Grampa Simpson
Banned
XBOX has always been and always will be money pit. It's not there to generate a profit. It's there for mindshare. Its there in case Windows and Office become even more of a B2B thing, and all but disappear from the home.
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Analyst: Xbox "generates" $2 billion in losses for MS. Hides it with patent royalties
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XBOX has always been and always will be money pit. It's not there to generate a profit. It's there for mindshare. Its there in case Windows and Office become even more of a B2B thing, and all but disappear from the home.
You can take Pachter's analysis with a crystal of salt the size of the grand canyon!
I'm not surprised. They still have a lot of money though, especially with the recent acquisition of Nokia.
Here's an excerpt from Microsofts FY13 financials (year end 30 June 2013)
If we remove $2bn (android patent revenue) from the revenue total we're down to $8.165bn revenue minus costs of $9.317bn we have a loss of $1.152bn.
I'm not sure where he's getting the $2.5bn loss of which $2bn he attributes to xbox.
From ZDnet
So not $2bn but only $1.6bn
There are so many holes in these analyst figures that they don't add up.
If I were a cynical person this is FUD about the current direction of Microsoft, doubting the strategies of Steve Ballmer and hoping to oust the current powers at Microsoft. On another article I saw that he recommends Ballmer resigns from the board and they buy back his $12bn in stock.
There is clearly a war about who is going to be the next CEO. It seems Ballmer and his allies wants Stephen Elop (MS, ex Nokia CEO) and other investors want John Mulally (CEO Ford). These articles are meant to pressure the board to change direction and right the failing company even if it mean sacrificing parts of the business that build brand awareness and are positioned for future growth.
Ask Sony before they went spending crazy with the ps3 or even fucking Nintendo for that matter.
Heck by the look of it, you'll probably be able to ask Valve soon.
Nightengale
Member
Sony is more likely to kill some of electronics business than they are to kill Playstation/SCE.
Unlike other parts of Sony's electronics family where they've lost a lot of market share, differentiator, and value proposition, taken away by guys like Samsung, Sony is in the position now where they're seeing stuff like their movies, music and gaming division as major differentiators, and core to what will differentiate Sony from other electronics guys.
Maybe a different CEO would have a different view, but right now, Kaz and his board are putting their weight behind the 'core divisions' of Sony, and Playstation is one of them.
I guess all the money that would have made the Xbox division profitable is being used to money-hat 3rd party developers and publishers. I heard they paid upwards of $500 million to get the Titanfall exclusive! And this is series that will eventually go multiplatform when their deal expires. Who knows how much they paid other 3rd parties as well!
Dude, he's an analyst from Nomura. He's not some disgruntled investor or shareholder activist. I'm not saying he's not wrong but he's not likely to put his professional reputation on the line issuing some politically motivated FUD that holds no water. That would be career suicide for someone in his position.
With all the big expenditures gearing up for X1 I believe it. There was a time when the 360 was keeping the division afloat, so I imagine these investment costs will pay off over the next couple of years.
Wait, from where are you getting the $500m investment figure?
Additionally, you're not accounting for the technology work Rare did with Bungie, Turn10, NXE, or the avatars. And you're also not considering the IPs bought (even if they're not being used now, they're worth something).
You mean Alan Mulally.
Wait, from where are you getting the $500m investment figure?
Additionally, you're not accounting for the technology work Rare did with Bungie, Turn10, NXE, or the avatars. And you're also not considering the IPs bought (even if they're not being used now, they're worth something).
You mean Alan Mulally.
-tetsuo-
Unlimited Capacity
What? Analyst do it all the time lol
RurouniZel
Asks questions so Ezalc doesn't have to
While I have a hard time believing MS is losing $2 billion per year, I wouldn't be surprised at all that it's a venture that is losing money overall, what with all the R&D, Marketing, Money-Hatting, etc.
That's exactly why I think it's safe to say Rare as a whole is a money-burner.
w1ck3dn1nj4
Member
Yup ironic isnt it? Google does not charge licencing fees for android, but MS does. Its also funny when I think how this free OS from Google will end up costing OEMS almost as much as the traditional MS licensing route. Its downright disgusting to see MS using patent trolling tactics to strongarm and extort money from manufacturers.
Patents are meant to be used as protection mechanisms to safeguard and encourage innovation, but no, MS is buying them up in bulk as ammunition to control and stifle competition instead. Case in point here being the threat and growth of free open software which calls into question the survival of their legacy as timeless tollkeepers. Nope, theres no such thing as free, according to this parasite company, because Fuck You Pay Me its an insult to our long held tradition of collecting a cut from everybody.
Normally I wouldnt care how companies leech one another, but when such actions have the knock on effect of raising costs and prices for me as a consumer, thats when I get livid. The patent system is clearly a failure and its kind of suspicious why theres not more scrutiny on how companies like MS are abusing the system at the expense of the consumer.
