Microsoft Loses $177m on Xbox in Three Months 809
Albanach writes "The BBC News are reporting in this story that Microsoft's Home Entertainment Division has filed a submission to the Securities and Exchange Commission reporting a loss of $177 million for the three months to 30 September 2002. The loss comes on revenues of $505m for the division that manufactures the Xbox games console. Microsoft are said to be prepared to spend $2 billion funding Xbox live over the next five years, suggesting it will be some time before the home entertainment division break into the black."
Only $177m? Who cares? (Score:5, Funny)
Re:Only $177m? Who cares? (Score:5, Insightful)
Even if that's not a lot of money for MS, in Belgium it's forbidden to sell products for less money than you needed to produce it...
It's unfair competition.
If they put Playstation and Nintendo out of business because they don't have the money to use this trick, some American judge should finally see what MS is doing and give them a REAL punishment...
Re:Only $177m? Who cares? (Score:4, Interesting)
They make a huge profit on the games, so maybe that's a loophole or something.
Re:Only $177m? Who cares? (Score:5, Insightful)
America has so called anti dumping laws.
However they get only applied if a non american company tries to sell for dumping prices inside of the US.
E.g. Korean car manufactors selling 30% cheaper than US car manufactors or VCR crafting companies regulary got a punishment import tax.
The US puts taxes at will on any kind of product if they think their own industrie soffers from forreign laws. E.g. genetic manipulated Soja needs to be noted as incridience in european food(by law). Europeans as majority do not buy genetic manipulated food. Feeding animals with genetic manipulated food is not allowed, as it gets to difficult to prove its absence in the final products (like ham). Result: US is threatening europe with a tax war since years just because Soja sales droped in Europe.
However: what is legal and what not, all over the world, is final descided by a US court.
Silly situation.
angel'o'sphere
Thank god it is legal to "price dump" (Score:5, Insightful)
Look, I hate MS as much as anyone, but romaticizing Sony or Nintendo as good guys is a pretty biased view.
If people really cared about the good guys winning the console war, people would've bought more Dreamcasts. Since they didn't win, you just have to go on which one has the games you want.
Besides, we're not talking about Wal-Mart selling drugs below cost to drive the local competition out of business; we're talking about a "give the razor, sell the blades" pricing model here.
There's a world of difference.
Scott
No, it's an investment... and lots of stores do it (Score:4, Interesting)
Microsoft, like every other game console producer, takes a hit on the console. It isn't to put the other guy out of business (though sometimes that's a benefit), but rather, to get you hooked on a specific console. After that, they recoup their loss on the games. After all, who buys a console and then never buys a game? The only significant difference here is that Microsoft is banking on turning the profit in an online system, rather than just games.
Last year, the Sheetz gas station near us was selling gas for $0.95/gallon, significantly less than what they paid for it. It wasn't to kill the competitor, but rather to get people in the habit of filling up there. The money they made from their food, drinks, and various items inside the store made up their loss and they slowly raised the cost of gas to normal rates. I fully recognize that, but you know what? I still shop there and I'm not the only one.
Re:Only $177m? Who cares? (Score:5, Informative)
I'm sorry, but this is a pet peeve of mine. Every idiot in the world speaks authoritatively about dumping when they have no idea whatsoever what it actually is.
Here's a hint: "Selling a product at a loss" is not dumping. Not even a little bit. If you produced a product and gave it away for free, that still wouldn't be dumping.
Dumping is very simple: It is selling a product in a foreign market for less than you normally sell it for in your domestic market. If you don't believe me ask the World Trade Organization [wto.org]. So unless you believe that MS is selling the Xbox cheaper overseas (hint: they're not), MS is not dumping.
You may now all return to your ignorant, dogmatic lives.
Ignorant?? (Score:3, Insightful)
The genetic molecules really are the blueprints for the enzymes, antibodies, and other protiens that build every facet of the food. And BTW, I don't buy the ecological argument against GMO's but I so think that there is a public safety issue.
For example: Some people are alergic to peanuts. The allergy is actually a reaction to certain protiens in the food itself. These protiens are built based on the structure of the DNA (DNA -> RNA -> protiens). Now if you take the gene responsible for this allergy and move it to say, corn because maybe you get better pest resistance, what happens when someone eats a piece of cornbread and dies of the allergic reaction? This is the fundamental public safety issue. If it affects, say one person in 500, that would have a minimal ecological impact, but the public safety issue would be pretty severe. Basically one could no longer controll allergies well by avoiding certain classes of foods.
The other argument against GMO's in food is an economic one-- companies like Mon$anto are trying to proprietize what is fundamentally a commodity market-- food. They want to license the food to farmers, particularly in the third world. In this way, they seek to controll the very food supply we all depend on, and that is a very dangious issue too. The battle against GMO's is the same as the battle for open source software.
Which is why I am all for Linux on the XBox
Re:Only $177m? Who cares? (Score:5, Insightful)
I am not Microsoft fan, but I have to say that this is actually the oposite of what happened. You see Microsoft made a much more expensive console then Sony or Nitendo (to produce that is). Then, Sony and Nintendo started dropping prices and Microsoft had to do it to keep up. They were planning on Moore's law dropping the cost to produce them before having to drop the price. The difference between Sony, Nintendo, and MS is that from the ground up MS has been planning on selling the Xbox as a service (ie Xbox live) to make their money. Besides, Sony has a huge market share. Mod: -1, not Anti-MS (this time)
Re:Only $177m? Who cares? (Score:3, Informative)
Then you would be a moron. Everyone in the industry knows that XBox is more expensive than the PS2 and GameCube.
