Xbox Arm of Microsoft Posts Profit

GameDailyBiz is reporting that Microsoft has posted a rare profit for their games business. As you might imagine, the good news is courtesy of high game and console sales thanks to Halo 3. "[Entertainment Division] revenue increased primarily due to increased Xbox 360 console and game sales. Xbox and PC game revenue increased $895 million or 148% as a result of increased Xbox 360 console sales, video game sales led by Halo 3, and Xbox 360 accessory sales. We shipped 1.8 million Xbox 360 consoles in the current quarter as compared to 0.9 million consoles in the first quarter of fiscal year 2007. Halo 3 was launched in September 2007 and generated approximately $330 million of revenue during the quarter."

Comments

Halo

[king-manic]

Every Quarter Halo is released is profitable for that quarter. Still not profitable that year or over all yet. Maybe in 2008.

Re:Halo

[Grandiloquence]

Microsoft logic dictates that a new Halo will henceforth be released EVERY quarter! Also, the next Halo will have Master Chief accompanied by his newest companion, Clippy. "It looks like you're trying to kill an Elite! Would you like help using the plasma rifle?"

Re:Halo

[iluvcapra]

I can't think of a better reason to never get the movie off the ground, it'll mean the end of the phenomenon. Just keep talking about it, like it's in the works.

Re:Halo

[moderatorrater]

I think it's interesting that they touted higher console sales. Aren't they still losing money on each console which, in turn, would mean it was software sales were able to cover up the hardware losses and make the quarter profitable?

Re:Halo

[king-manic]

I think it's interesting that they touted higher console sales. Aren't they still losing money on each console which, in turn, would mean it was software sales were able to cover up the hardware losses and make the quarter profitable? They were making money on each unit but the RROD warranty extension and high probability of unit failure wiped that out. They may make money next year with the advent of the new 65nm chips. Maybe, maybe not since the 65nm aren't out yet and we don't know if they have issues or not.

Re:Halo

[Amouth]

i think at this point only the PS3 is loseing money per consol...

i can't remember exactly where i read it but the number of 18$ is poping up in my head as what MS now makes per core unit...

Re:Halo

[Seumas]

Since half the consoles have to be replaced multiple times, they're definitely losing money on each console.

Another lesson in measure-twice; cut once. Imagine how much better they'd be doing financially, if they hadn't screwed up on the initial hardware design?

Then again, they also have morons like myself who bought two 360s, so that they'd always have one to play even when the other is "in the shop".

Re:Halo

[Anonymous Coward]

since the 65nm aren't out yet Xboxes with 65nm cpus have been shipping for about 2 months now. Certain lots manufactured after August 24, if I remember correctly. Go google it.

Re:Halo

[Toonol]

Well, presumably more hardware sales leads to more software sales in the future, ultimately resulting in profit. Otherwise, they'd be best advised to close up shop and get out of the market right now.

Re:Halo

[kurokaze]

the RROD warranty was accounted for in the last quarter. It has no basis on the results for this quarter.

I'm not going to speculate as to whether or not the console itself is making money, since I don't have a clue (and neither does anyone else here for that matter)

Re:Halo

[kurokaze]

Do you know this for a fact? that they are still losing money on each console as of this quarter? If so, please provide linkage.

Or perhaps you're just talking out of your ass, which I suspect is the case.

Re:Halo

[rtb61]

The idea is to get as many consoles out there as possible in order for other people to sell games for which M$ charge a licence fee. Loading up the consoles with a profit margin just reduces sales, so yes they are sold at cost or at a loss, in order to promote sales of the units.

The only slippery point of the claimed profit margin is whether it is just for that quarters operating costs or does it include all the prior losses ie. it looks good for fluffing up the share price but does it really reflect reality of the earlier billion dollar loses. Your are never in profit until you have accounted for all the losses.

Re:Halo

[alshithead]

"Since half the consoles have to be replaced multiple times, they're definitely losing money on each console.

Another lesson in measure-twice; cut once. Imagine how much better they'd be doing financially, if they hadn't screwed up on the initial hardware design?

