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[Mr_Moogle]

We all know that the Xbox lost Microsoft millions. But I assumed they would make certain changes to their business model so they could recoup their losses and make a profit on the Xbox 360.

However, from what I've heard they are already making pretty bad losses on the Xbox 360. If the 360 turns out like the Xbox and loses them hundreds of millions, would they have any reason to be in the console market. I just dont understand how they explain this to their investors.

Lets just say they make a massive loss on 360. Would they adopt the Nintendo model and try to make inexpensive hardware in their third console so they can make a profit on both hardware AND software?

I know Microsoft is a rich company and doesnt have to worry about these losses. But still, it'd be pretty pointless to enter a market if you cant make any money from it.

 

[Xellotah]

MS are in the industry becase of the love of it.

 

[Borys]

Lock this filth.

To answer your q.: it's Microsoft. They don't give a shit about losses. Total world domination has NO price.

 

[Idioteque]

retard pack and microtransactions ftw

 

[Mr_Moogle]

Filth seems a little harsh.

I'm just trying to get some kind of understanding as to the logic behind Microsoft entering this industry. The fact that they made losses on the Xbox wasn't surprising. They spent quite a bit of money on acquiring developer support and marketing. But I thought some things would change the second time around so they could make some money.

I know Microsoft doesn't give a shit about the losses but I have yet to see how they are going to make a profit....at least in the short term.

This isn't a Microsoft bashing thread. I like the fact that they are in this industry. More competition means better games and lower prices. Its good for gamers.

But how long can they keep it up if they are losing millions? Surely somebody is getting burned by this.

 

[First Children]

Lock this filth.

To answer your q.: it's Microsoft. They don't give a shit about losses. Total world domination has NO price.

They won't make a profit even when they'll dominate the world? :O

 

[Borys]

But how long can they keep it up if they are losing millions? Surely somebody is getting burned by this.

Long enough, even when bleeding money. Besides they already got the hardcore fanbase (I suppose around 10M) who will buy every MS console (priced at whatever level they wish) they throw at them.

 

[marc^o^]

You don't get the full picture if you only look at the console part.
What is at stake is the Digital Life. In ten years from now, most people will have suscribed to a digital life provider. Communication, Leasure, Work, most of our activities will go through Internet pipes. Who will own these pipes? Google? Sony?

MS OS and Softwares can't guarantee Microsoft a permanent growth.
They can't afford to miss the wagon of digital life subscriptions, thus the xBox and the billions they are willing to lose.

Microsoft ain't Sega, they could afford to lose 10 more $ billions, that wouldn't prevent them to pursue this goal/graal.

 

[Mr_Moogle]

Long enough, even when bleeding money. Besides they already got the hardcore fanbase (I suppose around 10M) who will buy every MS console (priced at whatever level they wish) they throw at them.

Doesn't Sony have most of the hardcore market?

Sony also takes heavy losses on the hardware but make their profit back in software. Does this apply to Microsoft? If it does, why arent they making money yet?

If the 360 loses millions, is it reasonable to expect a change is Microsoft's strategy? Or are they going to follow the same path as Sony. (ie fusing all sorts of multimedia technology to create an all-in-one media hub).

 

[Mr_Moogle]

You don't get the full picture if you only look at the console part.
What is at stake is the Digital Life. In ten years from now, most people will have suscribed to a digital life provider. Communication, Leasure, Work, most of our activities will go through Internet pipes. Who will own these pipes? Google? Sony?

MS OS and Softwares can't guarantee Microsoft a permanent growth.
They can't afford to miss the wagon of digital life subscriptions, thus the xBox and the billions they are willing to lose.

Microsoft ain't Sega, they could afford to lose 10 more $ billions, that wouldn't prevent them to pursue this goal/graal.

I have never heard of this 'Digital Life'. Care to explain?

 

[pilonv1]

You don't get the full picture if you only look at the console part.
What is at stake is the Digital Life. In ten years from now, most people will have suscribed to a digital life provider. Communication, Leasure, Work, most of our activities will go through Internet pipes. Who will own these pipes? Google? Sony?

It's the only saying of it's not a sprint, it's a marathon. Being a loss leader at the beginning of their entrance to the market means little if they end up turning large profits years down the line.

Anyway unless you've got some financial investment in the company who cares how much money they lose on their gaming divison? Gamers are the winners.

 

[sonycowboy]

We all know that the Xbox lost Microsoft billions.

Fixed

 

[Marathon]

"I know Microsoft is a rich company and doesnt have to worry about these losses."

"They don't give a shit about losses."