You are aware that XBox contains a few more items than PS2 and GameCube that cost $$$$.
And paying Intel and Nvidia 100 bucks per XBox can be more expensive than simply directly manufacturing hardware from your own fabs or fabbing partners. Unfortunately, they had little choice as they needed x86 compatibility.
Re:Only $177m? Who cares? (Score:4, Informative)
Sony controls and designs (with sub-contracting) all of the parts within it's hardware. The X-box has to source parts that are made by lots of different companies, who each get a profit, not on only the manufacture of the part, but also the design. This adds to the overall cost of the part.
By designing all the components (well most), Sony have bitten the bullet on the one-off design costs, which comes along with a long-term volume saving.
There is quite an overhead with working with third-party parts as well. You have to consider the cost of quality control, sending broken parts back etc. All this costs money and time, and goes against the minimal-supply stock models that most manufacturing plants follow nowadays.
The other poster was correct about the part list, although it could have been phrased in a more civilised manner! ;-) The HD etc do cost money. In later editions of the PSX (the original ones), Sony dropped the parallel port and audio/video outs to save money. These are simple hookups to parts of the PCB that already exist, but by not having connectors on the back means that you have saved money on both the raw parts themselves, and the cost associated with testing and repairing them on the production line.
Re:Only $177m? Who cares? (Score:4, Informative)
http://www.extremetech.com/image_popup/0,
GameCuBe naked:
http://www.segatech.com/gamecube/overview
If only looking at the Basic motherBoard, you can see why people think the XBox costs more than a GameCuBe.
PS2 naked:
http://www.megagames.com/ps2/images/psx2-
The thing to note aBout the PS2 is that recently Sony has managed to comBine the Emotion Engine and the Graphics Synthesizer into one chip:
http://zdnet.com.com/2100-1103-877756.html
Meaning, of course, that there's less silicon and simpler manufacturing. So in the end, while we don't know the component prices, we do think that the XBox costs more Because it has more components (including the hard drive!), a more complicated motherBoard, a more complicated CPU, and less system integration than either the PS2 or GameCuBe
Apologies for the strange text, my copy of Mozilla 1.3a happens to map 'B' to 'Manage Bookmarks', so I've got to use 'shift B' instead.
You can stop kicking the horse now... Please? (Score:5, Insightful)
As for putting Sony and Nintendo out of business, somebody really isn't in touch with the real world. First, the XBox is nearly dead last in console sales. That differential will decrease over time, but unless Sony and Nintendo do something incredibly stupid or MS incredibly brilliant, that's not likely to change in this round of the console wars. Second, Sony is a big boy. It has a diversified market beyond gaming. Their products have global reach and ideal penetration within their respected markets. Sony isn't going anywhere. Nintendo, on the other hand, has a far smaller foundation and hasn't exactly been making stellar decisions as of late. They haven't had a great console since the SNES, and the Gameboy is STILL their principle source of income. They're more likely to kill themselves off rather than be a victim of any MS "dumping" campaign.
But it's just another day in the anti-MS neighborhood, I guess...
Do you read the posts you reply to? (Score:3, Interesting)
My only point was that the XBox had recently been selling at a faster RATE than the PS2 or Gamecube. Not that anybody had caught up with the PS2's total. They have quite a headstart, after all.
All of these numbers fluctuate a great deal. Depending on which period you look at, all three have been in the lead at some point. Just for fun, here's one more link:
http://www.indiemagazine.co.uk/cgi-bin/news.cgi
Take it all with a grain of salt. I only wanted to point out that it wasn't as simple as "Sony has sold more". They started earlier than MS, so their overall numbers will always be higher. In terms of day to day sales, the three seem to be trading the lead pretty regularly.
Comment removed (Score:5, Insightful)
Re:Only $177m? Who cares? (Score:5, Informative)
In British Columbia (A Canadian Province), the stumpage fees go to the government. The government then uses the money to ensure adequate regulation of the companies. Cutblocks get re-planted, streams are protected, roads are deactivated. The problem is that in the US, they have a auction systems for timber. Private landholders auction their lumber from their private land holdings. Not only do they have to do their own re-planting (adding expense) they also require a profit. (Adding more expense)
When you look at the lumber barons who are doing the lobbying in Washington, most are from the southeastern US. They sell inferior quality wood compared to BC softwood. THeir product is also higher cost, mainly because they refused to spend the money to upgrade their mills. So they produce a low grade, high cost product (very labor intensive) that simply cannot compete in the marketplace. The BC mills spent billions upgrading their mills to be highly efficient. Now they are being penalized for their foresight.
Inevitably, whenever a US industry gets into a non-competitive situation where they can't dominate, out come the lawyers and the lobbyists. (steel) The WTO will overturn this tariff. Until then, thousands of workers and business' in British Columbia will suffer.
Did I mention that the average new house in the US is costing $3K-$5K more? They don't tell you that in Businessweek do they?
Re:Only $177m? Who cares? (Score:3, Insightful)
That being said, there are laws in the US against price dumping. Price dumping is intentionally undercutting your competition to put them out of business. I believe it is pretty hard to prove. However, in the console market, MS is certainly not undercutting b/c they are still higher priced than Nintendo and the same as Sony. Microsoft has been forced to this price point by competition.
Re: (Score:3, Insightful)
Re:Only $177m? Who cares? (Score:5, Informative)
Info here [actsofgord.com].
