Support NeoGAF

[EmSeta]

This is not intended as trolling. I'm very curious.

 

[Shogmaster]

Probably more than all the money Sony has made with the PS2.

the sad part is, it's probably true.

 

[GaimeGuy]

Didn't MS lose 1 billion dollars in their Xbox division in the first quarter of the fiscal year?

 

[DDayton]

I thought MS's quarterly reports were out not that long ago... can't you derive the information from that? I didn't think MS was trying to hide that state of affairs...

 

[deadhorse32]

I'd say between $4/5 billions

 

[budala1]

I'd say between $4/5 billions

Holy shit if true

 

[Alcibiades]

Probably more than all the money Sony has made with the PS2.

the sad part is, it's probably true.

actually, there has been some word that they have yet to break-even on their initial PS2 investment, and I think I remember something about a 7-year break-even, 10-year profit console cycle...

That said, it could be 4-5 billion for Microsoft, but I've also heard as low as 2 billion (though that may have been for marketing or XBox LIVE or something)...

Original estimates in 2001 were that Microsoft was losing $150 on each $300 XBox sold, and a few months later, the XBox price went down to $200, I doubt component prices went down much, and the XBoxes had already been manufactured with the $450 cost estimate...

They've been lowering the price little-by-little and are now down to $150 for an XBox, but I don't know how much they lose now on each console. It's not really an efficient system in terms of manufacturing, so I doubt component prices have fallen by $300 so that they are close to breaking even, even now...

 

[MetatronM]

All I know is Microsoft has lost more money on the Xbox than I will ever hopeto see in my lifetime.

And that's considered a smashing success.

 

[DDayton]

Step One: Sell systems at a loss.

Step Three: Profit.

 

[Blimblim]

The main problem with the manufacturing price of the Xbox is that MS pays some incredibly high prices for the GPU and Hard drive. As far as I understand it they more or less pay the same price for these parts now compared to 3 years ago. I know they managed to get the price down a bit with nvidia after a rather painful lawsuit, maybe it's the same with the hard drive manufacturer but I'm still quite sure they pay waaay too much for this part. I did not hear anything about the CPU, but I'd not be surprised if it was also the case their.
They are totally depended to NVidia's goodwill and simply have to deal with it, but you can be 100% sure this won't be the same with Xbox 2.
I find it a bit funny to think MS is being ripped off like that, refreshing in fact

 

[MightyHedgehog]

At least that money is being spent out into the marketplace. Money's not really worth anything until it's spent or traded hands. I'd guess at 3billion, including Live.

 

[DDayton]

At least that money is being spent out into the marketplace. Money's not really worth anything until it's spent or traded hands. I'd guess at 3billion, including Live.

I'll be sure to tell investment bankers that.

 

[MightyHedgehog]

Right. I don't own MS stock, so I couldn't care less about their financial standing with investment bankers and shareholders. We're talking about MS, anyway... hardly a flakey stock.

 

[DDayton]

Right. I don't own MS stock, so I couldn't care less about their financial standing with investment bankers and shareholders. We're talking about MS, anyway... hardly a flakey stock.

I was responding to this, actually...

At least that money is being spent out into the marketplace. Money's not really worth anything until it's spent or traded hands. I'd guess at 3billion, including Live.

... my point being that while you may not care about MS's financial state, the concept that money has "no value" unless it is spent or traded hands isn't entirely true. Holding onto cash doesn't remove its value, and I'd find it hard to believe that any businessman would find the notion that MS was better off spending cash simply to make sure that the cash was "spent or traded hands" to be a wise one. Few investment bankers would see a policy of "spending for the sake of spending" to be a sound one, and that's the policy you seemed to be backing.

 

[MightyHedgehog]

Man, you read my original post completely wrong, I think. I wasn't saying anything was necessarily good...just that money is being put into the marketplace...funding developers, arstists, factory workers, etc., etc. Someone always benefits from money being used. I am not, in any way, trying to say anything else.

