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[EdgeXL]

So since he says during the 360 days only, it’s not profitable now?

He specifically mentioned that as an example. He did not say whether they are profitable now or not.

 

[Synth]

If not MS some other company would be here to compete.

Also to be fair, the period of biggest Playstation dominance (PS2) wasn't bad for gamers at all.

It's not at all safe to assume that if MS wasn't in the console space to contest Sony that another company would be willing to jump in and start their own OG Xbox balance sheet to potentially chip at PlayStation. The most likely players to enter the fray would be companies that are already so service entrenched (Amazon, Google, Apple) that they'd likely represent everything most dislike about MS only amplified. MS joined at a time when hardware performing and physical media was mandatory, and both they and Sony have slowly been edging away from it towards a more digitial-focused, hardware agnostic ecosystem... the prospective replacement would be starting from their wildly successful digital ecosystems.

Also, its easy to confuse things being "good for gamers" during Sony's dominance, with "good for PS2 gamers" simply because the venn diagram would overlap so much at the time. If you're on the winning side, then you often don't shitty competitive moves (how many of us that owned a NES concerned themselves with the stunts Nintendo was pulling back then?), or how things could potentially be better. Sony only stopped signing off on huge moneyhat deals on stuff like Tomb Raider because they became so dominant it was almost as effective as being an exclusive anyway.

They were rejecting games from being 2D and not sufficiently showing off their consoles capabilities. The generation largely passed with online being crippled despite Sega's efforts to get the ball rolling as far back as 1998, and MS demonstrating how it could/should be done in 2002. The fact that the PS3's online situation occurred after nearly an entire generation of being able to look at MS' notes makes me wonder just how bad the situation could be if those notes weren't there to take (Nintendo is probably a good example, as they clearly don't pay attention). We'd probably even have some bullshit memory form cards still, ala Vita. The PS2 gen could have gone a lot better overall, and PS3 gen potentially far, far worse.

 

[LordBaztion]

I thought the long term plan for MS in the console business was to get third party manufacturers to make the boxes and they run the ecosystem like PCs and phones but, at this point, it seems that game streaming is going to happen sooner.

 

[Sony]

Until the day game streaming hits the same latency/input lag as playing a game locally, it is not to be taken seriously. (imo)

 

[Wedzi]

I thought the long term plan for MS in the console business was to get third party manufacturers to make the boxes and they run the ecosystem like PCs and phones but, at this point, it seems that game streaming is going to happen sooner.

Out of the big four (including Steam on this one) Microsoft is the one that actually has the resources and server farms to make that happen in a reliable way.

Wouldn't be surprised with Game Pass, the Minecraft Better Together update, more emphasis on Xbox Live and MAUs, that the future of Xbox is being the service that powers your gaming not the creators of the games (or maybe even the hardware, though that'll probably still live on) you play it on.

 

[border]

I thought the long term plan for MS in the console business was to get third party manufacturers to make the boxes and they run the ecosystem like PCs and phones but, at this point, it seems that game streaming is going to happen sooner.

3rd party OEMs cannot compete in the console space. Margins on hardware are too thin. The first party pretty much has to make their own consoles because the software/service royalties are necessary to offset manufacturing and R&D costs.

I am kinda curious why Microsoft doesn't seem too interested in streaming games though. I guess the presumption is that we're years and years of infrastructure upgrades away from it being really viable.

 

[avaya]

The ROCE of the business is probably very poor. You need massive scale to make a decent return and that scale has only ever been achieved by PlayStation...whose position remains precarious.

Nintendo's model is different but just as risky.

MS is a giant corporation which can fund this endeavour for a long time. However there are no blank cheques.

Platform ownership is a shit business truth be told.

 

[Lady Gaia]

3rd party OEMs cannot compete in the console space. Margins on hardware are too thin. The first party pretty much has to make their own consoles because the software/service royalties are necessary to offset manufacturing and R&D costs.

Absolutely. The last serious attempt to change the equation was 3DO, and that stumbled for exactly this reason. Selling a console at a profit prices it out of the market. Cutting those margins removes the incentive to produce the box in the first place.

I don’t pretend to have insight into the operating profitability of Xbox as a whole, but it’s definitely worth noting how consistently it is obfuscated. Either it’s bundled into some larger business, paired with a profitable product Microsoft likes to downplay (that was Office for Mac’s role at one point), or simply talked about obliquely (like when discussing selling devices above cost while completely ignoring overhead, one-time R&D costs, and similar.)