To sum it up, most people (at this point) believe that Sony still makes at least $50 per console sold, Nintendo is just about breaking even, and Microsoft is still losing at least $70 per console sold. (this is taking into account drops in production prices, drops in sale prices, etc).
Re:Only $177m? Who cares? (Score:5, Interesting)
Sony is not stupid. They do not sell at a loss. Sega sold at a loss and is now defunct as a hardware business. Nintendo sold the Gamecube at a slight loss but most accounts have them as about even now. Microsoft has billions it can throw down the drain, and so it sells at a loss.
Also, just a FYI, when Nintendo sells at a small loss it is almost meaningless to them, and I'll tell you why:
When a game is sold for $50, maybe $20 of it is profit. Of that, typically the console maker gets $5, and the game producer gets $15. However, Nintendo is in a special position in that it makes most of the really popular games for it's own console. Thus, if they sell at a $20 loss (which is about twice what most people estimated), but you buy the Gamecube and a single Nintendo produced game (which I guarantee you will), they've broken even, because they get all $20 of profit.
Microsoft, on the other hand, does not produce the games. Therefore, even if you are nice and say they're only losing $30 per console (which is way below most estimates), they need to sell 6 games just to break even. How many people do you know who have 6 XBox games? I don't know any. Every person I know with an XBox has less than 5 games, and typically has bought a single extra controller. Every person I know with a Gamecube has at least 5-6 games and most of them also buy 3 extra controllers due to the number of good 4 player games.
Something tells me MS is the only company really digging itself into a hole in the console business right now.
Accounting Tactic (Score:4, Interesting)
Re:Accounting Tactic (Score:2)
I assume you mean "taxbreaks on their profits."
Re:Accounting Tactic (Score:2)
Re:Accounting Tactic (Score:5, Informative)
Windows: $2.48 billion on $2.89 billion revenue
Office: $1.88 billion on $2.38 billion revenue
Servers: $519 million on $1.52 billion revenue
compare that with a loss of $177 (and microsoft lost on many other things, like CE/Mobility) and you'll see that the picture is not as bad as it looks (heh, for them, anyway)...
Slashdot is aiming for the sensationalism value again, but that's nothing new now, is it?
Re:Here's the Crime! (Score:3, Insightful)
Re:Accounting Tactic (Score:3, Insightful)
Companies may be bitching and moaning about the cost of the new licensing system for it, but not many of them are actually switching to Word Perfect or OpenOffice/StarOffice.
Office productivity suite dominance is still MSFTs cash cow, and until major companies are willing to jump ship they're going to be pretty profitable.
Is this like a movie company's "loss" (Score:5, Interesting)
Re:Is this like a movie company's "loss" (Score:3, Interesting)
Well, that's because they aren't losing money on game sales. The problem is that the game sales isn't enough to recoup the loss that the console itself generates. Also, none of this is strange because this was predicted by MS before it launched it's console. Of course, there's strong hopes that Christmas game and accessory sales will help get the XBox division out of the red.
Like that hurts them.. (Score:3, Insightful)
"Lost" (Score:3, Insightful)
I just don't think that purposefully loses should count like a standard lost. They know that this $177m they drop now, it's an expense. Not a loss. They will get it back, they are just taking credit out on their budget and getting the government to pay the interest.
Please go away. (Score:2, Interesting)
If expenses > revenue = LOSS
If expenses < revenue = PROFIT
It is that simple. This playing stupid accounting tricks is one of the reason the stockmarket went down so much. The investorers could not trust the numbers the companies where giving out.
Re:Please go away. (Score:2)
Re:"Lost" (Score:4, Insightful)
It's absurd that a company can consider a 200 million dollar loss "acceptable" and continue operating (under the same management) with plans for expansion.
This reeks of the ability to undercut the console market.
Re:Doesn't take a monopoly to invest lots of money (Score:3, Insightful)
Wrong. I'm saying the government shouldn't subsidize project losses in a profitable company. The full $177m should come out of MS's piggy banks, and I'd bet MS isn't paying much.
You're missing the bigger picture here. I'm assuming that you're referring to be able to write off losses from taxes (which is the government letting the people KEEP our money, not the government giving back money, subtle but important difference). The purpose of writing off losses is to promote economic growth.
You seem to have some need to punish success, but the purpose of government is to serve the people, INCLUDING Microsoft. If Microsoft is successful with XBox, that means more American jobs are created at the expense of jobs in Japan. This is exactly what the American government should be doing.
Re:Doesn't take a monopoly to invest lots of money (Score:5, Informative)
I object to the American populace losing ~$100M of tax money from Microsoft because Microsoft purposefully and deliberately priced the Xbox so low they knew they would have this loss.
Look at from a longer-term view. Microsoft does not intend to lose money forever. They want the books to be positive at the end of the day. The government allowing Microsoft to deduct losses now is an attempt to help Microsoft to become profitable in the future. Profitable in the future means revenues to the government. It doesn't do the government any good if they kill companies in the start-up phases before they get a chance to produce taxes.
$100M could do a lot towards fixing our schools so there aren't 55 kids in a kindergarden class. It's a start...
Two things to say about this:
1) It wouldn't do anything for the schools, since this is mostly federal taxes. Schools are locally financed (although, the feds have been sticking their nose more and more where they shouldn't lately)
2) I'd rather have Microsoft grow and create jobs for the parents of the children, rather than have the government take MORE of our money. The government has more than enough money to fix the schools. Insist on efficiency, not higher taxes.
