4 ms·

Nobody seems to remember just how much money Microsoft and Sony have lost on their consoles. - Through 2005, the Xbox gaming division had lost over $4 billion

by clobber 14y ago

Nobody seems to remember just how much money Microsoft and Sony have lost on their consoles. - Through 2005, the Xbox gaming division had lost over $4 billion [1] - Microsoft took a charge of $1 billion dollars on its June 2007 income statement to account for the cost of replacing bricked Xbox 360s [1] - Xbox 360 and PS3 losses total $8 billion [2] Luckily for Microsoft, they've had the cash to burn to strong-arm their way into the market. The units sold is nothing too impressive when you account for losses. 1. http://en.wikipedia.org/wiki/Xbox_360#Timeline_2 http://en.wikipedia.org/wiki/Xbox_360#Timeline_2 2. http://www.vg247.com/2013/01/07/xbox-360-and-ps3-losses-total-8-billion-ex-sony-employee-paints-grim-future/ http://www.vg247.com/2013/01/07/xbox-360-and-ps3-losses-tota...

redblacktree 14y ago
Isn't this how the console market works? You lose money on console units, but make it back in licensing? Or are you saying that, taking licensing into account, the Xbox still lost money for Microsoft? 2005 and 2007 were a long time ago. Do you know of more recent numbers?
- ghjm 14y ago
  The overall division really did lose $4 billion that year. In 2011 they made $1.3 billion. Overall, I think they're about at break-even for the program since inception.
  - jussij 14y ago
    But in the years that followed that same division has made over $3 billion just in Halo game sales alone.
    - ghjm 14y ago
      They also lost more money in years prior. I think they're in the black since inception, but not by much.
- clobber 14y ago
  I'm saying they're still losing money. The "lose money on units, make some back on software" model doesn't make economic sense anymore. The second link has recent numbers.
  - chc 14y ago
    > I'm saying they're still losing money. In what world? The Xbox has been turning a profit for most of its life. AFAIK it lost money its first couple of years (primarily due to the fact it was rushed to market), and since then it has been largely propping up Microsoft's entertainment division, which otherwise would be bleeding like mad. (The division lost money last year not because the Xbox was unprofitable, but because it wasn't profitable enough to cover Windows Phone's tab as well as its own.)
    - rhizome 14y ago
      AFAIK it lost money its first couple of years (primarily due to the fact it was rushed to market), That, and the fact that nobody in Japan wanted to buy one.
      - chc 14y ago
        That too, but it wouldn't have been as much of a problem if they hadn't needed to spend billions cleaning up their mess. They were already taking a loss on the system, then they had to take yet another loss because the systems didn't work.
        rhizome 14y ago
        RROD was much less of a problem than .jp sales, and much more easily fixed.
        sk5t 14y ago
        Y'know, it always seemed intuitively obvious to me that Japanese consumers would not be very receptive to any non-Japan-designed console unless it absolutely smashed the domestic offerings. One needn't chalk this up to xenophobia, but consider the advantage enjoyed by US domestic pickup truck manufacturers...
- muyuu 14y ago
  It's the way it works now, definitely. In almost any other market this would be considered dumping and anticompetitive practices, it sets an incredibly high barrier of entry to any potential newcomer.
adventured 14y ago
This is a very moot issue at this point. The $850+ million the Live division is now minting every quarter guarantees a strong profit base going forward for the Xbox. Their strategy worked brilliantly, and none of their competition has such a strong competitive advantage. Does it matter that it was expensive to acquire all those Live subscribers? No it does not. They made a huge bet on the future, and they had obscene amounts of cash available to do so. While Sony has spent the last few years trying not to go bankrupt, Microsoft is sitting on nearly $70 billion in cash. While Sony can't make a profit, Microsoft is generating $6+ billion per quarter. Microsoft can afford to make long term bets; Sony cannot easily replicate that approach. If the PS4 isn't successful, Sony is done in the console business. Given Microsoft's failure in tablets and smart phones, you can bet they'll spend whatever it takes to keep the XBox relevant in the living room. The latest Nintendo console is going to be a flop (on par with the GameCube), leaving only the PS4 as real competition in traditional console gaming. Microsoft will widen its Live advantage over Sony & Nintendo accordingly, becoming one of the few subscriber kings (along with Apple, Amazon, Netflix).
- klodolph 14y ago
  Yes, we've seen it before: I think every time a console flopped it took a company down with it (at least out of the console business). The same thing happened with synthesizers back in the day. But I have doubts. Even if the PS4 / WiiU fail and Microsoft does "spend whatever it takes to keep the XBox relevant in the living room", will that be enough? Microsoft wasn't shy about spending money on Zune, Windows phones, or tablets -- but the Zune is gone, the Windows phones have low single-digit market penetration, and the latest tablets don't seem to be doing better (we'll see, but it's not looking good). Reasons I'm doubtful about the future of the Xbox: 1. It's not competing against the PS4. It's competing against Steam boxes, Android consoles, phones, and tablets. Not direct competition, but competition for our attention. 2. Indie games were big in 2012, and 2013 is looking bigger. Microsoft's platforms (other than Windows) are looking less palatable, especially for newer studios. Larger studios still fail as often as they ever did, but they're not getting replaced. The AAA titles will keep coming, but they're competing with scrappy folk who license the Unity and Unreal engines for prices that are very friendly... until you want to release your game for the Xbox. 3. With every generation of consoles, it becomes more difficult and expensive to produce content that leverages the new technology. It was a long time before people figured out how to produce content that really made the PS3 look better than the PS2, although much of that was due to architectural decisions. It may be that the survival of the Xbox depends more on what the market looks like in 2015 rather than 2014 or 2013. What will Apple have released by 2015? How many indie studios will have edged the behemoths out of the industry? 4. New generations of consoles no longer provide additional media functions that consumers desire. Two generations ago you got a pretty fine CD player with your PS1, last generation you got a DVD player with your PS2, and this generation you can play Blu-Rays or stream content from Netflix/Hulu. What's left? We have a PS3, but much of its justification was as a way to play Blu-Rays, Netflix, and Hulu. On a side note, every time I've stopped by Ground Kontrol (the local arcade) recently, it's been packed. Even with a cover charge, even when most people have work tomorrow, even when the machines cost 25¢ per play, the doorman was turning people away because the building was at its occupancy limit.