Holding onto cash doesn't remove its value, and I'd find it hard to believe that any businessman would find the notion that MS was better off spending cash simply to make sure that the cash was "spent or traded hands" to be a wise one. Few investment bankers would see a policy of "spending for the sake of spending" to be a sound one, and that's the policy you seemed to be backing.

Never said anything of the sort. I said 'really' in the original post...taken to mean that its true value/potential is in being used...not held...because all that means is that you're going to spend it later...otherwise, why would you have the money, anyway?

Policy has nothing to do with this. Have you ever considered that their plan wasn't to lose money? They made poor decisions...such that can only be shown or proven wrong after the decision has been made. If they were somehow able to see, in advance, what actually has transpired, they would obviously made their decisions differently. It's so easy to keep focusing on the 'loss' of money involved with the investment...having the benefit seeing things after the fact. It's all hindsight. Obviously, they made some stupid mistakes.

 

[DDayton]

Man, you read my original post completely wrong, I think. I wasn't saying anything was necessarily good...just that money is being put into the marketplace...funding developers, arstists, factory workers, etc., etc. Someone always benefits from money being used. I am not, in any way, trying to say anything else.

Oh, I see! Well, yes, lots of people benefit. MS doesn't, and that was my only point... but it's better for everyone MS is dumping cash into.

I'm suddenly wondering about those early stories of software developers who got piles of cash to develop games, then went to publish the games on multiple systems.

 

[MightyHedgehog]

Oh, I see! Well, yes, lots of people benefit. MS doesn't, and that was my only point... but it's better for everyone MS is dumping cash into.

I'm suddenly wondering about those early stories of software developers who got piles of cash to develop games, then went to publish the games on multiple systems.

Ummm...heh....crucify them all you want.

 

[jedimike]

actually, there has been some word that they have yet to break-even on their initial PS2 investment, and I think I remember something about a 7-year break-even, 10-year profit console cycle...

That said, it could be 4-5 billion for Microsoft, but I've also heard as low as 2 billion (though that may have been for marketing or XBox LIVE or something)...

Original estimates in 2001 were that Microsoft was losing $150 on each $300 XBox sold, and a few months later, the XBox price went down to $200, I doubt component prices went down much, and the XBoxes had already been manufactured with the $450 cost estimate...

They've been lowering the price little-by-little and are now down to $150 for an XBox, but I don't know how much they lose now on each console. It's not really an efficient system in terms of manufacturing, so I doubt component prices have fallen by $300 so that they are close to breaking even, even now...

The latest Wedbush report showed that Nintendo was losing $20 per console and MS was losing $25 per console.

MS has lost 4-5 billion on Xbox.

 

[sonycowboy]

The latest Wedbush report showed that Nintendo was losing $20 per console and MS was losing $25 per console.

MS has lost 4-5 billion on Xbox.

They lost over 4 billion last fiscal year. It's probably up around 10 billion at this point, LTD.

 

[sonycowboy]

actually, there has been some word that they have yet to break-even on their initial PS2 investment, and I think I remember something about a 7-year break-even, 10-year profit console cycle...

So now, DCharlie is a legitimate source in and of himself, despite not being able to release his super secret proof?

 

[PhatSaqs]

Whatever the # is it's hardly a scratch on the MS candy painted Hummer. More like a fly hitting the windshield. How about guesstimating how much they've made from software sales, peripherals, etc.?

 

[open_mouth_]

It's not so much a loss as it is an investment... You've gotta spend money to *cough* eventually make money....

 

[EmSeta]

They lost over 4 billion last fiscal year. It's probably up around 10 billion at this point, LTD.

This true?

 

[human5892]

Whatever the # is it's hardly a scratch on the MS candy painted Hummer. More like a fly hitting the windshield. How about guesstimating how much they've made from software sales, peripherals, etc.?

I always thought that when people talked about the loss numbers, they were referring to net loss, so any revenue from software, etc. would already be in there.

 

[PhatSaqs]

I have no idea as i am, and probably will forever remain, a newb at these types of discussions

 

[EmSeta]

I always thought that when people talked about the loss numbers, they were referring to net loss, so any revenue from software, etc. would already be in there.