Re:"Lost" (Score:2)
And eventually expenses are considered as a loss.
Re:"Lost" (Score:5, Insightful)
No, they need to report this as a loss. Look, the Xbox division is a gamble by the larger company to enter into the home entertainment market. As with any gamble it contains a significant amount of risk. This loss quanitifies exactly how large a risk and let's the shareholders and prospective investors have some insight into how the gamble is going. Perhaps, this whole experiment will bomb
Ooze on over to infest the next marketplace (Score:5, Interesting)
They'll chip away at Sony and Nintendo's profits until even these successful companies can't make a profit.
I wonder why they're trying to pull out of the DVR market. They say that there's no money in it. Maybe. I thinks that maybe it conflicts with their DRM agenda.
Re:Ooze on over to infest the next marketplace (Score:2, Insightful)
Yeah, I bet you must feel really sorry for poor little Sony. Big bad Microsoft has soooo much more money then Sony. Sony are just the little guy trying to make an honest buck.
Jeez, open your eyes people, Sony has much more of a monopoly over Joe Public's possesions than MS do. Sony can piss money away on a loss leader just as well as Microsoft can.
Re:Ooze on over to infest the next marketplace (Score:3, Informative)
Register has the numbers, too (Score:2)
As El Reg [theregister.co.uk] points out: "it's also clear that Microsoft is the dominant force in the PC market, and only the PC market. It can afford to shoulder big losses in the areas where it wishes to be the dominant force for a very long time. Which is fortunate, because in several cases these look suspiciously like ventures normal businesses would be forced to put a bullet into. Now."
Isn't this the exact definition of (Score:5, Insightful)
Reminds me of a line form Citizen Kane (Score:5, Funny)
You're right, I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars *next* year. You know, Mr. Thatcher, at the rate of a million dollars a year, I'll have to close this place in... 60 years.
-- Charles Foster Kane
How is this news? (Score:3, Insightful)
Re:How is this news? (Score:3, Interesting)
Re:How is this news? (Score:3, Informative)
OT: But isn't it interesting how MS really isn't doing well in anything other than Windows and Office? The
Don't get me wrong, they're still printing money with Windows and Office, and they will for the forseeable future. But MS have been pretty much losers at trying to break out from those two (incredibly large and profitable) niches. All things come to and end though (see Wang, IBM, et al) and one wonders just what's going to happen to those guys when the industry takes its next big shift.
I'm not surprised (Score:2)
I played an Xbox a couple times... I don't know. I just don't have the same fun that I do on a PS2 or Gamecube. Xbox has all this horsepower and no track to race it on.
I knew I should've got another! (Score:5, Funny)
Billy Henderson always wins, 'cause his dad's the scout leader.
Standard Oil (Score:5, Interesting)
Sony is a strong, powerful company. Nintendo is slightly less so. I think, however, that if you were to do a direct comparison, Microsoft has the ability to lose more money and stay solvent for longer than either Sony or Nintendo.
This tactic was found to be in violation of the Sherman act when applied to Standard oil. It's amazing to me that MS is able to get away with the same thing without its competitors screaming more loudly at the US government.
Re:Standard Oil (Score:3, Insightful)
What exactly are they getting away with ? Losing money isn't a crime.
There isn't one single corporation not trying to gain market shares by playing with prices, in order to increase demand for their products. Most companies also accept losses to parts of their operations in hope that the profits of others will more than make up for it. Selling X-Box at a net loss isn't a big deal if you can make up for it with the games, subscription fees etc. Gillette is practically giving away the razors, but the price on the blades borders to extortion.
I think your concern would be valid if in fact what Microsoft is doing is the de facto standard for the gaming console market; you start of selling the consoles at a huge "loss" (i.e. you write off the development costs the first years) and then you practically break even on them. Sony isn't selling PS1 at a loss now, I assure you. But the main income is the games. Microsoft gets royalties for each and every title, without them having to lift a finger. Of course they can afford to get rid of the consoles at a loss.
Re:Standard Oil (Score:3, Insightful)
If Pepsi has a bad year, they still get to rely on taco bell, pizza hut, and doritos to make it through the year. Thats not a crime, its called diversification.
Sony does the same thing, they have TVs.
This is why MS does so well (Score:2)
In the long run, the plan is to eliminate console competition, just as Sony tried to do beforehand. They'll give X-boxes away if they have to.
Microsoft Good at Business? (Score:2, Interesting)
One interesting thing in the article is that several of their divisions (mobile divices, xbox, msn) are consistently losing money.
So, is Microsoft as a company really good at business strategies? It seems to me that the "$3.5 billion profits from its operating system and software divisions in the quarter" are what keeps it afloat. I doubt any other business could fail quite as much as Microsoft and still survive.
Re:Microsoft Good at Business? (Score:3, Insightful)
And overall... (Score:2, Insightful)
Windows OS sales: Up.
Office Package: Up.
Pre-packaged units with retail machines: Up.
MSN Subscriptions: Up.
Mouse sales: Up.
Boo hoo hoo? Psh.
Ridiculous (Score:3, Insightful)
This is similar to how we report linux and windows vulnerabilities. When a windows vuln is mentioned, we bitch about the OS and its quality etc. etc.; when a linux vuln is mentioned, we downplay the potential risks, and then compliment the speed of patch/update/fix release.
Don't get me wrong--I love linux, use nothing else, and haven't for many years; this ridiculous attitude of most zealots is annoying, however.