I have no doubt that there have been profitable quarters. Whether any one generation has been profitable when all costs are accounted for is another question, as is whether Xbox has broken into profitability considering everything since inception. Sunk costs aren’t entirely ignored. Either you have a path to profitability, or you can consider writing off the loss. Given how positive Xbox is from a branding standpoint I can’t imagine the latter is especially attractive.

 

[Liabe Brave]

So we can all operate from the facts, here are the actual numbers Microsoft have reported every year since Xbox started. All figures are operating income, and I note what other business groups are lumped into it (since Xbox is never by itself). Note that these official Microsoft financials don't precisely line up to Psychotext's previously-quoted post. I'm not sure the reason for mismatch, but I've linked all the Microsoft reports so you can check them yourself.

Note that when a platform is listed without further explanation--e.g. "Xbox 360" or "Windows"--the figures include all associated royalties, subscriptions, accessories, etc. Only if segments are specified is anything left out.

Second, "consumer software" refers to educational and productivity titles.

Finally, the original Microsoft Surface platform is listed under its revised PixelSense name, in order to avoid confusion with the new Surface line of devices.

[b]Year ending
Jun 30,      Reported         Including[/b]
[url="https://www.microsoft.com/investor/reports/ar03/alt/item_seven.htm"]2002[/url]         -$  874m         Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar03/alt/item_seven.htm"]2003[/url]         -$  924m         Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2004[/url]         -$1.337b         Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2005[/url]         -$  485m         Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2006[/url]         -$1.262b         Xbox/Xbox 360, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2007[/url]         -$1.898b         Xbox 360, PC/online games, Zune, consumer software and hardware, TV platform, mobile and embedded devices
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2008[/url]          $  497m         Xbox 360, PC/online games, Zune, PixelSense, consumer software and hardware, TV platform, mobile and embedded devices, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2009[/url]          $  169m         Xbox 360, PC/online games, Zune, PixelSense, consumer software and hardware, TV platform, mobile and embedded devices, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2010[/url]          $  517m         Xbox 360, PC/online games, Zune, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2011[/url]          $1.257b         Xbox 360, PC/online games, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2012[/url]          $  364m         Xbox 360, PC/online games, Surface, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Skype, Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar13/financial-review/discussion-analysis/index.html"]2013[/url]          $  848m         Xbox 360, PC/online games, Surface, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Skype, Android patent licensing
[url="https://www.sec.gov/Archives/edgar/data/789019/000119312516662209/d187868d10k.htm#tx187868_10"]2014[/url]          $5.605b         Xbox 360/Xbox One, PC software and accessories, Surface, Windows Phone, Windows, Bing, MSN ads, all patent licensing 
[url="https://www.sec.gov/Archives/edgar/data/789019/000119312516662209/d187868d10k.htm#tx187868_10"]2015[/url]          $5.095b         Xbox 360/Xbox One, PC software and accessories, Surface, Windows Phone, Windows, Bing, MSN ads, all patent licensing
[url="https://www.microsoft.com/investor/reports/ar16/index.html"]2016[/url]          $6.142b         Xbox 360/Xbox One, Mojang, PC software and accessories, Surface, Windows Phone, Windows, Bing, MSN ads, all patent licensing
[url="https://www.last10k.com/sec-filings/msft/0001564590-17-014900.htm#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F"]2017[/url]          $8.288b         Xbox 360/Xbox One, Mojang, PC software and accessories, Surface, Windows Phone, Windows, Bing, MSN ads, all patent licensing

Note the primary takeaway: Microsoft have never provided operating income or gross margin figures for Xbox by itself, much less net profit numbers for the division. And recently there's much more consolidation of business segments, leading to even less clarity. Only Microsoft employees could know for sure how profitable the Xbox division is, whether all-time or in a specific period.

This means, paradoxically, that Paul Thurrott is in a much better position to know the facts than GAF members or even investors. He might have sources who really know, unlike the average person. Of course, his sources could also be mistaken or inventing things, so his statements are second-hand and should be evaluated cautiously.