Then again, they also have morons like myself who bought two 360s, so that they'd always have one to play even when the other is "in the shop"."

I had to paste your whole comment because I have to respond to it all where I initially was going to only respond to part...I'll take your points out of order.

Last part...morons like you. I'll beg to differ and give you a high five. Buying two means you are a fan. That's not a bad thing for an overall good product like the Xbox. Second point, measure once, cut twice; a significant failure but tellingly...not a fatal failure. Your first point...losing money on each console, this too shall pass. I'm not a MS fan or hater. Exchange, good; server OS, constantly improving; desktop OS, damn do they fuck up; Office apps, too much eye candy and not enough focus on basics. If they eventually fail in any arena I doubt it will be their game console.

Re:Halo

[tilandal]

Its funny how the only console maker to consistently make money is the one who doesn't do that. Nintendo just revised earnings to $3.7 billion for this year.

Re:Halo

[king-manic]

the RROD warranty was accounted for in the last quarter. It has no basis on the results for this quarter.

I'm not going to speculate as to whether or not the console itself is making money, since I don't have a clue (and neither does anyone else here for that matter) MS said per box they were. The RROD extension means this year will not be profitable yet.

Re:Halo

[aichpvee]

The end of the phenomenon of endless fanboyism over a mediocre game? Fuck, if a movie is what it takes get that shit out tomorrow!

Re:Halo

[aichpvee]

If they'd built it right it would have cost them a lot more money. If they are actually able to manufacture them below the retail cost it is only because they have such shoddy construction.

Re:Halo

[rtb61]

The Nintendo console is different. It is a console that was carefully targeted at the family market, only had the hardware required to achieve that role and combined an effective viral marketing strategy to achieve sales. So M$ was clumsy and stupid basically reflected Ballmer's true lack business abilities and failed, all they really have done is damage their own PC Games business and of course Sony's high end game console (Sony had a chance at a work around but greed and stupidity ended that).

So where would M$ be now if the had invested those xbox losses in windows games instead, games consoles taking games from the windows os really do provide an opportunity for alternate operating systems.

Re:Halo

[elrous0]

Four words of advice, Bill: Uwe Boll to direct!

Holiday debt

[tepples]

That was MS's one big console seller. Sony has two big ones coming at some point (FF:XIII and MGS:4). Nintendo has a few (Mario Galaxy, Super Smash Brothers: Brawl, Mario Kart, and I'm sure others). Trouble is that "console seller" games published in North America between December 26 and June 25 don't tend to move a lot of consoles because a lot of potential customers are knee-deep in holiday debt. This time frame happens to include both Brawl and Mario Kart.

Re:Holiday debt

[pokerdad]

Trouble is that "console seller" games published in North America between December 26 and June 25 don't tend to move a lot of consoles

They still move them, its just harder to quantify the effect of the game. That is to say, there are going to be plenty of people, clearly some of them on Slashdot, that buy a Wii for no reason other than to play SSBB (in fact, reading some threads its clear some have already bought a Wii with no intention of playing anything but Brawl). The fact they don't buy the system+game on release day/week/month/quarter doesn't mean they don't buy the system.

Re:Holiday debt

[patio11]

Not to be a Nintendo fanboy (although, fair disclosure, I am a stockholder -- when you and 10,000 of your closest friends buy a Wii, I get a penny):

1) If you're going to be selling to cash-constrained customers, it helps to cost 30-50% what the competition does
2) Nintendo doesn't need hit titles to move consoles. Put a Wii on the shelf at any store I know about and a customer will do the moving for you, on the way to the checkout line.
3) Nintendo's developers don't need megahits, either, because the production costs mean you can make money without selling a million copies. 100k sales on a Wii game which is not one of Nintendo's big properties is a respectable and profitable endeavor, whereas 100k sales on something made for the other system doesn't cover production to say nothing of marketing. You're going to see an EXPLOSION in the coming year or three of games made on the model of Nintendo's DS offerings: cheap, maybe not games in the traditional sense of the word (Yoga for the Wii, Wiirobics, that sort of thing), and aimed at market niches the other two don't even pretend to reach for. And they'll print money hats, just like the DS titles do. (A lot of the DS study games sell tens or hundreds of thousands of copies after development cycles on the order of three to six man-years. That might be enough budget to add another weapon to Halo3.)