"they could afford to lose 10 more $ billions,"

:lol :lol

Boggle.

I would love to see Liddell's reaction to this thread...

 

[Mr_Moogle]

Fixed

Billions? Holy crap!

Its all well and good to say that they MIGHT turn a profit a few years down the track but I dont see them doing it with their current strategy. Its not like Sony is just going to dissappear.

 

[Amir0x]

Billions? Holy crap!

Its all well and good to say that they MIGHT turn a profit a few years down the track but I dont see them doing it with their current strategy. Its not like Sony is just going to dissappear.

Microsoft has ~5 billion loss on Xbox, or is it 6 billion now?

Anyway, yes eventually they will make a profit. They just gotta keep making headway and drill into the Sony position, so they make so much money on software that system losses are balanced.

 

[marc^o^]

Its not like Sony is just going to dissappear.

Was it your concern?

 

[Crazy Harry]

I think Microsofts hardcore isn't as big as 10 milion. I think it's more towards 5 milion and that is still a high estimate. Sony's is probably as big as 10 milion but I think it's not bigger than that.

I have no knowledge of financial law so could someone who knows explain me the following.
What I've heard is that a company is not allowed to support a product which is losing money, with the profits of another product (in also a different market) for unlimited time. This is considered competition counterfeiting (excuse my babelfish translation dutch->english) is what I've heard.
As you see, I've heard something but don't exactly know what I am talking about.
Could someone explain this to me how this works?
And isn't this the case with Microsoft and it's Xbox?

 

[KeithFranklin]

However, from what I've heard they are already making pretty bad losses on the Xbox 360. If the 360 turns out like the Xbox and loses them hundreds of millions, would they have any reason to be in the console market. I just dont understand how they explain this to their investors.

This is Microsoft's history. Windows took nearly 10 years to be a viable business. The office products were also rans for years. Windows Mobile took years before turning any sort of profit. Microsoft is a rare company in todays marketplace that makes long term investments. Most other US companies constantly do things half assed to make Wall Street happy.

 

[BudokaiMR2]

This is Microsoft's history. Windows took nearly 10 years to be a viable business. The office products were also rans for years. Windows Mobile took years before turning any sort of profit. Microsoft is a rare company in todays marketplace that makes long term investments. Most other US companies constantly do things half assed to make Wall Street happy.

Yes but one important points is that they aren't battling against these lazy US companies. They are taking on Sony,who has had a huge influence on the last two generations and has one of the best company images as far consumer electronics are concerned. They they are taking on Nintendo(whether they like it or not) who is a master of making profits and is on fire as of late. Nintendo is also well known to look years into the future(look at how long they worked on the Revmote) and they make a profit while doing it.

 

[HyperZone<3]

Microsoft could fund NASA and still remain profitable.

The reason they are still in the videogame industry is because they see it as a viable, long-term market and a reasonable extension of their PC/internet business. Even if they've lost billions(around 3 or 4 last I checked) on the Xbox, its still done more to increase their mindshare, to strengthen the Microsoft brand amongst new customers then anything else they've done in years.

Honestly, would anybody have guessed six years ago that there would be millions die-hard Microsoft fans, much less ones that couldn't give a rats patoot about PCs? I think that makes it rather successful to Microsoft, even if the balence sheet doesn't reflect that.

They won't ever give up videogames, and IF, IF they decide to bail on the game industy and retreat to their more comfortable PC field (when has Microsoft ever admitted defeat), its a sure thing that the Xbox, in some form or another (TiVo, media delivery thang, something) is here to stay.

 

[D3VI0US]

Sure when we reach the ONE CONSOLE FUTURE and everyone is gaming on Windows PC's.

 

[BudokaiMR2]

Sure when we reach the ONE CONSOLE FUTURE and everyone is gaming on Windows PC's.

That thought is going to give me nightmares tonight....

Thanks...thanks alot.

 

[D3VI0US]

Just wait until we see people using their Wired X360 controllers on their Vista PC's playing XNA games with playing games with their X360 friends using their "PC Live" accounts. Halo 2 PC should forward their agenda nicely as well as the release of Vista.

 

[ToxicAdam]

I think there is a limit to what are "acceptable" losses. I can't imagine MS being happy about losing another Billion a year for 4 years and still maintaining the same marketshare. What's the point in that?

At some point, there IS a tipping point, but who really knows where? The company is full of delusion though, just the other day I read Bill Gates saying that MS will release a product that will compete with the Ipod.

Talk about fighting windmills.