Was this part of the plan? (Score:2)
But I'd think that Microsoft had a huge advantage - after all, they own MS-Windows and can leverage that technology within the internals of the X-Box. Furthermore, the X-Box should be a great game box, because there are so many software vendors that already produce software for Windows.
So where did Microsoft go wrong? Is the X-Box just grossly mismanaged, with a seemingly unlimited budget? Or is this something that is "expected", and therefore was part of the grand plan, and therefore will ultimately result in the glowing profits and new markets for Microsoft?
The only other thing I know is that I bought a PS2. I thought of going with the X-Box - heck, it is a sweet game console. But I stuck it out with the PS2 because of game availability - after all, the PS2 has already been proven. Not sure if I made the right choice, but I don't think I made a bad choice.
XBOX #3 in this console iteration (Score:3, Insightful)
that said, i don't this MS really cares. for a first iteration console they've done well, and you can kind of think of xbox as a testbed for future MS consoles (especially xbox live). also, they only have some 50 billion left in the bank (oh, the convenience a desktop OS provides!).
my bet is that xbox2 will come out BEFORE ps3 simply because first-mover momentum in the industry has become more important. the ps2 is hard to develop for, but the installed base is NUTS so developers flock to the ps2. MS realizes this so i wouldn't be surprised xbox2 comes out by 2004ish.
Re:XBOX #3 in this console iteration (Score:3, Insightful)
I'm not so sure about this. I think for a lot of users, it's all about past performance. When Sega came out with the Dreamcast, there was no way that I, or any of my friends were going to buy one simply because we knew that Sega never seems to meet expectations. We discussed the matter at length and we all felt that Sega didn't stand much of a chance in the market that was then dominated by Sony and Nintendo. Looking back on it, I am very glad that we decided not to buy since Sega eventually gave up on hardware and those that bought Dreamcast systems are now left out in the cold.
Sony on the other hand has a lot of connections with software developers and has been able to leverage that consistently. While you won't see all of the coolest titles on PS2, you will see a large number of great games that sell very well. Sony proved themselves when they released the first Playstation. A lot of people said they couldn't compete with Nintendo due to lack of experience. That turned out to be false. People said that they wouldn't have as many games as Nintendo. Count them. Sony dominates. Why do they dominate? I think it boils down to two things. First, they are in Japan and they know how to cater to Japanese gamers. That is a huge market and they have been very successful in it. Second, they don't tailor to younger kids. They have games suited to different age groups and I think the GameCube is lacking in games for adults. Sure they have some but from what I've seen, a lot of their games (while very good) are for younger people. Nothing at all wrong with that, and it does seem to be working for them, but they won't be able to garner the market share Sony has with that strategy.
I was excited when I first heard that MS was getting into the console market because I think they make great hardware, I like a lot of their software, and they have had some great games over the years. Motocross Madness and Age of Empires II were awesome. But one of the main reasons that I bought a PS2 was because I already had PS1 games. And guess what folks? The PS3 will be backwards compatible. How is MS going to compete with that?
I think there will be a slight advantage to MS if they get the XBox 2 out the door before the PS3 but in the long run, I don't think it will make a bit of difference. I know that when the PS3 comes out, I will buy one. I have a lot of PS1 games, a lot of PS2 games and I want to be able to play all of them on the same console. Sony knows that I'm not the only one that feels this way and unless something drastic happens (which isn't very likely), they will continue to dominate the market for years to come.
I think one thing a lot of people are forgetting is that it's not just MS vs Sony vs Nintendo in this. There are a lot of other companies involved in this. Some companies only develop for a single platform and they have a lot at stake in whether or not the platform succeeds or not. Also, Sony is no little kid on the playground that MS can bully around. They have some pretty deep pockets as well, although I don't think they need them in this case. Does anyone have any numbers as to how Sony is doing with the PS2? Everyone I know has one and has bought a lot of games so they must be making a pretty nice profit.
Market Share (Score:2)
How to make the Xbox a success (Score:2, Troll)
- Keep it open, stupid. The barrier to entry is very high for
Xbox development - the very opposite of the strategy that have made Linux
and Windows very successful amongst amateur programmers such as the founder
of this site. "Developer" Xboxes which will run all signed and unsigned
software should be plentiful and cheap - not subsidized, but rather
sold slightly above cost. This has the benefit of making Microsoft's
economy of scale pay off for thousands of potential game developers (read:
licensees) as well as hardware hackers who are looking for a cheap PC.
- Buck the content industry. Manufacturing Xboxes that defeat
region encoding and macrovision with small modifications would cause sales
to skyrocket. Likewise, since Sony has their own gaming arm and no other
RIAA/MPAA company is involved in game production, the support of the
content industry is meaningless.
- Focus on getting better games. Why does nobody develop good
games for the Xbox? For starters, Microsoft has failed to push Xboxes in
the game capital of the world, Japan. Microsoft needs to revamp their
entire strategy with regard to this country, starting with the release of
hentai games and ending with the successful ports of many PS2 games over to
the Xbox platform. The Xbox will go nowhere if there is no good software
to run on it.
- Keep manufacturing costs down. Microsoft needs to switch to AMD
or Transmeta chips, which pack more power for the buck, run cooler, and are
100% compatible with their existing software base. Also, this will allow
them to use cheaper graphics coprocessors by using a cheaper, more powerful
main CPU.