by clobber 14y ago

redblacktree 14y ago

Isn't this how the console market works? You lose money on console units, but make it back in licensing? Or are you saying that, taking licensing into account, the Xbox still lost money for Microsoft? 2005 and 2007 were a long time ago. Do you know of more recent numbers?

ghjm 14y ago
The overall division really did lose $4 billion that year. In 2011 they made $1.3 billion. Overall, I think they're about at break-even for the program since inception.
- jussij 14y ago
  But in the years that followed that same division has made over $3 billion just in Halo game sales alone.
  - ghjm 14y ago
    They also lost more money in years prior. I think they're in the black since inception, but not by much.
clobber 14y ago
I'm saying they're still losing money. The "lose money on units, make some back on software" model doesn't make economic sense anymore. The second link has recent numbers.
- chc 14y ago
  > I'm saying they're still losing money. In what world? The Xbox has been turning a profit for most of its life. AFAIK it lost money its first couple of years (primarily due to the fact it was rushed to market), and since then it has been largely propping up Microsoft's entertainment division, which otherwise would be bleeding like mad. (The division lost money last year not because the Xbox was unprofitable, but because it wasn't profitable enough to cover Windows Phone's tab as well as its own.)
  - rhizome 14y ago
    AFAIK it lost money its first couple of years (primarily due to the fact it was rushed to market), That, and the fact that nobody in Japan wanted to buy one.
    - chc 14y ago
      That too, but it wouldn't have been as much of a problem if they hadn't needed to spend billions cleaning up their mess. They were already taking a loss on the system, then they had to take yet another loss because the systems didn't work.
      - rhizome 14y ago
        RROD was much less of a problem than .jp sales, and much more easily fixed.
        sk5t 14y ago
        Y'know, it always seemed intuitively obvious to me that Japanese consumers would not be very receptive to any non-Japan-designed console unless it absolutely smashed the domestic offerings. One needn't chalk this up to xenophobia, but consider the advantage enjoyed by US domestic pickup truck manufacturers...
muyuu 14y ago
It's the way it works now, definitely. In almost any other market this would be considered dumping and anticompetitive practices, it sets an incredibly high barrier of entry to any potential newcomer.