Banjo-Kazooie
Member
Stop making numbers up. Nowhere has it been reported that was the figure spent, so please stop spreading numbers that are pulled out of you know where, it only serves to misinform. With that being said, the only number that has been predicted was 50mil for the rumored year times exclusivity which has sinse changed, so maybe you are getting confused. It's obviously more than 50 now, but 500?
PanicFreak
Member
You heard wrong.
You're thinking of jokes like Pachter, we're talking people with jobs outside the gaming media circlejerk.
Brofist
Member
Ah yeah I had meant MS Gaming and not as a whole.
AranhaHunter
Banned
No one knows for sure how much MS makes from android patents. Sony, Moto, for example do not pay patents to MS whereas Samsung, HTC, and LG do. This is just an educated guess on the author's part.
He is writing that Microsoft should sell 2 consumer facing businesses and buy back all of Steve Ballmer's stock and you think that is an unbiased view?
He is laying out how he sees the current position of Microsoft and how they could be better highlighting the current problems as he sees them while clearly slanting his view towards Alan Mulally as the new CEO (I think I called him John last time because in my mind Alan Mulally = cricketer)
Analysts do this kind of thing all the time, giving opinions is their job. Anyone can read the data but they make money by interpreting it and making arguments with it.
I am pretty sure Google charges fees for putting their apps on Android (playstore, gmail etc) which is pretty much every decent Android phone on the market.
IMO, this is a very suspect article. The writer and source use very vague terms throughout the entire piece, and there are no timeframes to backup any of the allegations:
Is that 2 years? Is that 5 years? If it was for the entire Xbox 360 generation I would be concerned, but if that figure includes the XB1 R&D costs then I'm not as worried. This is why context matters.
Nothing screams confidence in your allegations than the use of the word 'probably'.
I am not an insider, so I don't know the truth about this. Microsoft could very well be losing ridiculous somes of money. At the very least, MS is able to subsidize a risky push into the console space with royalties from their competitors. That's not the worst position to be in.
Is that 2 years? Is that 5 years? If it was for the entire Xbox 360 generation I would be concerned, but if that figure includes the XB1 R&D costs then I'm not as worried. This is why context matters.
Nothing screams confidence in your allegations than the use of the word 'probably'.
I am not an insider, so I don't know the truth about this. Microsoft could very well be losing ridiculous somes of money. At the very least, MS is able to subsidize a risky push into the console space with royalties from their competitors. That's not the worst position to be in.
Microsoft was about as fiscally responsible as possible with the Xbox 360. Xbox Live is basically pure profit, and has been for quite some time. It's incredibly successful as well. The Xbox 360 hasn't had a real price drop in years, and each unit has been selling in the green for years now. It doesn't hurt that it has sold extremely well to boot.
Granted, research and development for consoles does cost a lot of money, and Microsoft has certainly expanded its internal studios - and has clearly pursued some other games investments. But 2 billion dollars in the hole? I'm just not seeing it. How does Entertainment & Devices turn a profit with Windows Phone and Surface all burning a shit ton of money, on top of the Xbox burning a shit ton of money? Surface alone lost $900 million in one quarter. $2 billion annually isn't enough to subsidize all of that to the point of turning a profit.
You are a liar.
I am sure the losses are really heavy if you include everything. Like doing the NFL deal as 1 big expenditure 500 million. I am sure titan fall is now costing upwards of 100-150 million now. Then you start adding in R&D for the hardware like the reported 100 million for the controller. Then the advertising money they will spend to launch the system which I would assume will be more than kinect's 500 million. That is why the only way to get rid of the division would be to give it away. No other companies like Samsung would want any part of all those kind of losses to make it back over time when they can sell phones at 300% mark up.
Saying it's biased implies he's suggesting they make those moves for reasons other than believing they would be in the best interest of MS shareholders.
TekGryphon
Banned
Unless I see direct evidence to the contrary, I'm assuming that these revenue figures don't count Live subscriptions and put those into a different revenue stream.
Maybe R&D was quite expensive. Didn't the spend 100 million on designing teh controller alone?
D Bo Chops
Member
The key phrase in the original post is "probably loosing", which means this is pure speculatoin by some "analyst". They might take a hit with XboxOne but the 360 dominated profits with all the Live/online revenue they pulled in.
You are probably right actually! Instead of being included under Entertainment and Devices division, it could be lumped under the services umbrella where things like Azure are.
wow....
Ludicrous Speed
Banned
Yeah this sounds like pure speculation. Cue I want tosee the receipts jif
Manmademan
Member
Has Microsoft ever released subscription numbers for live gold? I can't imagine them ever doing so.
Fox Mulder
Member
surely there's better ways to back out than looking incompetent.