Re:Now what?

[Anonymous Coward]

Mass Effect.

Re:Now what?

[Lemental]

Two words.

Mass Effect

That will sell more consoles as well. PS3 owners who have been coming into my store want it ported over. Maybe it will be since EA now holds Bioware, but, until then XBOX has it locked.

Re:Now what?

[ObiWanStevobi]

First of all, I doubt Halo 3 is done moving consoles. As long as Sony fans are left waiting for a Halo killer, there will be converts.

Second, their overall collection of very good games (but not real console movers) is far outpacing Sony. The best game Sony will have before spring 2008 is the Orange Box, which Xbox already has. Their next best game, Oblivion (IMO), Xbox had early as well. Resistance was pretty good, but on Xbox you have Gears Of War beating it out. Sony needs more than one or two good games to catch up. Xbox box has (will have by years end) many solid unanswered games: Dead Rising, Forza, Ace Combat 6, Bioshock, Mass Effect, Saints Row, Perfect Dark Zero, Ghost Recon Advanced Warfighter, etc.

I do think Xbox made a huge mistake in promoting Halo over their overall line-up. A Halo killer will come along eventually. But where their biggest lead over Sony will be is overall line-up (and online service). To their credit, they do have some exclusive RPGs meant to combat FF, but they just don't do it. They might, however, be enough to lure someone that was waiting on that single PS3 game and liked some of Xbox's other titles.

Re:Now what?

[Pojut]

Mass Effect...Fable 2...The next Ninja Gaiden game...Marvel Universe Online...Splinter Cell: Conviction...Too Human...Warhammer: Battle March...

There are plenty more exclusives on the way for people to get excited about. Mass Effect, Fable 2, and Ninja Gaiden 2 will likely sell like hotcakes. Splinter Cell: Conviction looks to be absolutely amazing. Assassin's Creed, while not exclusive, will likely help shift some more units as well.

Bzzzt.

[ubikkibu]

Ghost Recon Advanced Warfighter 2 came out for the PS3 on August 22. Is the Xbox still waiting for it?

Re:Bzzzt.

[ObiWanStevobi]

I didn't see a 2 in my comment. 2 is $60 and no real major improvement over the first one you can get for $30. It was never ported to the PS3, and the PS2 port was miserable.

Re:Bzzzt.

[absoluteflatness]

Not really a fair comparison though. If the PS3's got the next edition of the game that's "not a major improvement " (so, a minor improvement), I'm not sure you can meaningfully point to the older edition as an Xbox exclusive. It's true, but it's still a stretch.

Of course, the general point of the 360 crushing the PS3 right now on exclusives is true, so quibbling over one title is pretty irrelevant.

Re:Bzzzt.

[DarkArctic]

No its not. The Xbox 360 had that same game back in March.

And that hot seller, the Zune

[ubikkibu]

"For the remainder of fiscal year 2008, we expect [EDD] revenue to increase due to the increased sales of Xbox 360 consoles and related games, accessories, and services, and sales of Zune products,"

Now I don't believe anything said in this story.

Re:And that hot seller, the Zune

[ObiWanStevobi]

I'd believe they turned a profit due to Halo (impossible not to considering the sales numbers and the fact that expeted console & repair losses were already written off previous quarters), but the division does include the Zune. I'd imagine that since the entire division made a profit, the news is being spun to look like all products in that division had strong sales, not just Halo (which probably covered losses on consoles and the Zune). That's just the gut opinion talking though.

Re:And that hot seller, the Zune

[NatasRevol]

No, they (the entertainment division) turned a profit because they back dated their $1B warantee into the last quarter, so this one looks much better. The next one will be bad again.

