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Analyst: Xbox "generates" $2 billion in losses for MS. Hides it with patent royalties
- Thread starter ekim
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I would be utterly shocked if they thought that was a good idea.
Aquamarine
Member
They can manufacture a crisis-like situation because of the massive costs involved with developing a new platform.
It's probably true that Xbox has "generated" $2 billion in losses for Microsoft...but ValueAct can take a one-time event and harp on it to grow resentment for an underperforming division.
I don't doubt the shareholder will eventually get their way. If Xbox One underperforms, skepticism will skyrocket and there will be a growing trend to cut Xbox out of the Microsoft umbrella. Even if Xbox One performs per expectations, it's still a segment that, over the years, has generated a loss for the company. We may find it on the chopping block with a new CEO regardless.
Even if it had a production like Alias? In any case, it's just about building exclusive characters/IP that get people to a cross-platform service.
Mermandala
Member
Rick Sherlund is probably CBOAT. nedtu seez smoe handrittin analus for comferm/azian
I think you're underestimating how expensive that would be to do, and the likelihood it would flop. There's nothing about the Perfect Dark IP that makes me think it could become a hit TV series.
The Xbox division is getting little enough return on investment compared to other parts of the company as it is.
It was just an example of monetizing an IP that builds cross-platform audiences.
As for the expense of the show, assuming it builds an audience like any other show, there are ads, syndication, episode/season sales, etc. Additionally, there would likely be cross-pollination of the audiences, so the game could drive show viewership and vice versa.
Eh what? Is this revisionist history or something? HD-DVD never caught on. Blue ray is nearly the standard now (Regular DVD still exists...).
Streaming vs. physical sales is an entirely different animal and I hear you can still buy vinyl if you are into it, so lets at least try to stay focused here shall we?
uncledonnie
Banned
Did we get any concrete confirmation of the claims in this article? Seems like speculation.
It's not going to be subsidised. I don't believe that for a second. It might be sold at a meagre profit - much like Google's Nexus line - but Valve are not going to sell their Steam Machines below cost, and Valve's partners definitely aren't going to sell their machines below cost.
Now, what is potentially interesting is that certain companies (Intel and AMD being two big possibilities) might create Steam Machine specific parts that eschew certain features in favour of lower component costs. That might allow Steam Machines to come in at lower prices than self builds at the expense of some flexibility.
And Valve never said they were entering the 'console market'. Remember, Valve thinks that the console market is going away sometime in the near future. They think that Apple/Amazon/Google/whoever. are going to effectively kill the traditional console market.
They said that their goal with SteamOS is to deliver a more streamlined, console-like experience, which is a completely different thing.
Edit - Although, it seems that you're arguing semantics here. To me, consoles mean locked down ecosystems with little to no room for hardware customisability. Steam Machines aren't going to be locked down and they are going to be customisable, which is the exact opposite of the Xbox One/PS4.
Are you talking Sony and MS as a whole or just their console divisions?
Their insurance arm does pretty well, bringing in about 60+% of Sony's operating profit. Their electronics divisions have just lost money, but I think that had a lot to do with PS3 mismanagement wiping out everything.
Giant Panda
Member
Yeah the Sony and Microsoft console doom and gloom are coming from different angles. The rest of Microsoft does really well, so really the Xbox has been more of a drag on the rest of the company. So they might decide to just get rid of the Xbox division. For Sony, the rest of the company does pretty poorly (outside insurance) and could drag down the PlayStation division.
Most new TV shows fail.
Isn't this true of any entertainment medium?
NullPointer
Member
Yeah I'm sure all this TV stuff is going to work out just great for MS.
Just great.
Yup.
TV audiences have clamored to interact more with content and advertising and that makes them almost natural gamers. Gamers of course have asked for decades now for all of their game worlds to become TV shows.
Finally everybody can get what they've always wanted.
Just great.
Yup.
TV audiences have clamored to interact more with content and advertising and that makes them almost natural gamers. Gamers of course have asked for decades now for all of their game worlds to become TV shows.
Finally everybody can get what they've always wanted.
It does seem like a console to me. I do understand your point but let me ask another question. Can you play PC games on this Steam Machine without Steam? Because if not...it's locked down.
Yes, you can. You can install Windows on it if you want to, or use a completely different Linux distro. It's up to you.