These are just a start, but if Microsoft takes these suggestions, their Xbox division will be well on its way to profitability.Re:How to make the Xbox a success (Score:5, Insightful)
This directly opposes Focus on getting better games. While one or two good games might come from Joe and Tom working in their bedrooms for 8 months straight, most of todays games are massive efforts and the cost for playing helps to ensure that only those who are truely serious will play. Don't get me wrong, I'd love to get my mitts on a dev kit cheaply, but games today are way more complex than the average person/small team can effectively deal with.
Manufacturing Xboxes that defeat region encoding and macrovision with small modifications would cause sales to skyrocket
Me thinks that your definition of "skyrocket" and M$'s definition of "skyrocket" might be orders of magnitude different. Who in the US (general game playing population) gives a flip about region encoding? Sure, beating Macrovision might be interesting and sell a few more boxes, but it's a GAME BOX, those features have no interest to GAMERS. This is especially accute concerning M$, since even as you mentioned they have made little inroads in Japan, and after all, isn't getting those hot Japanese titles months before they come here one of the primary reasons that the hardcore gamers care about region encoding.
Microsoft needs to switch to AMD or Transmeta chips, which pack more power for the buck, run cooler
Uh, which AMD chip runs cooler? Which Transmeta chip packs more power for the buck? Do you know the details for M$'s agreement with Intel to know if they could truely save money by switching. Could the other two companies afford to offer prices as low as Intel could?
Also, this will allow them to use cheaper graphics coprocessors by using a cheaper, more powerful main CPU
Isn't this bucking the trend? Aren't games systems moving towards ever more powerful graphics subsystems with modest increases in cpu performance. Sony gets away with using a ~300mhz (IIRC) cpu, I don't think that the console makers are too stressed out about raw CPU performance.
but if Microsoft takes these suggestions, their Xbox division will be well on its way to profitability
They need to produce better games than Sony and offer the user a better experience for the buck and most importantly, they need market share. The power of the last point is elegantly illustrated by Sony. PS1 was the market share (though long money losing) vehicle that allowed Sony to start cashing in once PS1 was established thus smoothing the road to much quicker profitability on PS2.
Xbox 2 (Score:5, Interesting)
1) They are said to be abandoning dependency on third party chip makers (aka Intel and nVidia). This means they will probably buy a chip company.
2) They will want their console to be the latest and greatest, so they will probably release it late but with extremely powerful and expensive hardware. If they learned their lesson this time they will release it concurrently with their main competitor, but I don't think they have. The hardware will probably be a derivative of x86, but they could abandon that for a custom chipset (although that's doubtful - they might pull a PS2 and allow backwards compatibility with Xbox 1 games). They will probably sell at a loss in the beginning (as some console companies do).
3) Who knows how much PR money they will spill into the Xbox2's budget.
I'd say profits at 2005 would be during that small window of time, those few months, between when Xbox 1 + Xbox Live! + PR Money for Xbox1 + nVidia/Intel-tax become profitable, and when Xbox 2 will be unleashed (assuming the usual 5 year cycle).
Actuallly, $177M isn't that bad (Score:4, Insightful)
I expect that they will scale back their marketing a LOT as soon as they proliferate a base number of boxes, which was their entire objective anyways.
Besides, Microsoft was already planning for first year loses [com.com] so it isn't like that this wasn't forseen.
Re:Actuallly, $177M isn't that bad (Score:3, Insightful)
Umm, math? (Score:4, Informative)
When do you think they spent most of that $500 million? That's right, the launch events, the pre-release hype, and everything leading up to that first day. (Think of all of those campus tours and giveaways and what not.)
This is talking about the losses of the box for the most recent quarter. Marketing expenditures for the XBox have decreased dramatically since then.
In fact, losses accelerated when they clipped $100 off the price tag. They've managed to do some work to decrease the cost of the box since then but nowhere near a 33% cost reduction.
You mean until they break the competition.. (Score:2)
Must be nice to flood a market, and push out all the existing competition, thats the advantage of a monopoly that has no bonuds, branching out into other markets, to do the same practices that worked so well before..
How Sad (Score:4, Insightful)
The desire among the overzelous Linuxites for the Xbox to fail is palpatable at Slashdot. Just look all the posts advising people to buy a Xbox but not buy any games. Just so MS can lose money. Its pathetic and sad.
Go ahead and buy a Xbox, waste your time and install Linux on it. But I dare you not to play Halo on it (Game of the Year and a work of art).
I dare you not to plug in your Cat-5 and fire up Unreal Championship (released Today!). Oh! and when Halo2 is released later late 2003, please do'nt go and buy it. Leave it to the serious gamers.
The Xbox is a great piece of tech. Real gamers know it. Thats why in the states its outselling the GameCube (read linked article above).
Losses are larger than 2 Billion over 5 years (Score:2)
They have since upped the loss projects to 2 billion over the first two years of the project. See:
http://www.msnbc.com/news/772001.asp?0si=-
The XBox is classic monopoly leverage at work. Use the revenue from the desktop monopoly to dump product on an emerging market and attempt to control it.
I suggest boycotting Microsoft and purchasing a GameCube or PS2.
IANAASCM - I am not an accountant, so correct me. (Score:2)
If I am wrong, please tell me. I have an oogy feeling about it.
Market Distortion (Score:5, Insightful)
As the story at the Register [theregister.co.uk] points out, any other business with ventures losing money like Xbox and MSN would kill them off as clearly bad business decisions.
A company willing and able to sustain hundreds of millions of dollars poured down a holes that are peripherally related to their core business of PC software, for years at a time, is crazy.
A company willing and able to do that against large, established business like AOL/Time Warner and Sony is downright scary.