See here: http://www.microsoft.com/msft/earnings/FY07/earn_rel_q4_07.mspx
This quarter was closed BEFORE the announcement this summer.
ahref=http://www.news.com/2100-1014_3-6195058.htmlrel=url2html-21144http://www.news.com/2100-1014_3-6195058.html>

Re:And that hot seller, the Zune

[NatasRevol]

Here's the second link. I guess it pays to preview.

http://www.news.com/2100-1014_3-6195058.html

Re:Now what?

[Jeff DeMaagd]

That, and to make a net on what they spent so far on the entire XBox division, they have to make another $6B.

Re:360 fanbois

[ObiWanStevobi]

I agree about the flamebait. I think the guy is wrong, but it wasn't by any means flamebait.

Re:Now what?

[ObiWanStevobi]

If people haven't decided on a console by TBA, I'm sure it will move units. If the consoles hit $200 before then, I suspect it will be to late to make a huge difference.

So... has the Xbox overall been profitable yet?

[GrumblyStuff]

I recall the first one (in combination with rolling out Live) sunk about $4 billion.

Re:So... has the Xbox overall been profitable yet?

[XaXXon]

obviously not. When it's news that they had a profitable QUARTER and they've been around for many years. No. They're not profitable overall.

Re:So... has the Xbox overall been profitable yet?

[SuiteSisterMary]

Yes, but unlike most American companies, Microsoft is more than capable, and willing, to take a very long view. They're refreshingly willing to take an upfront loss to reap long term profits.

Besides, they knew full well that the Xbox would never make money. For example, they didn't own the various chipsets, so they couldn't do the usual console cycle of re-engineering, to allow for cost reductions. They addressed many of these problems for the 360.

Re:So... has the Xbox overall been profitable yet?

[tbannist]

Not exactly. Because of the windows and office monopolies Microsoft doesn't have to make a profit on anything else and generally speaking they don't. What they do is create a vaste wasteland of computer related businesses that undercut their competition and bleed them to death to scare people away from software businesses.

Microsoft takes a loss on 360s because they want to drive Sony and Nintendo out of the console business. That's their long term plan: Establish a monopoly then raise prices. As long as it doesn't work it's ok for customers, but if it does work then everyone gets screwed.

Re:Now what?

[provigilman]

http://en.wikipedia.org/wiki/List_of_best-selling_video_games/

You know, actually checking your facts first might help. First off, you can't compare Halo, a 3 game franchise, to the likes of Mario (11 games in the SMB series proper, not counting the innumerable spinoffs and special appearances). Secondly, you're a bit off base in terms of your numbers.

For example, Halo 2 has sold 8 million copies. That is the most of any shooter game, save Goldeney for N64...which also sold 8 million copies. It's also the #22 franchise (inluding PC) of all time, which impressive considering it's up against the likes of Final Fantasy and Street Fighter. It also beat out the likes of Metal Gear, Mortal Combat, Warcraft, Diablo, etc.. In fact, taking out some of the PC games like Lineage, the Sims and Command and Conquer would put it in the top 20 console franchises of all time.

So considering that it's technically in the top 20 console franchises of all time, and Halo 2 is tied with N64's Goldeneye as the most popular shooter ever, is it really so crazy to look for a Halo killer? Not if you're planning on making an FPS it's not...

That explains why my 360 died last night

[ScotchForBreakfast]

*sigh*

Re:Now what?

[IrquiM]

Already have tons of games on my PS3 that are better than the ones you mentioned - even Go! Sudoku is better than Halo and Orange Box and such...

But hey! That's my opinion - not yours! So, don't try to force your taste in games onto others...

Seems like you like shooting stuff - I don't! And looking at world wide sales of consoles, it's the "non-shooting games" that win, i.e. games like Buzz and Singstar...