I understand that but it comes with SteamOS and in that sense it's locked down.
What? How is that locked down? Is my Macbook locked down because it comes preloaded with OSX, even though I can install Windows or Linux on it in less than 20 minutes? Is my Nexus 4 locked down because it comes with stock Android, even though I can install any number of ROMs or even other operating systems (Ubuntu, for example) on it? (Hint: The answer to both of these questions is 'no'.)
You're not making any sense.
Woo-Fu
Banned
You mean in the sense it isn't locked down at all?
....
TimeEffect
Member
So wait...how bad is Sony doing? I have to imagine its worse.
doing what?
OK maybe locked down is the wrong wording for what I'm trying to say. But what I mean is that within the SteamOS environment software will be inclusive to that. Unless you install some other OS whether via dual boot or reformatting. So not lock down but closed software environment.
Brown Intruder
Banned
dont say things like that... analysts are generally ridiculed on the gaming forums unless they "predict" something that is in-tune with the community.
then their words are taken "as-is", and no one even bothers to question it
iLLmaticV3
Member
I honestly wouldn't be surprised. Quite a bit of failed hardware launches lately on their part.
I'm still failing to see your point.
Can you install another OS on the PS4? Or the Xbox One? Can you install whatever software you like on the PS4/Xbox One? No? Then they're locked down.
Can you install another OS on Steam Machines? Any software you want, including stuff like EA's Origin and Ubisoft's whatever it's called? Yes, and yes. So it's open.
SteamOS is going to be open sourced, too, so developers can release their own modified versions of SteamOS, if they want. Never gonna see that happen with a console.
$2 billion per year? I don't by it.
$2 billion this year? Yeah, I could see that:
XB1 R&D
Kinect 2 R&D
NFL deal
moneyhatting devs
manufacturing millions of XB1 with no sales to offset the costs yet
Easy to see they could be $2 billion in the red for the Xbox division so far this year.
But their past financials show the Entertainment/Devices divison being in the black since 2008. Android didn't really start to take off until 2009/2010, and MS didn't strike licensing agreements until 2010. Their deal with Samsung wasn't struck until Sept 2011.
So these Android licensing revenues couldn't have begun counting for much until at least 2010.
But 2013? Yeah, I can see that they could hide a lot of the XB1 initial costs by hiding them behind $2 billion in Android licensing fees.
$2 billion this year? Yeah, I could see that:
XB1 R&D
Kinect 2 R&D
NFL deal
moneyhatting devs
manufacturing millions of XB1 with no sales to offset the costs yet
Easy to see they could be $2 billion in the red for the Xbox division so far this year.
But their past financials show the Entertainment/Devices divison being in the black since 2008. Android didn't really start to take off until 2009/2010, and MS didn't strike licensing agreements until 2010. Their deal with Samsung wasn't struck until Sept 2011.
So these Android licensing revenues couldn't have begun counting for much until at least 2010.
But 2013? Yeah, I can see that they could hide a lot of the XB1 initial costs by hiding them behind $2 billion in Android licensing fees.
You are failing to see my point because you don't want to see it. What I'm suggesting really isn't that hard to grasp. The box (Valve's offering) is a PC you can install whatever on it...that is understood. The SteamOS is open so you can develop your own stuff but the content which will come to it will have to be developed with it in mind. I can't take software I purchased on Origin and play it on SteamOS. In that sense it is locked.
I don't want to argue the point of what is open and what is not. I just don't buy Valve's explanation of what it is and what their goal is. IMO, it's a console....not in the traditional sense of the word but it is. It's as much of a console as OUYA or Gamestick or Nvidia's weird handheld thing.
ITT - people apparently knowing better than one of the most qualified tech industry analysts, because, well, they just really like playing on their Xbox.
pretty done
Member
Moneyhatting EA to keep Titanfall off PS4 must have cost a lot.
They scared.
They scared.
Blu ray beat HD-DVD, but DVD has remained the dominant "standard" format. Sony thought Bluray would overtake dvds in 3 years, which it has never come close to doing. So yeah, it didn't "catch on" the way Sony envisioned.
I'm not saying that bluray is dead, it will eventually overtake the DVD. It just won't ever reach the type of market penetration that the other formats have enjoyed because streaming media is the new darling format of the masses. Blu Ray will remain the format of choice for gaming consoles and movie enthusiast.
.
