When will Microsoft own up to the X360 bomb?

Praxis · Post by **Praxis** » 2007-04-20 04:59pm

Hotfoot wrote:Actually, reports from 2001 indicate that they did sell the Gamecube at a small loss (under $20), but regardless, it's not near the "norm". Unfortunately, such data seems to be spare the further back you go. If it started with the PS1, however, that's a long term trend, as it goes back to 1994. I'm pretty sure it goes back further than that, but I don't have any reliable numbers on that mark.

However, I still maintain that just because the 360 isn't a runaway smash like the Wii, doesn't mean it's a failure, and it's certainly not a failure just because Japan didn't pick it up.

Product-wise, it's not a failure. Marketshare-wise, it's not a failure.
Business-wise, it's certainly not a success; it has only lost money, and hasn't really significantly bolstered any other divisions of Microsoft. Yet.

So yeah, Sony done fucked up this round, and while people are still questioning Microsoft's place in the market (with some good reason), I still think it's way too early to call the game as a loss for the 360.

The Zune, of course, can go to hell.

Oh, no, you misunderstand my argument. I'm not questioning Microsoft's place in the market; they're outselling the XBox, they're going to have a significant marketshare this time around (1 year has gotten the 360 to almost half of the original XBox's sales over 4 years).

I only question if the product is actually worthwhile to the company. You can get spectacular market- and mind-share, and still lose a bunch of money.

Totally agree on everything you said about Sony.

Count Dooku · Post by **Count Dooku** » 2007-04-20 05:30pm

If the numbers in the article are correct, than the statements Microsoft made are a bit confusing to me. At GDC this year they said the exceeded the number of Xbox Live subscribers by 400,000, and had done it six months earlier than their target date, and had sold a few hundred thousand consoles more than they'd predicted. They also touted the sucess of the Xbox Live Marketplace and such. If this really is true, how much of a 'failure' did they really expect it would be?

Vendetta · Post by **Vendetta** » 2007-04-20 08:33pm

Praxis wrote: Product-wise, it's not a failure. Marketshare-wise, it's not a failure.
Business-wise, it's certainly not a success; it has only lost money, and hasn't really significantly bolstered any other divisions of Microsoft. Yet.

The key term there is "Yet".

If Microsoft are in a position where they were willing to sink seventeen billion dollars into the market over ten years (and this being one year ago now, from Xbox 360 Uncloaked), it's too early to say whether they can meet their own objectives for the Xbox or not. Clearly, the point is not to make a profit on the console itself.

In another four years, it might be possible to say whether Microsoft has achieved a net benefit from their console operation. Right now, they're still in the loss leader phase. (hell, as far as I'm concerned they already have. Not only is the Xbox 360 the only Microsoft product I've bought since 2004, it's also the largest timesink I own.)

Praxis · Post by **Praxis** » 2007-04-26 08:57pm

Hotfoot wrote:
Praxis wrote:They turned a small profit one quarter, which didn't come close to paying for the loss of the previous quarter. The XBox 360 has just been moer losses since then.

Yes, it's very likely they will make a profit in Q4 2007 with holiday season. However, it's not likely to be a $5 billion dollar profit; that's just insane. It might be enough to make back the money lost on a SINGLE QUARTER, but not 6 years of losses.
Hey, if I'm wrong, I'm wrong. It's entirely possible I misread my sources and they were talking about short-term profits.

Just an update. This just in today:
http://kotaku.com/gaming/lol-they-made- ... 255654.php

Losses are getting smaller, but they're still greater than a quarter billion per quarter.

Xisiqomelir · Post by **Xisiqomelir** » 2007-04-26 10:42pm

Don't post the rumourtaku link, it's not as good as the real PR:

Entertainment and Devices Division ("EDD") products include the Microsoft Xbox video game console system, PC games, consumer software and hardware products, the Zune digital music and entertainment device, TV platform products for the interactive television industry, and Mobile and Embedded devices (principally Windows Mobile software platform and Windows Embedded device operating system). The success of video game consoles is determined by console innovation, the portfolio of video game content for the console, online offerings, and the market share of the console. We believe that the functionality of the Xbox 360 console, games portfolio, and online offerings are well-positioned relative to competitive consoles launched during 2006.

EDD revenue decreased during the three months ended March 31, 2007 primarily because of decreased Xbox 360 console sales. During the quarter, we shipped 0.5 million Xbox 360 consoles as compared to 1.7 million consoles in the third quarter of fiscal year 2006, which was the first full quarter of Xbox 360 console sales. Xbox and PC game revenue decreased $393 million or 44% during the three months ended March 31, 2007 due to the decrease in console sales. Revenue from Zune, consumer hardware and software, and TV platforms increased $103 million or 61% during the three months ended March 31, 2007, primarily reflecting the recent release of Zune and new consumer hardware products. Mobile and Embedded Devices revenue increased $38 million or 30% during the three months ended March 31, 2007 driven by sales growth in Windows Mobile software and Windows Embedded operating systems.