Naturally, it's the net loss that's interesting.

 

[sonycowboy]

This true?

Yes

Microsoft’s Home and Entertainment division, which houses the Xbox business, had revenue of $499.0 million in the quarter and $2.88 billion for the full year. Those numbers compare to $483.0 million in the last fiscal year’s fourth quarter and $2.75 billion in FY 2003.
An operating loss of $1.1 billion was realized in the sector in the fourth quarter, versus an operating loss of $1.6 billion one year earlier. For the full year, the Home and Entertainment division had an operating loss of $4.7 billion, up from the $3.7 billion loss in the company’s 2003 fiscal year.

So, just from fiscal years 2003 & 2004, they lost 8.4 billion dollars. Add in fiscal years 2000, 2001, & 2002 and they are easily over 10 billion. And yes, I know there were other divisions in there that lost money, but I think they were only losing ~100 million a year before the Xbox division was added.

 

[sonycowboy]

I always thought that when people talked about the loss numbers, they were referring to net loss, so any revenue from software, etc. would already be in there.

Revenue - Expenses = net income (or net loss)

Revenue = Hardware Sales, first party software sales, royalties, disc manufacturing, Xbox Live revenue, peripherals, etc. It's all in there.

 

[evilromero]

Step One: Sell systems at a loss.

Step Three: Continue losing money.

Fixed.

 

[human5892]

Revenue - Expenses = net income (or net loss)

Revenue = Hardware Sales, first party software sales, royalties, disc manufacturing, Xbox Live revenue, peripherals, etc. It's all in there.

Right, thanks. That's what I assumed.

 

[rastex]

Yes



So, just from fiscal years 2003 & 2004, they lost 8.4 billion dollars. Add in fiscal years 2000, 2001, & 2002 and they are easily over 10 billion. And yes, I know there were other divisions in there that lost money, but I think they were only losing ~100 million a year before the Xbox division was added.

You're obviously going to have to prove this.

 

[GSG Flash]

Whatever the # is it's hardly a scratch on the MS candy painted Hummer. More like a fly hitting the windshield. How about guesstimating how much they've made from software sales, peripherals, etc.?

Losing billions of dollars is always a big deal, even with the amount of cash MS has. Whenever you're losing billions in an investment, you know something's wrong.

 

[teh_pwn]

Yes, MS has lost a lot, but they make so many billions more on profit from their software. That's because they rushed Xbox's design. Now they are essentially copying Nintendo's philosphy with the next hardware (Power PC CPU, Ati GPU, smaller and less PC-like architecture).

 

[Tritroid]

1 million dollars.

 

[IJoel]

 

[jarrod]

At least that money is being spent out into the marketplace.

Yes because creating an unsustainable, loss taking, false market is just what this industry needs.

 

[deadhorse32]

Yes because creating an unsustainable, loss taking, false market is just what this industry needs.

....To crash


I KID

 

[Warm Machine]

Haven't the sales of Halo alone paid for any of their loses?

 

[jedimike]

So, just from fiscal years 2003 & 2004, they lost 8.4 billion dollars. Add in fiscal years 2000, 2001, & 2002 and they are easily over 10 billion. And yes, I know there were other divisions in there that lost money, but I think they were only losing ~100 million a year before the Xbox division was added.

I think you are presuming too much of the loss is from Xbox. And the last year has skewed losses because of development costs for Xenon, which is specifically mentioned in the report.

4-5 billion is probably a pretty high estimate.

edit : fixed

 

[sonycowboy]

I think you are presuming too much of the loss is from Xbox. And the last year has skewed losses because of development costs for Xenon, which is specifically mentioned in the report.

4-5 billion is probably a pretty crappy estimate.

fixed

 

[jarrod]

I think you are presuming too much of the loss is from Xbox.

Well what else is there in H&E. The defunct WebTV division? The highly profitable PC gaming division? The even more profitable Mac Office division?