Really hope they get a good enough foothold this generation that the higher ups decide to stay in the game. Even if I've been disappointed with microsoft for the past several years compared to their awesome beginning of last generation, I think a sony/nintendo only console market would be a bad thing for the industry, and maybe even speed things along toward making this the last generation.
Prince Vultan
Banned
Where did Sony outline this plan? I'd be interested in reading up on their vision for the format. Got any links?
And Blu-Ray must be doing well enough compared to DVD seeing as in every store that stocks movies where I live (Most notably the HMV store), Blu-Rays currently have just as much shelf space as DVDs do (Bargain sections being obviously mostly DVDs still). However you slice it, it's been a hugely successful format.
It's hard to say this without sounding like a Nintendo fanboy, but revelations like this really call into question how much financial sense it makes to get into the game console business the way Sony and Microsoft have. Anybody have that spreadsheet comparing the three companies' profits between 1983 and 2011?
Tallshortman
Member
Windows and enterprise services. They play pretty fast and loose with their money.
It is quite successful but it hasn't replaced DVD yet, which was the original intent, like when DVD replaced VHS.
bleachrude
Banned
Except that his numbers don't make sense at all. Again, to those defending this guy's pedigree, can you explain how ANDROID was covering the losses for Xbox when the big patent deal with Samsung was signed in 2011? So please explain to this MS fanboy how this makes sense? Especially in say 2008-2010 when Android market share was still under Iphone's market share? I can see the 2 billion making sense if you are talking over the entirety of the xbox life or even in years when there is a launch (since MS would rack up a huge cost) but say in 2009? Android sure as hell wasn't covering for Xbox then
I couldn't find the thread where much of this was discussed a long time ago. However here's what a little bit of googling kicked up
Blu-ray to outsell DVD by 2011, says Sony Pictures
The reality of 2011 was that Bluray was ~22% of DVD sales.
There is no dedicated "Xbox division" in Microsoft's earnings reports, so we don't really know how profitable their whole Xbox endeavour is. That's what this analyst is saying: That they are covering up the poor overall performance of the Xbox with other, unrelated, revenue streams in the same business division.
Well his pedigree is what gives him "street cred" as it was. This guy obviously has insights and conversations with people we don't so therefore i'll take his word for it over "xdude" or whoever. It's simple as that.
It also explains why these shareholders have been public with wanting to get rid of xbox division. It's not a money maker, it's a waste that's taking away time, money, and energy from their core business.
bleachrude
Banned
Except that his numbers make no sense and as yet nobody has actually answered the question. How can Android patents be covering for Xbox if Android patents didn't kick in until 2011? This isn't exactly that is unknown.
Yes, I understand he has insight based on his background but this seems just plain weird I'm wondering more about the original interview now since as someone mentioned earlier in the thread, serious business reports don't use "fun faces" pics in serious articles. Sure, fluff pieces about how a company tries to incorporate well-being into the daily job, you have these type of photos but this type of article?
Hmm...I wonder if it could mean "opportunity cost" as a lost. Aka the money spent on Xbox could've been spent on a different portfolio and thus generated more of a profit....THAT could make sense.
Let me put it this way:
Nintendo has gaming business.
Sony has TV, blu-ray, gaming, computers, mobile, movie, music, insurance, electronics generally etc. businesses.
These two companies are basically worth the same (Sony's market cap is $17 billion and Nintendo $15,5 billion) although the other one tries to offer everything and the other concentrates on one business.
For comparison, Microsoft as a company is worth $313 billion dollars. Also, just for comparison Samsung who is competing in many of the same product categories as Sony is considered worth $190 billion dollars.
Sony's credit rating might be lowered to junk status by Moody's after latest financial results: http://www.bizjournals.com/losangeles/news/2013/11/04/sonys-credit-rating-might-be.html
Fitch did this earlier: http://www.kotaku.com.au/2012/11/sonys-credit-rating-slashed-to-junk-status/
What is credit rating: http://bobbyfinance.com/2013/04/17/what-is-credit-rating/ (basically means it's harder to get loans, or having to pay higher interest rates on any loans they get in the future.)
They recently cut their projected earnings by 40%, so not great.
Ingueferroque
Banned
R&D, marketing, moneyhats...
And rightfully so, neglecting the importance of building an extensive 1st party lineup of AAA games will give these sort of results.
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