit 0% after 10 years (a pretty awful return) so investors would be right to be angry at Microsoft.

Yeah, that's great, but what about 15 years down the road? Or 20? In 20 years, who knows if Windows will still be the cash cow it is now? Who knows if video games will be either? Microsoft at least has the ability to benefit as long as either one of those is a cash cow in 20 years.

That's the kind of long-term thinking they're after. They're a company built around having a couple of cash cows lying around (Windows, Office). They are always looking for another one.

I'm not even a Microsoft fan. But they're definitely doing a good job of fucking things up less hard than Sony this time around. Not that that's particularly difficult, but the company DID produce Microsoft Bob, so you never know.

As much as I hate Microsoft...

[Vrejakti]

...I have to admit, they've made a lot of smart moves getting into the console industry. The original XBox faced many difficult challenges in gaining sales. However, they learned much from where things went wrong, and came out strong with the launch of the XBox 360. Perhaps their biggest advantage has been the availability of the XBox 360 at retailers during the times of Wii and PS3 shortages. Even if they haven't made a profit up to this point, the amount of market share they've picked up along the way leaves them with a very bright future.

Lessons

[hansamurai]

Microsoft and Sony are learning something this generation, mostly that throwing the most powerful hardware you can buy at the consumer sells systems, but not at the rate you could be if you lowered your costs. I think we'll see a change in at least one of these juggernauts next round.

As for profiting, good for them, but seriously, just keep delivering good games and people will buy your system. I don't own an Xbox 360 but there's a few games coming out this year (GTA, Halo, Mass Effect, Burnout) that have me considering. I've owned a Wii, and it was great, then the supply of games I was interested in fell off, so I sold it to my brother in law. I'll probably buy another when the games I want to play start coming, mostly just Smash Bros. at the moment.

Of course, everyone wants instant gratification

[Maximegalon]

"A vision does not take 7 years to finally break even on a yearly basis after you have lost $6 Billion."

First off, your numbers are off. The classic xbox launched 11/01. Work may have started earlier but you don't earn sales until the product comes out. Profitability is expected in 06/08, not 11/11. So you are off by 3.5 years when you say it took them "10 years" to make a profit.

Also, the last stat I saw said an estimated 5 billion lost, not 6 billion. Finally, the hardware is now making a profit for them, and the chip size reduction will only further that.

Even using your numbers of $6b over 10 years, that is only 250m per quarter. That's basically nothing to MSFT. If they can invest pocket change and get big returns down the road, why not?


"So investors would be right to be angry at Microsoft."


The last I checked, investors are pretty darn happy with MSFT's stock as a whole. As of today, they are within $1 of their 52 week high.



Maybe you should check your facts. I agree with above. It's typical US sentiment. Where is my instant gratification? I didn't get rich quick, any setback is certain doom, kill the show after two episode if the ratings don't meet expectations, etc. etc.

Yawn @ the blatant PS3 fanboy.

[Anonymous Coward]

Kindly provide well founded evidence for the following of your claims:

- 30% - 40% failure rate of the XBox 360

- That failing elite units are a common occurance, more so than just the standard defect rate for any other electronic hardware

- That Bluray production prices have dropped "dramatically"

If you'd kept out the pro-Sony stuff, you could well have squeezed your pro-PS3, anti-MS troll post through, however the pro-Sony stuff is absolutely laughable, to suggest the PS3 has any chance at all of breaking even in the next few years - even if it starts selling is a complete joke. The fact that the PS3 loses far more per unit sold than the 360, and sells far less games per-unit as well as not making anything from it's online service demonstrates how utterly daft your claim is.

I'm not sure what you're on about when you suggest the 360 has extremely highly priced peripherals either, the 360 controllers are actually the cheapest out the lot, here in the UK a 360 wireless controller can be purchased for £19.99, a Wii-mote for £24.99 and a PS3 Sixaxis for £27.99. The 360 HD-DVD drive can be purchased with the premium console together for less than the PS3, in fact the only addon for the 360 that is rather extortionate is the wireless adapter which is a fair point.

XBox live is indeed pay for, congratulations on recognising that, but it's also a much better service, the term "you get what you pay for" really couldn't be more appropriate, pay nothing and get shite, pay something and get a decent service, seems like a fair compromise.

You do have some valid points, but unfortunately they're points that don't have anti-PS3 counter-arguments. It's not as if the PS3 is exactly default free when it also suffers overheating issues (which I'd argue is worse, at least MS' consoles outright fail so you can get them replaced, good luck getting an intermittently crashing PS3 replaced - you just have to live with it).

The irony of your closing statement is rather amusing, of all the players in this generation that are having to look at closing shop in the console business it is undoubtedly Sony, with the uncertainty as to whether they can turn a profit or even aquire a feasible userbase. Whilst Microsoft is starting to make money with the 360 and their general gaming division, Sony is beginning to lose it, and lose it fast.

Re:Same Story For The Past Six Years

[Anonymous Coward]

"And still people defend Microsoft. I don't get it."

There are usually two camps those people fall into:

1) The "Microsoft is always teh winner!" crowd. These are the people who constantly say "LOL! Bill Gates will just buy out such and such company with pocket change" when things are going poorly for the latest attempt for Microsoft to branch out from their OS and office software monopolies. If if they think the Microsoft product sucks they still feel an emotional attachment to Microsoft as some sort of proxy hero being able to buy their way out of any problem.

2) Former Dreamcast owners who "hate teh Sony for killing their Dreamcast with teh Hype". Still bitter after all these years they latched onto Microsoft with dreams of crushing the company that killed their crappy little console. With the failure of the first Xbox and the disaster the 360 has become this group of people are become frantically desperate as they look back and see they've been console losers for close to a decade.