A normal business, run to increase profits, would look at the margins on Office and Windows and simply jack up their prices. It's an iron-clad guarantee to increase profits at MSFT. There is virtually zero price elasticity of demand [mintercreek.com] for Windows and Office and MSFT management owes it to their shareholders to optimize profits by taking advantage of their stranglehold on the market.
[Note: I don't own any MSFT.]
Re:Market Distortion (Score:3, Insightful)
If they were short-sighted, sure. Microsoft is not short-sighted. They very much have a long term plan, and know that short-term sacrifices are often necessary to realize long term gain.
Microsoft believes that, long-term, Internet access and console gaming are going to be high-profit ventures. I question the first (it's commodity), but I think they're right on the second. Sony poured tons of money into the PS1 before it became profitable. And they were up against corporations like Nintendo and Sega, both of which have a much longer history in gaming and had established markets. Sega is now out of the market and Nintendo has been floundering recently. Sony's Playstation division is now hugely profitable. But by your logic they should have ditched after the first year since they were losing so much money.
Sony shareholders should be damned glad you're not senior management.
Microsoft shareholders are damn glad too.
A normal business, run to increase profits, would look at the margins on Office and Windows and simply jack up their prices
Uh... they're running at over 80% profit right now. They did just effectively jack up prices with the last licensing agreement for corporations. They are now losing business on new sales from Gateway and HP (Office or Works no longer bundled). They are facing increased downside pressure from Linux on the server, primarily due to TCO. So they should raise prices more?
I am a MSFT shareholder. And I am damn glad you aren't on the board. Frankly, I'd like to know if you have influential decisions on any other corporations, simply so I can make sure I don't own any of their stock.
Less than I thought, but still bad... (Score:5, Informative)
It's bad from a PR perspective. It's bad considering that Nintendo and Sony are now actually turning a profit on the consoles, a slim one but a profit nonetheless. Sony has managed to fit the entire Emotion Engine + CPU + sundry other parts onto a single chip, which reduces cost significantly. I'm not sure how Nintendo has pulled it off.
Xbox Live is doing better than expected, but the total numbers are pretty intimidating for MS. Last I checked (2 weeks ago), the score is:
- approximately 8 million GameCubes
- approximately 10 million XBoxen
- approximately 52 million PlayStation 2s
By those numbers, it's safe to say Sony has wrapped up this round, if you're looking for a 'winner'. 5X the market share is too compelling for game designers. The games go where the customers are.
[tangent]
I like the Xbox, even if it is a little limited in scope. There's a completely different philosophy at work at Sony's computer entertainment division that I don't think MS really understands. The Xbox is basically a kickass 3D sandbox. The PS2 is a super-flexible games machine; by this I mean that the PS2 is oriented for all kinds of games, not just 3D. The PMUs for example, can generate procedural textures on the fly. Take the oft-lamented VRAM issue. VRAM holds lots of shiny textures. But what if you are generating textures from (basically) pure math? No texture overhead. (Bryce 3D, to name a weird example, gets away almost entirely without using graphical textures.)
And now we see Sony moving fast to innovate in areas that Microsoft basically can't... namely, they've gone and asked IBM for a radically different kind of chip. MS is in no position to do this, as part of their whole pitch is the fact that it's a PC in a box, with MS's x86 programming tools.
[/tangent]
Re:Less than I thought, but still bad... (Score:3, Insightful)
Sure, MS could ask for a new chip, but they won't. As I mentioned in the original post, part of their leverage is the fact that DirectX and other specific x86-related development environments port over to the XBox so easily. Developers, developers, dev... [ducks]
Sony is cooperating with IBM on the chip design. IBM has the fab plants necessary to make Cell chips in the amounts Sony needs. IBM can leverage some of Sony's R&D. Seems like innovation to me.
Besides, they're not going to turn away from all the legwork they've done to get Intel and AMD 'Palladiumizing' their CPUs. Particularly if the next XBox is a 'convergence' device that downloads movies and other media. The temptation to crack into what is essentially a PC will be great for many users.
Article is wrong (Score:5, Informative)
Re:Article is wrong (Score:3, Informative)
I believe the XBOX was in development last year. So while nothing was being sold, they still had to pay the employees, maintain/invest in equipment, facilities, etc. and spend money on marketing, etc.
Without having a further breakdown, we can't conclude much about how much money exactly was lost on the XBOX.
Fair's Fair (Score:3, Funny)
Hell, the value of man-hours consumed by Solitaire alone must be close to the GNP of your average South American country...
GMFTatsujin
This is a common tactic (Score:3, Insightful)
Much as MS abuses the law in many many other areas, this is just a (shitty) business practice you see every day.
Re:This is a common tactic (Score:3, Insightful)
I suppose it also wouldn't penetrate your sloped forehead if I mentioned to you that Sony dropped the price of the PS2 first, would it? Of course not, it might interrupt your mindless bashing session.
Perspective (Score:4, Interesting)
I don't begrudge people their money and I'm not an anti-corporate type. MS may be evil, but not for simply making money. Still, it's good to put numbers like $2 billion in perspective. The state I live in has about 8 million people. We're facing a budget shortfall (two-year budget, compared to MS's five-year plan) of about $2-3 billion, and people are flipping out -- school funding may be cut, roads might not get fixed or else taxes are going seriously up. One can argue about the reasons -- like government spending way too much already -- and it's not really important to my point. I just wanted to give that figure a context: It's a statewide disaster. Or an investment in making a line of video game hardware successful. Take your pick.