 

[BeOnEdge]

the entertainment division IS NOT exclusive to the xbox. you guys are plain stupid if you really think MS has lost anything more than 2-3 billion on the xbox. if you are including dev cost for both xbox 1 and 2 and advertising over 10 years then MAYBE 5-6 billion but some people are making it seem as if all this money has been blown from launch until now which is rather fanboyish.

 

[jarrod]

the entertainment division IS NOT exclusive to the xbox.

Nope, it's actually got profitable divisions also.

 

[human5892]

the entertainment division IS NOT exclusive to the xbox. you guys are plain stupid if you really think MS has lost anything more than 2-3 billion on the xbox. if you are including dev cost for both xbox 1 and 2 and advertising over 10 years then MAYBE 5-6 billion but some people are making it seem as if all this money has been blown from launch until now which is rather fanboyish.

Besides WebTV (which, as jarrod mentioned, is defunct now anyway), what other loss-inducing products are including in the division? If you name some and back it up with some proof I'd be more inclined to believe you.

 

[DSN2K]

Microsoft have money to play with for the next 10 years or so.

 

[jedimike]

First off... Sonycowboy's numbers are wrong. The operating loss for H&E was $1.2 Billion for the entire year.

http://www.microsoft.com/msft/earnings/FY04/earn_rel_q4_04.mspx

Year Ended June 30 2004 = Operating Loss ($1,215) in millions & ($1,191) for 2003.

the rest of this stuff doesn't say much, but I added it for those that are interested

Home and Entertainment includes the Microsoft Xbox video game console system, PC games, the Home Products Division (HPD), and TV platform products for the interactive television industry. The relative success of competing video game consoles is determined by console functionality, the portfolio of video game content for the console, and the relative market share of the console. Microsoft is a relatively new entrant in the video game console business with its first release in fiscal 2002, but has established itself as one of the leaders. Revenue and units have grown quickly since 2002, but revenue growth has moderated in fiscal 2004 due to price reductions typical at this stage in the console lifecycle. We believe that our competitive position and revenue is bolstered by our increasing software game attach rates, providing higher margins to offset the decreasing price trend on consoles sold.

Full Fiscal Year

Xbox revenue decreased $5 million or 2% from the prior year’s fourth quarter, with a $51 million decline related to past price reductions of Xbox consoles and software, offset by $32 million related to higher Xbox console volumes and $14 million due to higher volumes of Xbox software. Overall, Xbox console volumes increased 27% in the fourth quarter compared to the prior year’s fourth quarter. This increase was partially attributed to increased demand for the console following the price reduction implemented at the end of the third quarter of fiscal 2004. Xbox’s life to date U.S. games attach rate according to NPD data was 6.9 games per console. Revenue from consumer hardware and software, PC games and TV Platforms increased $21 million or 10% compared to the fourth quarter of fiscal 2003 due to a new release of Mac Office, partially offset by the company’s exit of the gaming devices and home networking businesses. Home and Entertainment operating loss for the fourth quarter of fiscal year 2004 increased from the fourth quarter of fiscal year 2003 due primarily to inventory adjustments of $94 million, reflecting the current stage in the lifecycle of the Xbox console.

 

[FitzOfRage]

Revenue from consumer hardware and software, PC games and TV Platforms increased $21 million or 10% compared to the fourth quarter of fiscal 2003 due to a new release of Mac Office

Why is that grouped with the Xbox, PC games, etc. group instead of with the other Office products?

 

[jedimike]

$10 billion is ludicrous... that means for every console they sell, it costs MS $645.

 

[jarrod]

Why is that grouped with the Xbox, PC games, etc. group instead of with the other Office products?

To help offset XBox losses, why else?

 

[BeOnEdge]

web TV isnt defunct. isnt it called MSN TV now? i see stupid commercials for it at like 2am every weekend. either way, you cant put it all on XBOX UNLESS you are couting R&D, advertising and almost every other facet of the xbox side of the business. you're still acting as if the XBOX the ms sells every month is creating this loss. as someone posted that would mean it costs MS $645 per xbox sold which is just stupid and impossible yet thats what some people here take it as.