 

[3rdman]

The contracts that MS signed with Nvidia for the Xbox was completely in Nvidia's favor...MS has never owned its IPs for it and are left to purchase the chips from them for whatever price Nvidia sees fit. Its the reason we never saw a smaller Xbox as well. At least this is how I understand the problem to be, if I'm wrong, please correct me.

The 360 is 100% MS owned (from what I understand) and will drop in price as quickly as MS is able to...A size revision down the line is also probable.

 

[DCharlie]

Ms has lost 6 billion, but here is how much ms care -> .

 

[Dave Long]

The thing about hoping to overtake Sony and prior Microsoft strategy in that area is that they never really had to fight against competitors like Sony and Nintendo to make Windows and Office the defacto standard products for the home. Everyone likes to trot out Windows, but if MS had moved everyone to Windows more slowly it still would've happened. DOS was king. It was only a matter of time and Apple and IBM were so screwed up then that they couldn't hope to stop it.

This is a totally different ballgame. One that is going to require continued innovation and a whole lot more top quality product on the software side in order to "win". Arguably, changing the entire paradigm of games, like Nintendo is doing with DS and Revolution, is a better way to take marketshare from your competitors and to create a larger slice of the market for yourself. Microsoft has shown little to make me believe that they can do that kind of thing. Their iterative processes that have led to successful monopoly products may be the wrong approach to videogames.

 

[jarrod]

Really, who cares if they ever turn a profit on the Xbox line... unlike Sony or Nintendo, they don't have to.

 

[Marathon]

http://minimsft.blogspot.com/2005/09/microsoft-reorg-reshuffle.html

"Considering history, it's going to surprise many when Xbox 360 is profitable in a big way for Microsoft over the next few years. Profitability is a top priority across all aspects of the business. Responsible decisions have been made from the first day of planning to make sure that everything stays on track."

"Rest assured, there is a clear understanding that the blank check days are over and responsible decisions are mandatory"

Anyone have any more stupid comments about how Microsoft doesn't care about profitability or massive losses?

 

[jarrod]

http://minimsft.blogspot.com/2005/09/microsoft-reorg-reshuffle.html



Anyone have any more stupid comments about how Microsoft doesn't care about profitability or massive losses?

Is that fear I smell?

 

[I <3 Katamari]

How come this is the only thread Speevy hasn't mentioned Microsoft in? ;x

 

[Prine]

They make loads on software thanks to xbots buying multiple games like mad men.

Hardware costs counter any gains made on software though. Even with Halo 2 making all that money in nov decemeber they still lost money (though i think it was more to do with the other entertainment departments)

 

[Fatghost]

Just wait until we see people using their Wired X360 controllers on their Vista PC's playing XNA games with playing games with their X360 friends using their "PC Live" accounts. Halo 2 PC should forward their agenda nicely as well as the release of Vista.

I'm not sure if you're trying to be sarcastic here.

 

[Striek]

MS isn't interested in profits? Well that $100 WiFi and 20gb HDD sure make sense. The raised prices for controllers and the incredibly small memory card also support that assertion.

My opinion: The Xbox360 seems like a console built around profit. Compared to PS3 its a very barebones console, should come down in manufacturing price quickly (passed onto the consumers at a later date I'm sure), but really....arcade is probably going to be the biggest money-maker. Almost pure-profit to millions of LIVE connected gamers (which in itself could be bringing in $1B a year on subscriptions in the end).

Outside of la-la-land on forums, MS do want to profit and know that they can't continue for generations losing, because its just bad business. Nothing they've done so far for the 360 indicates they're willing to lose any money competing this round. And I don't think they will.

 

[Dr_Cogent]

This thread seems kinda pointless.

Obviously, someone at MS, and probably more than just one person, expects the console division to be profitable at some point or they simply wouldn't even be in the biz.

 

[PhoenixDark]

I seriously doubt they'll ever be profitable. The Xbox 360 is a very expensive system. There is far more tech in it than the original Xbox, so of course production costs are high.

The Xbox 360 is going to be more successful in the US and Europe than the previous Xbox, and it might preform even worse than the original Xbox in Japan. I really think the 360 could sell around 25 million units in the US over the next 5-6 years. But will these improved sells be enough to break even? I don't think so. The first Xbox is 6 billion dollars in the hole. $6 billion! You have to be crazy to suggest MS can even cut that number down 50% with the Xbox 360.

In fact, I doubt MS will even break even on software sales. You can't tell me that Kameo and PD0 didn't cost more than $10 million to make; both games are no where near making that up. It's early of couse, but both games have still criminally underpreformed. If it costs $15-20 million to make these games, I just don't see many developers making profits outside of Bungie.