Looking over what has been released, my personal estimation is that Xbox probably was profitable in FY 2011, 2012, and maybe 2013. These are the peak Kinect years, before Xbox One came along and ruined the party. Of course, I can't know if I'm right; but I do think this is the most plausible conclusion that can be drawn, given the narrowness of margins every year else, and the patterns of other divisions grouped with Xbox.


EDITED with new sources to regularize all figures as operating income.

 

[Humdinger]

Note the primary takeaway: Microsoft have never provided operating income or gross margin figures for Xbox by itself, much less net profit numbers for the division. And recently there's much more consolidation of business segments, leading to even less clarity. Only Microsoft employees could know for sure how profitable the Xbox division is, whether all-time or in a specific period.

This means, paradoxically, that Paul Thurrott is in a much better position to know the facts than GAF members or even investors. He might have sources who really know, unlike the average person. Of course, his sources could also be mistaken or inventing things, so his statements are second-hand and should be evaluated cautiously.

Looking over what has been released, my personal estimation is that Xbox probably was profitable in FY 2011, 2012, and maybe 2013. These are the peak Kinect years, before Xbox One came along and ruined the party. Of course, I can't know if I'm right; but I do think this is the most plausible conclusion that can be drawn, given the narrowness of margins every year else, and the patterns of other divisions grouped with Xbox.

Interesting, thanks for compiling this. I'd have to be a financial guy and understand MS's business much better than I do to sort this all out.

So the takeaway is we really don't know, because MS has never provided net profit numbers for the gaming division, much less for Xbox.

 

[Metfanant]

Interesting, thanks for compiling this. I'd have to be a financial guy and understand MS's business much better than I do to sort this all out.

So the takeaway is we really don't know, because MS has never provided net profit numbers for the gaming division, much less for Xbox.

i always thought this was pretty common knowledge, and i've always been under the impression that this was done to not necessarily HIDE xbox performance, but to soften the blow so to speak...

 

[jayu26]

So we can all operate from the facts, here are the actual numbers Microsoft have reported every year since Xbox started. I note what type of number it is, and then what other business groups are lumped into it (since Xbox is never by itself). Note that these official Microsoft financials don't precisely line up to Psychotext's previously-quoted post. I'm not sure the reason for mismatch, but I've linked all the Microsoft reports so you can check them yourself.

Note that when a platform is listed without further explanation--e.g. "Xbox 360" or "Windows"--the figures include all associated royalties, subscriptions, accessories, etc. Only if segments are specified is anything left out.

Second, "consumer software" refers to educational and productivity titles.

Finally, the original Microsoft Surface platform is listed under its revised PixelSense name, in order to avoid confusion with the new Surface line of devices.

[b]Year ending
Jun 30,      Reported     Type                Including[/b]
[url="https://www.microsoft.com/investor/reports/ar03/alt/item_seven.htm"]2002[/url]        -$   874m     Operating Income    Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar03/alt/item_seven.htm"]2003[/url]        -$   924m     Operating Income    Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2004[/url]        -$ 1.337b     Operating Income    Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2005[/url]        -$   485m     Operating Income    Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2006[/url]        -$ 1.262b     Operating Income    Xbox/Xbox 360, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2007[/url]        -$ 1.898b     Operating Income    Xbox 360, PC/online games, Zune, consumer software and hardware, TV platform, mobile and embedded devices
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2008[/url]         $   497m     Operating Income    Xbox 360, PC/online games, Zune, PixelSense, consumer software and hardware, TV platform, mobile and embedded devices, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2009[/url]         $   169m     Operating Income    Xbox 360, PC/online games, Zune, PixelSense, consumer software and hardware, TV platform, mobile and embedded devices, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2010[/url]         $   517m     Operating Income    Xbox 360, PC/online games, Zune, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2011[/url]         $ 1.257b     Operating Income    Xbox 360, PC/online games, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2012[/url]         $   364m     Operating Income    Xbox 360, PC/online games, Surface, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Skype, Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar13/financial-review/discussion-analysis/index.html"]2013[/url]         $   848m     Operating Income    Xbox 360, PC/online games, Surface, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Skype, Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar15/index.html#discussion-analysis"]2014[/url]         $19.724b     Gross Margin        Xbox 360/Xbox One, OEM and consumer Windows, consumer Office and Office 365, Windows Store, Bing, MS retail stores, Windows Phone (not hardware), Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar15/index.html#discussion-analysis"]2015[/url]         $17.680b     Gross Margin        Xbox 360/Xbox One, OEM and consumer Windows, consumer Office and Office 365, Windows Store, Bing, MS retail stores, Windows Phone (not hardware), Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar16/index.html"]2016[/url]         $ 6.142b     Operating Income    Xbox 360/Xbox One, Mojang, PC software and accessories, Surface, Windows Phone, Windows, Bing, MSN ads, all patent licensing
[url="https://www.last10k.com/sec-filings/msft/0001564590-17-014900.htm#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F"]2017[/url]         $ 8.288b     Operating Income    Xbox 360/Xbox One, Mojang, PC software and accessories, Surface, Windows Phone, Windows, Bing, MSN ads, all patent licensing