Linux is the target .... (Score:5, Funny)
Big Deal (Score:5, Insightful)
How much do you think Microsoft lost on Internet Explorer through its first three or four versions?
How much did that end up costing Netscape?
Of course, even taking the dynamics of the bubble into consideration, Sony has much deeper pockets than Netscape ever did...
Re:Big Deal (Score:3, Interesting)
On the first three or four versions??? Internet Explorer has never made a profit, only massive massive losses. Why? Because some starry eyed futurist over at Redmond HQ got scared that maybe oneday the web would become a kickass way of building applications. They were terrified that somehow, magically, the dire NS4 codebase would turn into an easier way to write apps than Windows was.
How much did that end up costing Netscape?
It cost them everything.
Rather amusingly, Microsoft made it a self fulfilling prophecy, by destroying Netscape the Mozilla project was born, and what have the Mozilla team done? Why, only gone and built a kickass applications platform based on web technologies! The irony is too great really, if they'd just left Netscape along the old NS4 codebase would never have been scrapped in the way it was, and today we wouldn't have XUL/XBL/RDF Templates and the rest.
Of course, even taking the dynamics of the bubble into consideration, Sony has much deeper pockets than Netscape ever did...
Yes, but these guys are playing with hardware, not software, and hardware is far more expensive than software - it's a similar situation but on a larger scale.
Its working (Score:4, Interesting)
In the UK the XBOX has now put itself as the number 2 console , ahead of Nintendo's gamecube.
Xbox wins race of the also-rans
http://www.guardian.co.uk/online/comment/story/0,
Oh come on (Score:3, Insightful)
This is simply an artifact of accounting methods (Score:4, Insightful)
If I open a new comic book store, I have to pay 1st months and last months rent (2x rent), Buy shelves, inventory, register, computer, business license, phone installation, internet installation, website setup costs...
Now I start to sell comic books at the going rate. Can the comic book store up the street call foul because I'm operating in the red at this very moment? I won't have all that start up stuff paid off within the next 6 months (when a public company would have to file a financial report). I won't have it paid off in a 12 months. I'll be lucky to be operating in the black in 18-24 months. I'm not cheating, I just have a business plan that lasts longer than the SEC filing period.
=Shreak
I actually respect this... (Score:4, Insightful)
My heart is breaking. (Score:5, Funny)
Even if it did not have this huge amount of cash on hand the $3.5 billion profits from its operating system and software divisions in the quarter more than offset any loss.
I imagine billg broke into a cold sweat when he heard the news of this financial catastrophe...
t_t_b
Stop kicking the horse... Please? (Score:5, Insightful)
As for putting Sony and Nintendo out of business, somebody really isn't in touch with the real world. First, the XBox is nearly dead last in console sales. That differential will decrease over time, but unless Sony and Nintendo do something incredibly stupid or MS incredibly brilliant, that's not likely to change in this round of the console wars. Second, Sony is a big boy. It has a diversified market beyond gaming. Their products have global reach and ideal penetration within their respected markets. Sony isn't going anywhere. Nintendo, on the other hand, has a far smaller foundation and hasn't exactly been making stellar decisions as of late. They haven't had a great console since the SNES, and the Gameboy is STILL their principle source of income. They're more likely to kill themselves off rather than be a victim of any MS "dumping" campaign that everybody else also seems to be engaged in.
But it's just another day in the anti-MS neighborhood, I guess...
Anyone familiar with Cell phone pricing? (Score:3, Informative)
National Pride (Score:3, Interesting)
Microsoft is the only american player in the game.
Don't get me wrong, I'm just as concerned about M$ as the next guy, but it seems to boil down to buying my entertainment from either some big japanese company or some bigger american company. I'm no economist, but isn't it better for my nation if my money stays in my nation's economy?
Striving for relevance... (Score:3, Insightful)
"The documents also reveal that five of the seven divisions of the company are operating at a loss. "
Could you possible sensationalize this article anymore? "XBox falls from orbit, kills wife and kids!" The XBox did not lose $117 million. The Home and Entertainment Division did. Not only that, Five other divisions of Microsoft are also operating at a loss, not that those deserve mentioning.
Jeez, Taco, can't you screen these articles just a tad bit better?
Re:Selling one's soul (Score:2)
Re:Sigh.... (Score:2, Interesting)
Re:Sigh.... (Score:2)
"Kinda like the IE approach."
When did they start charging for IE?
When they started charging for my soul!!!!
Re:Sigh.... (Score:2, Interesting)
That's right - IE is included "Free" with your $299 licence for Windows XP.
Re:500lbs Gorilla ... (Score:5, Funny)
Just think, a free 2-day Serial Key to MS-Office with every BillyBurger sold!
Re:500lbs Gorilla ... (Score:3, Funny)
Re:The reason... (Score:2, Funny)
That's odd...
The $300 iMac I bought off eBay plays iTunes. :)
Re:The reason... (Score:3, Interesting)
Yes. Of course. That's the reason. Everybody that bought an XBox hacked it to run Linux instead of buying games.
Maybe they lost money because:
1) Couldn't break into key Japanese market
2) Expensive, generic hardware that lends itself to piracy (far more likely than, say, Linux use)
3) Ugly machine, shitty controllers (this stuff counts in the console market)
4) They had to pay to get third party developers (ie/ Bungie)
5) They wanted to combine PCs and consoles (in a fashion) but failed miserably on both counts
Obviously, they went in knowing they would lose money. They are losing money in other sectors too (ie/ MSN).