adventured 14y ago

This is a very moot issue at this point. The $850+ million the Live division is now minting every quarter guarantees a strong profit base going forward for the Xbox. Their strategy worked brilliantly, and none of their competition has such a strong competitive advantage. Does it matter that it was expensive to acquire all those Live subscribers? No it does not. They made a huge bet on the future, and they had obscene amounts of cash available to do so. While Sony has spent the last few years trying not to go bankrupt, Microsoft is sitting on nearly $70 billion in cash. While Sony can't make a profit, Microsoft is generating $6+ billion per quarter. Microsoft can afford to make long term bets; Sony cannot easily replicate that approach. If the PS4 isn't successful, Sony is done in the console business. Given Microsoft's failure in tablets and smart phones, you can bet they'll spend whatever it takes to keep the XBox relevant in the living room. The latest Nintendo console is going to be a flop (on par with the GameCube), leaving only the PS4 as real competition in traditional console gaming. Microsoft will widen its Live advantage over Sony & Nintendo accordingly, becoming one of the few subscriber kings (along with Apple, Amazon, Netflix).

klodolph 14y ago
Yes, we've seen it before: I think every time a console flopped it took a company down with it (at least out of the console business). The same thing happened with synthesizers back in the day. But I have doubts. Even if the PS4 / WiiU fail and Microsoft does "spend whatever it takes to keep the XBox relevant in the living room", will that be enough? Microsoft wasn't shy about spending money on Zune, Windows phones, or tablets -- but the Zune is gone, the Windows phones have low single-digit market penetration, and the latest tablets don't seem to be doing better (we'll see, but it's not looking good). Reasons I'm doubtful about the future of the Xbox: 1. It's not competing against the PS4. It's competing against Steam boxes, Android consoles, phones, and tablets. Not direct competition, but competition for our attention. 2. Indie games were big in 2012, and 2013 is looking bigger. Microsoft's platforms (other than Windows) are looking less palatable, especially for newer studios. Larger studios still fail as often as they ever did, but they're not getting replaced. The AAA titles will keep coming, but they're competing with scrappy folk who license the Unity and Unreal engines for prices that are very friendly... until you want to release your game for the Xbox. 3. With every generation of consoles, it becomes more difficult and expensive to produce content that leverages the new technology. It was a long time before people figured out how to produce content that really made the PS3 look better than the PS2, although much of that was due to architectural decisions. It may be that the survival of the Xbox depends more on what the market looks like in 2015 rather than 2014 or 2013. What will Apple have released by 2015? How many indie studios will have edged the behemoths out of the industry? 4. New generations of consoles no longer provide additional media functions that consumers desire. Two generations ago you got a pretty fine CD player with your PS1, last generation you got a DVD player with your PS2, and this generation you can play Blu-Rays or stream content from Netflix/Hulu. What's left? We have a PS3, but much of its justification was as a way to play Blu-Rays, Netflix, and Hulu. On a side note, every time I've stopped by Ground Kontrol (the local arcade) recently, it's been packed. Even with a cover charge, even when most people have work tomorrow, even when the machines cost 25¢ per play, the doorman was turning people away because the building was at its occupancy limit.