Note the primary takeaway: Microsoft have never provided operating income or gross margin figures for Xbox by itself, much less net profit numbers for the division. And recently there's much more consolidation of business segments, leading to even less clarity. Only Microsoft employees could know for sure how profitable the Xbox division is, whether all-time or in a specific period.

This means, paradoxically, that Paul Thurrott is in a much better position to know the facts than GAF members or even investors. He might have sources who really know, unlike the average person. Of course, his sources could also be mistaken or inventing things, so his statements are second-hand and should be evaluated cautiously.

Looking over what has been released, my personal estimation is that Xbox probably was profitable in FY 2011, 2012, and maybe 2013. These are the peak Kinect years, before Xbox One came along and ruined the party. Of course, I can't know if I'm right; but I do think this is the most plausible conclusion that can be drawn, given the narrowness of margins every year else, and the patterns of other divisions grouped with Xbox.

Good stuff. But all this consolidation really kills any chance of doing analysis on just Xbox numbers.

 

[Lady Gaia]

Good stuff. But all this consolidation really kills any chance of doing analysis on just Xbox numbers.

That’s definitely not an accident, but it’s difficult to draw specific conclusions from that fact alone. The business is competitive enough that you don’t want to reveal too much about your financials, and R&D investments come in cycles that make simple analysis misleading enough that you wouldn’t want armchair analysts trying their hand at it.

 

[FinaruDensetsu]

I mean even if Thurrott is right, he could only possibly be right in saying that in the aggregate, Xbox has come out in the red (i.e. add up all the profits and losses from the first year Xbox OG released until now).

But what kind of company looks at profit that way? Whatever losses you had in previous years is written off and it's only the current year that matters.

 

[Liabe Brave]

I mean even if Thurrott is right, he could only possibly be right in saying that in the aggregate, Xbox has come out in the red (i.e. add up all the profits and losses from the first year Xbox OG released until now).

No, you're incorrect. As I showed above, he could be right that no specific Xbox generation has ever been profitable, or that no year has ever been profitable, or even that no period of any length has ever been profitable.

We don't have the facts to rule out any of those possibilities.

 

[Lady Gaia]

But what kind of company looks at profit that way? Whatever losses you had in previous years is written off and it's only the current year that matters.

That’s simply not true if you have a cyclical cost structure that mandates heavy R&D up front for a console launch you then need to offset through the rest of the generation. If you can’t make a full generation profitable it doesn’t matter whether the latter years are profitable on their own. There’s always another launch coming up to consider as part of the overall profitability of the business.

 

[legend166]

The funny thing is Microsoft actually nailed the streaming boom with Xbox 360 apps and for some idiotic reason thought cable TV was still a thing worth aiming for with Xbox One instead of doubling down on streaming. I guess a hangover from their original 90s idea and Kinect/Profiling advert dream.

The problem is they can't compete against <$100 streaming devices, or as I said earlier, the fact that practically every TV sold from now on will having streaming capabilities built in.

The problem Microsoft is facing is their hardware sales are becoming very soft in the US, which is far and away their best market. It looks like they sold <100k in July and unless the Xbox One X can provide them with a significant long term boost, the XBox One line is going to end up selling what, maybe 60% of the 360? It gets hard to maintain a profit making marketplace when your user base is shrinking.

 

[Iced Arcade]

I'll take it with a grain of salt since it's Paul Thurrott. He's been salty towards MS since just a bit into Windows Phone 7s launch (look through his site).

 

[bitbydeath]

I'll take it with a grain of salt since it's Paul Thurrott. He's been salty towards MS since just a bit into Windows Phone 7s launch (look through his site).

