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XBox (Games) Microsoft The Almighty Buck

Microsoft's Revenues Up Except for Games Division 68

Posted by Zonk from the taking-a-loss-on-the-360 dept.
Gamasutra reports on Microsoft's announcement that their revenues are up, but the games division has seen a sharp decrease in profitability. From the article: "Microsoft's Home and Entertainment division, which overall includes the Microsoft Xbox video game console system, PC games, the Home Products Division, and TV platform products for the interactive television industry, saw revenue of $1.56 billion in the 3 months to the end of December and a significant loss of $293 million, compared to $1.37 billion revenues and a small profit of $55 million in the same period last year."
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Microsoft's Revenues Up Except for Games Division More

Microsoft's Revenues Up Except for Games Division

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  • XBOX 360 (Score:3, Insightful)

    by pvt_medic ( 715692 ) on Thursday January 26, 2006 @09:48PM (#14575056)
    They report though that the XBOX 360 is a large part of their increased revenue. MSNBC Article [msn.com] Now this doesnt make sense one bit since they lowered the prediction on unit sales for 360 and they loose over $100 per unit. I am slightly confused by their numbers.

    • Re:XBOX 360 (Score:1, Insightful)

      by Anonymous Coward
      revenue is money in. They don't lose revenue on the 360 even if they do make a net loss from it.

    • Re:XBOX 360 (Score:1, Funny)

      by Anonymous Coward
      They had to pay the IRS a good deal to understand the numbers too. So don't worry, you aren't the only one who can't understand.
    • Increased revenue because they sold fewer 360s at a loss. That means less loss overall, less drain on other sources of income.
    • Although the image of Microsoft Executives returning $100 notes to the wild for them to run free has a kind of warped appeal, surely you mean that they lose over $100 per unit?

  • That's what you get... (Score:3, Insightful)

    by nenya ( 557317 ) on Thursday January 26, 2006 @09:54PM (#14575083) Homepage
    ...when you sell your next-gen, multi-million-shipping unit at a loss.

  • I like xbox (Score:3, Insightful)

    by trolleymusic ( 938183 ) on Thursday January 26, 2006 @09:55PM (#14575088) Homepage
    It's sorta funny, the only Microsoft product I like is xbox and that seems to be the one they're always having financial trouble with.

    I'm now a happy apple user, I don't have to deal with windows anymore, but I still have to use the horrible MS Office for Mac so that my windows-based colleagues and I can exchange work.

    Unline the other MS products I've used, i've always found the xbox experience to be easy and user-friendly.
    • but I still have to use the horrible MS Office for Mac so that my windows-based colleagues and I can exchange work.

      Try OpenOffice.org for Mac. Microsoft won't read its native file formats, but it can pretty handily read and export in Microsoft file formats.

      - Greg

  • Misleading headline (Score:5, Informative)

    by ThisIsForReal ( 897233 ) on Thursday January 26, 2006 @09:59PM (#14575113) Homepage
    ...except for game division?

    FTA: Microsoft's Home and Entertainment division, which overall includes the Microsoft Xbox video game console system, PC games, the Home Products Division, and TV platform products for the interactive television industry, saw revenue of $1.56 billion in the 3 months to the end of December and a significant loss of $293 million, compared to $1.37 billion revenues and a small profit of $55 million in the same period last year.

    Grrr, the headline made it sound like revenue for the game division was down, but it was up, too. Please keep the headlines accurate for those of us who don't want to read the synopsis, let alone the actual article!

    • Typical (Score:3, Funny)

      by truthsearch ( 249536 )
      So you don't want to read the synopsis... or the actual articles... but you're quick to post a comment.

      Typical Slashdot. :)
    • Actually the headline was accurate this time. The division of Microsoft that includes its games lost almost $300M in the last quarter. The implicaiton is that Microsoft on a whole still gained money, which they did. It was up last year, just shown in comparison. The article itself is misleading, as it was certainly a planned loss.

      • Re:Misleading headline (Score:4, Informative)

        by MBraynard ( 653724 ) on Thursday January 26, 2006 @11:45PM (#14575779) Journal
        Actually the headline was accurate this time. The division of Microsoft that includes its games lost almost $300M in the last quarter.

        Actually, the headline is inaccurate. The games division revenue IS up. And the amount of money 'lost' is irrelevant to revenue.

        REAL journalists make these mistakes regularly - Slashdot makes these mistakes contantly as it is run by individuals who are ignorant of all matters not related to hentia and linux.

    • Well, the revenues are way up, but the profits are way down. If you are in business, and not making a profit, well, that's a bad thing.
    • While I see the error now, when I read it I understood exactly what was being said. Something like "MS profits up from last year, game division still lags" would probably be a bit better.