Really? Like when? Don't say Pachter...
Typo. I meant to say $50 million. And I'm not making numbers up, if my memory serves me right Patcher is the one who mentioned the 50 million - so that the game doesn't come out on PS4. Which is in-line with what they paid Rockstar for the GTA stuff.
lol
Agent Gibbs
Member
Some body please include this in the main post so we can stop all the whining of "who's this guy/random analyst/no idea what he's talking about"
It would likely be a 9 figure number for the titanfall exclusivity.
Oh god I totally failed at reading comprehension there. I re-read and found the sentence where it specifically says $2bil loss attributable to Xbox. Thanks for the correction.
AranhaHunter
Banned
The article also makes a lot of assumptions, i.e. MS makes $5 per unit sold and the patent covers 70% of the market. Estimates of MS making $5 - $15 per unit and MS having nearly every major OEM under a license.
I have read that Samsung, HTC, LG, and others are under the license with MS whereas Sony and Moto are not - and therefore do not have to pay MS patent fees. I do not understand how exactly that works, why do some OEMs have to pay MS and not others? If Moto, owned by Google, does not have to pay, why doesn't google use those patents that prevents Moto from paying MS to get those other OEMs off the hook?
Regardless, MS wants more money out of android, their consortium - which ironically includes Sony - is suing google and Android OEMs over the nortel patents.
I think the key takeaway from these articles is that a lot of MS's big investors have little confidence in the electronic products. Surface, Xbox and zero confidence in Bing. I think they believe these products don't bring enough dollars to the table and are weighing down the profitability of their other key businesses. Office & Windows, I can honestly see Xbox being spun off into it's own company. Whether or not they would survive without the big MS dollars is another story but even so I can see other investors stepping up to fill the void.
There is zero doubt that Xbox has grown into a big brand but it is also understood why MS's investors would want to get rid of the product. I would say Bing would go before it but so much of Bing is integrated into Xbox that I would go as far as to say the xbone would be a different product were it not for Bing.
There is zero doubt that Xbox has grown into a big brand but it is also understood why MS's investors would want to get rid of the product. I would say Bing would go before it but so much of Bing is integrated into Xbox that I would go as far as to say the xbone would be a different product were it not for Bing.
I don't completely buy this report. Microsoft sees pure profit from plenty of avenues for Xbox.
....Launching a year early a system that had plenty of problems to the point that people had to buy multiple (as in a half a dozen) systems to even operate is not exactly responsible.
Especially since it cost them quite a bit to fix that glaring mistake.
The way they handled their sutdios in the big restructuration is also not pointing at them knowing what the hell they were doing.
How do you know that?
It's most certainly not pure profit since it should cover the cost of maintenance of the servers (despite the mp being p2p there still need to be servers after all). Then again with them monetizing everything and putting ads everywhere...
Still considering that they redesigned the whole interface multiple times and had to probably redo the infrastructure since the 1rst time they did it (seriously I don't see them having everything in place when they 1rst made it).
I doubt it is that much of a moneymaker.
I'll gladly take hard data to prove me wrong though (and not middle school maths showing that Xnumbers of people x price of subscription = shitload of money, if you don't have the cost you can't have any estimate of the profitability of the thing)
Japan aside (where let's face it's most certainly a money pit), it has indeed sold fairly well at a fixed price point.
However the device most certainly was sold at a loss but overall it can't be a loss all things considered.
That's logical.
It have closed other studios too...
For the last year Skype most certainly isn't a money pit or they wouldn't have bought it (did it already pay for itself though...I have no idea).
There's also plenty of other devices with the MSFT brand name too, considering the fudging of the numbers of the E&D division they might as well take all the revenue garnered by patent in it..
Some companies like Sony and Moto have sufficient patent portfolios of their own that no one can really strongarm them into payments. They are probably in a cross-licensing deal. Either that or MS just hasn't got around to them yet.
Sony and Moto have around 30% of the Android market, hence the 70%. MS hasn't gone after them because they have similarly huge patent pools that MS likely infringes on.
Sony haven't gone after MS because, well, why go to bat for your competition when you can realize an extra few bucks per competitively-priced Xperia? Google hasn't because everyone knows exactly who wins in all-out patent war: the firms litigating the case on either side, full stop.
WhiskeyKnight
Member
I don't get it.
If the Xbox brand keeps losing money why does Microsoft keep releasing new ones?
If the Xbox brand keeps losing money why does Microsoft keep releasing new ones?
uh, so only 1.6 billion? You do realize that analysts know more than we do? In that 400 million difference you have Skype, Windows Phone, etc, etc... it is quite possible that Xbox lost extra 400million there but other parts pulled through.
Nevertheless, I dont see why we as customers should care if they lost some money or not... Microsoft is overall doing good, despite the slip with Windows 8.
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