Must be a long game since he's been a Microsoft journalist for the past 20-30 years.

Giving Windows Phones a bad rap is certainly his undoing, that thing is praised everywhere.

 

[Ozzy Onya A2Z]

So we can all operate from the facts, here are the actual numbers Microsoft have reported every year since Xbox started. I note what type of number it is, and then what other business groups are lumped into it (since Xbox is never by itself). Note that these official Microsoft financials don't precisely line up to Psychotext's previously-quoted post. I'm not sure the reason for mismatch, but I've linked all the Microsoft reports so you can check them yourself.

Note that when a platform is listed without further explanation--e.g. "Xbox 360" or "Windows"--the figures include all associated royalties, subscriptions, accessories, etc. Only if segments are specified is anything left out.

Second, "consumer software" refers to educational and productivity titles.

Finally, the original Microsoft Surface platform is listed under its revised PixelSense name, in order to avoid confusion with the new Surface line of devices.

[b]Year ending
Jun 30,      Reported     Type                Including[/b]
[url="https://www.microsoft.com/investor/reports/ar03/alt/item_seven.htm"]2002[/url]        -$   874m     Operating Income    Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar03/alt/item_seven.htm"]2003[/url]        -$   924m     Operating Income    Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2004[/url]        -$ 1.337b     Operating Income    Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2005[/url]        -$   485m     Operating Income    Xbox, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar06/staticversion/10k_fr_dis.html"]2006[/url]        -$ 1.262b     Operating Income    Xbox/Xbox 360, PC/online games, consumer software and hardware, TV platform
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2007[/url]        -$ 1.898b     Operating Income    Xbox 360, PC/online games, Zune, consumer software and hardware, TV platform, mobile and embedded devices
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2008[/url]         $   497m     Operating Income    Xbox 360, PC/online games, Zune, PixelSense, consumer software and hardware, TV platform, mobile and embedded devices, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar09/10k_fr_dis.html"]2009[/url]         $   169m     Operating Income    Xbox 360, PC/online games, Zune, PixelSense, consumer software and hardware, TV platform, mobile and embedded devices, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2010[/url]         $   517m     Operating Income    Xbox 360, PC/online games, Zune, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, retail sales of Office and Windows
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2011[/url]         $ 1.257b     Operating Income    Xbox 360, PC/online games, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar12/financial-review/discussion-analysis/index.html"]2012[/url]         $   364m     Operating Income    Xbox 360, PC/online games, Surface, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Skype, Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar13/financial-review/discussion-analysis/index.html"]2013[/url]         $   848m     Operating Income    Xbox 360, PC/online games, Surface, consumer software and hardware, TV platform, mobile and embedded devices, Windows Phone, Skype, Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar15/index.html#discussion-analysis"]2014[/url]         $19.724b     Gross Margin        Xbox 360/Xbox One, OEM and consumer Windows, consumer Office and Office 365, Windows Store, Bing, MS retail stores, Windows Phone (not hardware), Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar15/index.html#discussion-analysis"]2015[/url]         $17.680b     Gross Margin        Xbox 360/Xbox One, OEM and consumer Windows, consumer Office and Office 365, Windows Store, Bing, MS retail stores, Windows Phone (not hardware), Android patent licensing
[url="https://www.microsoft.com/investor/reports/ar16/index.html"]2016[/url]         $ 6.142b     Operating Income    Xbox 360/Xbox One, Mojang, PC software and accessories, Surface, Windows Phone, Windows, Bing, MSN ads, all patent licensing
[url="https://www.last10k.com/sec-filings/msft/0001564590-17-014900.htm#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F"]2017[/url]         $ 8.288b     Operating Income    Xbox 360/Xbox One, Mojang, PC software and accessories, Surface, Windows Phone, Windows, Bing, MSN ads, all patent licensing

Note the primary takeaway: Microsoft have never provided operating income or gross margin figures for Xbox by itself, much less net profit numbers for the division. And recently there's much more consolidation of business segments, leading to even less clarity. Only Microsoft employees could know for sure how profitable the Xbox division is, whether all-time or in a specific period.

This means, paradoxically, that Paul Thurrott is in a much better position to know the facts than GAF members or even investors. He might have sources who really know, unlike the average person. Of course, his sources could also be mistaken or inventing things, so his statements are second-hand and should be evaluated cautiously.