  • In other words, the XBox 360 plant was expensive. (Score:5, Insightful)

    by Thag ( 8436 ) on Thursday January 26, 2006 @10:05PM (#14575139) Homepage
    I'm guessing that's what we're seeing: the startup costs for the Xbox 360 and its launch publicity. So even though revenues were up, the increased operations costs turned it into a net loss, for now at least.

    I would expect the 360 to be profitable for them in the long run, though.

    Jon Acheson

  • In other words.. (Score:4, Informative)

    by Mr_Tulip ( 639140 ) on Thursday January 26, 2006 @10:15PM (#14575191) Homepage
    TO put it more simply, Microsoft's total income from games, XBOX and, Home PC is higher by around $190 million, and profit is down by about $230 million from last year. That's only around a $40 million net difference from last year, and I expect a lot of that is the cost of launching a new console.

    • Re:In other words.. (Score:3, Informative)

      by Anonymous Coward
      TO put it more simply, Microsoft's total income from games, XBOX and, Home PC is higher by around $190 million, and profit is down by about $230 million from last year. That's only around a $40 million net difference from last year, and I expect a lot of that is the cost of launching a new console.

      You must be using the new math. Revenue has increased by about $190M, while profit is down around $230M. You can't subtract these numbers. Indeed, if you add them, you see that their expenses increased by $420M
      • True, my subtraction makes no sense.. time to lower the dose on my medication. The point still stands that in general, it's good news for MS, as revenue is up, and expenses are higher presumably due to marketing and R&D for the XBOX 360
        • Higher revenue is only a good thing if your profit margin remains the same. If your profit margin is negative, then the more money you make, the more money you lose. If you have a profit marge of -1% and you make $100, you lose $1. However, if you have a profit marging of -1% and you make $1,000,000,000, you lose $10,000,000. I could have a revenue of $130 billion, but If it cost me $645 billion to sell that $130 billion, then I wouldn't be running a very good business.
          • You're looking at a single aspect of a static snapshot and using that perspective to judge future performance without actually thinking about what that snapshot represents.

            Eternally selling one product at a loss is a bad thing. Microsoft isn't selling one product.

            Game consoles are generally sold using a razor-blade model. Sell the razor at a loss (console), sell the blade at a profit (games). Revenue trending up generally means that you're selling more stuff, which is a very good thing for the future (mo
            • But Microsoft tried this last time, with the original XBox, and they never did end up making a net profit on the venture. What makes them think that's it's going to work this time around. They can make more cash by selling their online service, but the other manufacturers are planning to give that away for free. Nintendo sells it's consoles above cost, and got just as manu sales as Microsoft did in the last round. So I would have to say that selling at a loss is not the only way to do it. I think a maj
              • Early on in a console's life market share and adoption is more important than breaking even on the hardware. Market share attacts developers, which increases the number of games available for the system, which increases consumer interest, which in turn increases marketshare.

                Losing money early on isn't a terribly big deal, as you expect to make it back over the life of the console when customers purchase new games or controllers/peripherals. Remember, early adopters will be "in" for much longer than people
      • You must be using the new math.

        What's important is that he tried, not that he got the correct answer.
        • What's important is that he tried, not that he got the correct answer.
          --
          ObsessiveMathsFreak

          Oh, so you're one of those throwbacks that thinks that math is about accuracy, proof, and all that other old-school stuff?

    • The last 3 months of 2004 included the release of Halo 2, which sold millions within the quarter. It was the only quarter where the Xbox division has ever made a profit. You can't really judge other quarters based on that one. This quarter is just standard fare for the games division.

    • Re:In other words.. (Score:3, Informative)

      by moosesocks ( 264553 )
      and I expect a lot of that is the cost of launching a new console.

      I expect that a lot of that is the cost of launching a new console unsuccessfully.

      The demand for the 360 seems tiny compared to the demand for the original xbox not to mention all the wasted money on the hype microsoft built up for the 360 which was completely destroyed by the fact that there wasn't enough of them to supply what little demand they did have.

      The dreamcast had a more successful launch than the 360. I have a pretty good feeling
      • The demand for the 360 seems tiny compared to the demand for the original xbox not to mention all the wasted money on the hype microsoft built up for the 360 which was completely destroyed by the fact that there wasn't enough of them to supply what little demand they did have.

        Okay, I admit I'm a little biased (see my profile), but what are you smoking?