EDD revenue increased during the nine months ended March 31, 2007 primarily due to increased Xbox 360 console sales, sales of Zune, and increased Xbox accessories and video game sales. We shipped approximately 5.9 million Xbox 360 consoles during the first nine months of fiscal year 2007. Since the Xbox 360 console was launched in November 2005, we have shipped approximately 11 million units. Xbox and PC game revenue increased $914 million or 37% during the nine months ended March 31, 2007 as a result of the increased number of consoles sold and related accessories and video game sales. Revenue from Zune, consumer hardware and software, and TV platforms increased $426 million or 68% during the nine months ended March 31, 2007, primarily reflecting the release of Zune and new consumer hardware products. Mobile and Embedded Devices revenue increased $109 million or 31% during the nine months ended March 31, 2007, driven by sales growth in Windows Mobile software and Windows Embedded operating systems.

EDD operating loss decreased during the three months ended March 31, 2007 primarily due to decreased products costs from lower sales of Xbox 360 consoles and increased Mobile and Embedded Devices revenue, partially offset by expenses related to the launch of Zune and increased Xbox 360 console warranty expenses. EDD operating loss decreased during the nine months ended March 31, 2007 primarily due to increased Xbox 360 platform sales and improved Xbox 360 console margins, partially offset by expenses related to the launch of Zune and increased Xbox 360 console warranty expenses. Headcount-related costs increased 10% and 13% during the three and nine months ended March 31, 2007, reflecting an increase in salaries and benefits for existing headcount and a 13% increase in headcount, partially offset by decreased stock-based compensation expense.

For fiscal year 2007, we expect revenue to increase due to the increased availability of Xbox 360 during the entire fiscal year and sales of Zune after its November 2006 launch. Revenue from mobility and embedded devices is expected to increase due to unit volume increases of Windows Mobile software driven by increased market demand for phone-enabled devices and Windows Embedded operating systems.

500K shipped FOR THE QUARTER pretty much confirms that Roger Ehrenberg was correct in saying that they stuffed the channel over the holidays to get their "10M 360s!" talking point.

Hotfoot · Post by **Hotfoot** » 2007-04-26 10:43pm

You know, I talked early on in this thread about using the entire entertainment division as simply being "Xbox". It's weird, but people seem to forget that other products are put out by Microsoft as well, like the Zune, which is clearly selling like hotcakes, unlike it's competitor, the iPod.

Of course, this article mentioned it, and even pointed out that Microsoft said that most of the hardware revenue is generated by the Xbox and Xbox related sales, but then the writer is right back to "Xbox losing monies" tack.

You can understand why I take such statements with a grain of salt, and hence why I refer specifically in my posts to the Xbox itself, not the entire entertainment department. It's kind of like how I'll point out that Sony, while bombing on the PS3, isn't suddenly going to collapse just because the console isn't doing well. Even the entertainment department might pull through, assuming Blu-Ray dominates the market and somehow generates enough demand.

It is interesting though, in that it does seem to indicate that my original sources were ill-informed, or that I misinterpreted what they were saying.

Hotfoot · Post by **Hotfoot** » 2007-04-26 10:50pm

Xisiqomelir wrote:500K shipped FOR THE QUARTER pretty much confirms that Roger Ehrenberg was correct in saying that they stuffed the channel over the holidays to get their "10M 360s!" talking point.

...The fact that they wanted to make sure they had plenty of consoles in stock for the holidays had NOTHING to do with it, I'm sure. Lord knows they weren't making any sales due to the PS3/Wii shortages. Not with next-gen consoles being a big gift for the holidays or anything.

Sam Or I · Post by **Sam Or I** » 2007-04-26 11:01pm

Arthur_Tuxedo wrote:
The SNES and Genesis had superior graphics and sound to the PC for years. The PS was superior for months, as was the Dreamcast. This is not exactly encouraging, but at least it's better than the 360, which was outclassed by PC's the day it came out.
Well golly gosh, do you think that might be because consoles need to freeze hardware before release to allow their game developers time to work with it? If you buy a top of the line graphics card for a PC, you could wait for up to a year for its resources to be used to full effect in a game, much less used at all.
True, but sparing no expense on a new PC that's just going to be obsolete in 6 months is foolish. I was comparing consoles against PC's with more sensible performance parts, such as the 8800 GTS 320 instead of the 8800 GTX.

You have activated the Amiga fan boy in me. My vote goes for the Amiga which could display 4096 (in HAM) colors and run at 30 fps in stereo 16 channel sound quite some time before either of the 2 consoles came out.