But in the end, does MS truly care about profits right now? No. They are willing to spend whatever it costs to buy/own the gaming industry. Although I think the PS3 will easily win this generation, even the staunchest Sony fan must admit that Sony as a company is floundering. They won't be here forever; they don't have the long term resources for that. But MS does. When all is said and done, MS will be market leader one day. It's inevitable.

 

[Furoba]

Microsoft has ~5 billion loss on Xbox, or is it 6 billion now?

Anyway, yes eventually they will make a profit. They just gotta keep making headway and drill into the Sony position, so they make so much money on software that system losses are balanced.

Heh, that's nearly double of what Sega had in the red back in the day... And Sega achieved that in about 8 years... Microsoft in 4 - 5 years... Their strategy was marketshare for money from the beginning, so marketshare is not a suitable indicator to tell who is the market leader/second/third/...

Microsoft might need a few generations to recoup on their losses if they can't become as big as Sony this generation.

 

[I <3 Katamari]

This thread seems kinda pointless.

Obviously, someone at MS, and probably more than just one person, expects the console division to be profitable at some point or they simply wouldn't even be in the biz.

That doesn't mean it will.

 

[Dr_Cogent]

That doesn't mean it will.

No shit, but who can possibly know it will?

Who can see into the future? No one.

So, hence, my point still stands. The thread seems kind of pointless to begin with.

Is there honestly someone on here who can say for sure one way or the other whether it will make money? Obviously some think it will, and some probably don't. No one knows for sure.

 

[Borys]

I seriously doubt they'll ever be profitable. The Xbox 360 is a very expensive system. There is far more tech in it than the original Xbox, so of course production costs are high.

The Xbox 360 is going to be more successful in the US and Europe than the previous Xbox, and it might preform even worse than the original Xbox in Japan. I really think the 360 could sell around 25 million units in the US over the next 5-6 years. But will these improved sells be enough to break even? I don't think so. The first Xbox is 6 billion dollars in the hole. $6 billion! You have to be crazy to suggest MS can even cut that number down 50% with the Xbox 360.

In fact, I doubt MS will even break even on software sales. You can't tell me that Kameo and PD0 didn't cost less than $10 million to make; both games are no where near making that up. It's early of couse, but both games have still criminally underpreformed. If it costs $15-20 million to make these games, I just don't see many developers making profits outside of Bungie.

But in the end, does MS truly care about profits right now? No. They are willing to spend whatever it costs to buy/own the gaming industry. Although I think the PS3 will easily win this generation, even the staunchest Sony fan must admit that Sony as a company is floundering. They won't be here forever; they don't have the long term resources for that. But MS does. When all is said and done, MS will be market leader one day. It's inevitable.

 

[LakeEarth]

Well they won't make money off me. Pepsi contest ftw!

Wait, actually maybe not. I've already pumped $50 of my money onto Live Arcade, bought 3 console games. Will eventually get another controller, play and charge kit, pay for Live Gold every year... okay maybe they will break even on me

 

[Outcast2004]

Well they won't make money off me. Pepsi contest ftw!

Wait, actually maybe not. I've already pumped $50 of my money onto Live Arcade, bought 3 console games. Will eventually get another controller, play and charge kit, pay for Live Gold every year... okay maybe they will break even on me

And THIS is where they'll make a majrooity of their money...nickel and diming you for fun annd profits.

I assure you they are making some money off the accesories. A $99 wirless adaptor? $50 controllers? $40 mem cards? $5 for intangible games? Licensing fees from games? Toss in Xbox Live subscriptions and so on and so forth.

There's going to be some money made.

 

[Striek]

I seriously doubt they'll ever be profitable. The Xbox 360 is a very expensive system. There is far more tech in it than the original Xbox, so of course production costs are high.

Relatively this isn't really the case, the Xbox had an inbuilt HDD, ethernet etc. and costed $300. That was arguably more impressive (especially in regards to the competition) in 2001 than the 360 today.

I really think the 360 could sell around 25 million units in the US over the next 5-6 years. But will these improved sells be enough to break even? I don't think so. The first Xbox is 6 billion dollars in the hole. $6 billion! You have to be crazy to suggest MS can even cut that number down 50% with the Xbox 360

No one is suggesting that it will recover what the original Xbox cost (although it might), but if you seriously think that 25M in the US (say 40M WW) isn't enough to be profitable you're nuts.

In fact, I doubt MS will even break even on software sales.