        If there was "little demand", then there'd be no supply problems. There would be hundreds of 360s readily available. That's simply not the case (except in Jap

        • Re:In other words.. (Score:1, Informative)

          by Anonymous Coward
          "Toy Story-rendering anyone?"

          http://news.com.com/2100-1040-250632.html [com.com]

          "One of the basic premises of the Xbox is to put the power in the hands of the artist," Blackley said, which is why Xbox developers "are achieving a level of visual detail you really get in 'Toy Story.'"

          http://www.wired.com/news/technology/0,1282,40970, 00.html?tw=wn_story_related [wired.com]

          "Gates said the 3-D chips in the Xbox would be three times faster than anything on the market and offer nearly unlimited graphical visuals. "We're approaching th
          • Waddaya know, the AC is actually right! A simple Google search confirms that the Toy Story comparison was actually made by Gates, but for some reason, the press attributed it to Sony. Then apparently it took off from there and now everyone and their mother thinks it was Kutaragi that made the claim. (To be honest, though, that sounds much like something he WOULD say) Of course Sony did make a lot of claims about the PS2 power (like how it would replace the PC [cnn.com], but that's pretty common for most console maker
        • There's a small demand compared to the original XBox.

          There's an even smaller supply, hence the shortages. Most large chain stores were only getting 10-20 units per shipment. They're going to sell out regardless of demand. The only true way to gauge demand at this point is to look at the number of people who want one from the people you know.

          Most of my friends were in line to buy the original xbox the week it came out. They have little or no interest in the 360, and I would say that out of my friends,
          • I think both of us are relying on anecdotal experience. Most of my friends (myself included), had little to no interest in the original Xbox. Microsoft had no experience in the console business, so we were all in a "wait and see" attitude. This time around, it's actually different, and a few of my friends have actually gotten 360s at launch (or at least tried to).

            I find it hard to believe there's LESS demand for the 360, now that Microsoft has proven themselves, in some degree. Certainly from reading all th

  • Small? (Score:3, Funny)

    by suricatta ( 617778 ) on Thursday January 26, 2006 @10:42PM (#14575354)

    "...a small profit of $55 million..."

    Maybe I'll go work for the Microsoft Games Division and ask for a small salary :)

    • That's almost nothing compared to the profit they make off the Office and Client divisions... almost makes you wonder why they bother...
    • A quarterly profit of $55 million is kinda small compared to the average ~$1 billion in losses that division has seen per year for the last four years.
  • The XBox 360 just isn't selling. Maybe they're hard to find at retail, but there are thousands available on eBay. An unopened core system just sold for $255 [ebay.com], well below the $299 list price. The speculators who bought at the launch are getting killed.

    Microsoft will probably have to relaunch the product at a lower price point, and lose even more money per unit.

    How much longer will Microsoft's stockholders put up with this money drain? Microsoft lost money on every original XBox, so, hoping to make so

    • Maybe they're hard to find at retail, but there are thousands available on eBay.

      I wonder how many of these just go back and forth between "speculators".

      Microsoft will probably have to relaunch the product at a lower price point, and lose even more money per unit.

      I'm waiting to see whether their better-laid plans work out this time around (better contracts with component makers, etc).

      And in regards to the shareholders, I wonder if those who own MS stock have all been pacified by the big giant with promi

    • The XBox 360 just isn't selling.

      Are you kidding? (Or rather, are you trolling?)

      The units are still hard to find at retail, no doubt. Yes, there are a lot of units on eBay, but just doing a search for "xbox 360" brings up several packages that are over well $400. A few weeks ago, they were selling for much higher even (over $600). Plus, a lot of shady folks were actually selling Xbox 360 empty boxes, which IMHO is pretty fradulent. There were definately a lot of speculators and in-store managers that hoarded
      • I don't feel sorry for those shmucks who somehow sold them at a loss (they should learn to use the reserve price feature).

        If you watch the XBox 360 core system auctions on eBay, anything priced over $350 just does not sell. The auctions with high reserves just scroll off, unsold. You can usually get $300, and you might be able to get $325. Above that, forget it. If you've got a garage full of the things, it's time to take what you can get.

        • That's because the core systems are $300 at retail, and they've been much more likely to be on stock than the premium bundles (which are $400). Most of the hardcore fans want only a premium system, and those who don't can now get it with some calling around.

          Also remember that eBay prices were huge right before Xmas, with parents desperate to fill their kids' wish lists. If you've got a garage full of Xbox 360s with the hope of selling them for mega profit ... you're screwed. You're only going to get it for
        • why pay the hassle of ebaying when you can get it cheaper at walmart? No S&H, no paypal, no dealing with slow shippers or fraudsters.

          WalMart has been getting stocks fo Core systems, it's the premium that is hard to find and sought after but even then it's really a matter of just looking for it.

          Ebay is hardly the value of the market

  • Home & Entertainment Division (Score:3, Informative)

    by R3d M3rcury ( 871886 ) on Friday January 27, 2006 @01:01AM (#14576186) Journal
    "Microsoft's Home and Entertainment division, which overall includes the Microsoft Xbox video game console system, PC games, the Home Products Division, and TV platform products for the interactive television industry [...]"

    ...and the Macintosh Business Unit.

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