XBox Live is the killer app

[sneakyimp]

Given the popularity of WoW and Counterstrike type games, my thinking is that on-line games are the killer app. Human players are *so much more interesting* than AI. Halo just offers a taste of that. I believe Microsoft is well-positioned in this regard relative to Nintendo and Sony due to XBox Live. PS3 is pretty much tanking all around as far as I can tell. Also, isn't Grand Theft Auto one of the most serious console-movers in history? According to Wikipedia, M$ is a step ahead of sony there and there is not GTA planned for the Wii is there? "It has been confirmed that episodic content will be released on the Xbox 360 exclusively. Microsoft officially announced a strategic alliance with Rockstar Games over the rights to episodic content through their Xbox Live service at their X06 event. An announcement regarding the release of episodic content for the PS3, however, is still expected, whilst fans speculate that each console will receive its own exclusive episodic content via their respective download services (Xbox Live for the Xbox 360 and PlayStation Network for the PlayStation 3)."

Re:XBox Live is the killer app

[revengebomber]

Human players are *so much more interesting* than AI. Halo just offers a taste of that. So they just invent an AI that insults your sexuality and whines constantly. Problem solved.

Re:XBox Live is the killer app

[KDR_11k]

I have a feeling that sooner or later Rockstar will throw a half-assed port of a PS2 GTA3 game on the Wii (probably with analog stick aiming) and then act surprised as it doesn't sell.

Re:Now what?

[tepples]

Big console games are in the 10-15 million selling range. No Halo is even close to those types of sales, or ever will be. Heck, even Halo 8 only made it to quad platinum (4 million).

Re:Sharpe ratio

[Grave]

Yes, but Microsoft is more interested in the long-term game than the short-term. The XBOX was created to prevent Sony from getting too large a foothold in the home media arena, which both companies expected (correctly) would eventually be computer-driven. They look ahead to any market that might potentially expand to encroach on their territory and go after it. XBOX and Zune both came about because MS perceived a possible future threat to their business, and because they saw an opportunity to expand into new markets that may some day yield tremendous profits, or at least sufficient tie-in with Windows to allow them to hold onto the OS market.

While $1 billion is nothing to sneeze at, Microsoft has plenty of money to throw around; in fact they MUST spend some of it, or investors get very antsy.

Re:Now what?

[Grave]

Not sure what your comment has to do with his point that Mass Effect is going to sell some consoles, and that those consoles aren't gonna be made by Sony. Halo may have been the biggest console seller since SMB, but that doesn't mean there aren't other great games coming in the next few weeks and months. Right now, there is no one big system selling game for the PS3, and the longer that remains true, the more people will get a 360, thus reducing potential PS3 sales as most games are dual platform.

Re:Now what?

[MBraynard]

I agree with some of your reasoning but your list of 'unanswered' games is not particularly objective; IE - they aren't unaswered because they aren't worthy of answer.

AC6, PDZ and Saint's Row? You must be joking. GRAW2 was on the PS3.

It's not like there aren't unanswered 360 games - you just listed the ones that were NOT among them. Like PG3, Geometry ars, Viva Pinata, Burnout Revenge, and Cra-Cra-Cra-Crackdown.

Re:Now what?

[toolie]

Heck, even Halo 8 only made it to quad platinum (4 million). Here's some friendly advice. That joke was worn out since Halo 2. Seriously. Find some new material, for the love of God.

They're getting there

[Jeppe Salvesen]

XBox marketshare never really took off. The PS2 just killed the competition.. Now we've got three systems that do pretty well:Wee, XBox360 and PS3. Looks like Microsoft is doing something right for a change.

Here's to hoping they f*ck up ASAP!

Re:Sharpe ratio

[aichpvee]

Sort of right. But xbox is more about expanding the microsoft monopoly into the living room that cutting off Sony. It is very much offensive rather than defensive.

Re:Now what?

[provigilman]

Well, you know what they say... You can lead a Troll to a link, but you can't make him click.

Re:Now what?

[Liquidrage]

Then XBL Arcade sounds more like what you're looking for. And that's where MS has an even bigger lead on Sony then just those titles that have been mentioned.

Re:Now what?

[WhoBeDaPlaya]

Tell me about it. The X360's lineup is so strong that I am fairly tempted to get one, sort of a lot coming from a pretty diehard PC gamer (3.4GHz C2D, 4GB, 8800GTS so I do have the muscle to handle everything new).