Whats PDZ at? ~300k in the US? Thats >$12 million right there. Development costs + distribution + marketing will easily be recovered, PDZ and Kameo will both be million sellers and very profitable.

even the staunchest Sony fan must admit that Sony as a company is floundering. They won't be here forever; they don't have the long term resources for that. But MS does.

Sony is at its strongest in years (although thats not saying much with the recent years its had), and has its greatest product lineup in a long time. They're still profitable and are aiming to get their profit margin up further, and won't be going anywhere for a long time. Alot is riding on BR but even that failing is not going to bring down Sony. If it succeeds however....anyway, yeah, PlayStation won't be going anywhere as long as its profitable.

 

[jedimike]

I have no knowledge of financial law so could someone who knows explain me the following.
What I've heard is that a company is not allowed to support a product which is losing money, with the profits of another product (in also a different market) for unlimited time. This is considered competition counterfeiting (excuse my babelfish translation dutch->english) is what I've heard.
As you see, I've heard something but don't exactly know what I am talking about.
Could someone explain this to me how this works?
And isn't this the case with Microsoft and it's Xbox?

It's OK for MS to lose money with the Xbox because they have competitive pricing. It would be against the law if MS was selling the consoles for $50 a piece while the competition was selling at $150.

IMO, this is why you haven't seen a price drop from MS or Sony. Sony doesn't want to drop the price because, a - the PS2 is still selling well and b - they know MS will drop the price of Xbox the next day. A lower priced Xbox would just encourage more casuals to have both a PS2 AND Xbox. Something Sony doesn't want.

 

[Dave Long]

Whats PDZ at? ~300k in the US? Thats >$12 million right there. Development costs + distribution + marketing will easily be recovered, PDZ and Kameo will both be million sellers and very profitable.

Perfect Dark Zero... maybe. Kameo? Doubtful. If you mean million across all territories, I'll give you that, but definitely not here in the US.

 

[trmas]

This is NOT about making a profit for MS - this is about control of the living room and evolution of the way the consumer is using the PC in the home. This is about media standards, and "digitizing" everything in life. In the near future, you will have the option to download movies from a service (MS, Sony, Google, whatever), and the same goes for games. The industry is following the same model music did, and MS is worried that the "settop box" like PS3 will eat into their PC business.

MS does look to the future - they saw this coming years ago and built the XBox line simply to protect their interests. They got into the business simply because they had the foresight to see where Sony was going.

 

[marc^o^]

The only scenario in which Microsoft could lose billions again this gen is the following:
PS3 launches at a competitive price and thus gets most of the hardcore gamers.
Revolution delivers on its promises and thus gets most of the casual gamers.

One thing is sure at this stage, Microsoft lost a good occasion to grow a big userbase before PS3 and Revolution launch. No matter how good x360 and xBox live are, Microsoft won't stand a chance if these 2 hypothesis happen.

 

[PhoenixDark]

Relatively this isn't really the case, the Xbox had an inbuilt HDD, ethernet etc. and costed $300. That was arguably more impressive (especially in regards to the competition) in 2001 than the 360 today.


No one is suggesting that it will recover what the original Xbox cost (although it might), but if you seriously think that 25M in the US (say 40M WW) isn't enough to be profitable you're nuts.


Whats PDZ at? ~300k in the US? Thats >$12 million right there. Development costs + distribution + marketing will easily be recovered, PDZ and Kameo will both be million sellers and very profitable.


Sony is at its strongest in years (although thats not saying much with the recent years its had), and has its greatest product lineup in a long time. They're still profitable and are aiming to get their profit margin up further, and won't be going anywhere for a long time. Alot is riding on BR but even that failing is not going to bring down Sony. If it succeeds however....anyway, yeah, PlayStation won't be going anywhere as long as its profitable.

I need confirmation on those PD0 numbers. I doubt 300,000 sales has generated $12 million.

Sony has been in some financial trouble for awhile now. If the PS3 fails, they'll be in even more trouble. I'm not saying it will fail of course.

 

[Ghost]

I think they'd probably be making money on xbox now if they hadnt decided to jump to 360 so quickly.


So assuming they wont do the same this gen they will make money.

Larger install base + console made the traditional way (specially made parts that get a lot cheaper a lot faster) + buy your own damn hard drive + MICROTRANSACTIONS = $$$$$$



Seriously, how much must MS have taken from Live Arcade already?

 

[marc^o^]

This is NOT about making a profit for MS - this is about control of the living room and evolution of the way the consumer is using the PC in the home. This is about media standards, and "digitizing" everything in life.

Exactly. This is the big picture.