Looking over what has been released, my personal estimation is that Xbox probably was profitable in FY 2011, 2012, and maybe 2013. These are the peak Kinect years, before Xbox One came along and ruined the party. Of course, I can't know if I'm right; but I do think this is the most plausible conclusion that can be drawn, given the narrowness of margins every year else, and the patterns of other divisions grouped with Xbox.

Nice to see real numbers, breakdowns and sources, thanks. The reason they lump divisions together and muddy financial reporting is tax minimisation, not some sinister stealth prop up Xbox numbers agenda.

49 million active XBL users per month and 9 billion gaming revenue per year, yeah they have plenty of room to make profit and play around with various projects until the cows come home. Of course Xbox is here to stay. Nadella literally keeps stating exactly that.

 

[Banjo-Kazooie]

Jez is tweeting about it now too: https://twitter.com/jezcorden/status/897273549022482432

 

[Uno Venova]

Jez is tweeting about it now too: https://twitter.com/jezcorden/status/897273549022482432

It’s kinda funny that this article was out for a while but the Gaf thread is what got people tweeting about it, lol.

 

[Herp Derpington]

It's hard not to root for Microsoft failing and going the fuck away.

According to who, you? Speak for yourself. I enjoy their products and want them to stick around.

I'll take it with a grain of salt since it's Paul Thurrott. He's been salty towards MS since just a bit into Windows Phone 7s launch (look through his site).

He covers them. He's more knowledgeable about the workings of that company than anyone here could ever hope to be. He has every right to question what Microsoft does; he's not a shill for them.

 

[Lady Gaia]

The reason they lump divisions together and muddy financial reporting is tax minimisation

Can you cite how exactly that would work? These are just arbitrary organizational divisions within the same corporation, not distinct corporate entities. It changes how they report finances to the public including investors, but it shouldn't have any bearing on reporting for tax purposes.

 

[Ozzy Onya A2Z]

Can you cite how exactly that would work? These are just arbitrary organizational divisions within the same corporation, not distinct corporate entities. It changes how they report finances to the public including investors, but it shouldn't have any bearing on reporting for tax purposes.

Below is a little about one of the leading accounting staffers from last year trying to blow the lid on international tax avoidance/minimalisation. Governments around the world, especially Australia, are now reigning in tax avoidance and working to balance tax minimalisation. As for the specifics of Xbox globally if I could tell you I'd be earning $25M a year in accounting. *ask an corporate auditor/accountant.

http://www.abc.net.au/news/2016-07-...misation-costs-governments-1-trillion/7587092

The big four accounting firms have been branded as aggressive, unethical, and accused of "perpetrating the greatest tax crimes in history" by a leading corporate tax authority.

At least $US1 trillion in tax revenue is lost worldwide, and $50 billion in Australia, as a result of aggressive tax minimisation schemes established by the four giant firms who audit the books of nearly all the world's major companies, said George Rozvany, a 32-year veteran of the corporate tax industry.

The guy making these claims literally is the source from the inside:

Mr Rozvany spent 32 years working in the corporate tax field, for Ernst and Young, Coopers and Lybrand (now PwC) and the defunct Arthur Anderson.

He was head of tax for chemical giant ICI in Australia as well as for the world's largest insurer, Allianz.

How about this tax avoidance report from 2015, just a couple of billion missing for Microsoft Aus:
http://www.smh.com.au/business/the-economy/apple-google-microsoft-cop-tax-audit-20150408-1mgsma.html

And this tax avoidance report from 2017, oops another 3Billion from MS, Google, Apple in Aus:
http://www.dailytelegraph.com.au/ne...n/news-story/1e1e55e203e91aa59ef6f144973da41a

 

[Iced Arcade]

Must be a long game since he's been a Microsoft journalist for the past 20-30 years.

Giving Windows Phones a bad rap is certainly his undoing, that thing is praised everywhere.

Yeah I don't know what you just said.

If it doesn't fit your agenda then don't but all I said was check out his site (I've followed him for years)

 

[wapplew]

Jez is tweeting about it now too: https://twitter.com/jezcorden/status/897273549022482432

Only trust Jez when it's come to Xbox news.

 

[NintendosBooger]

Also to be fair, the period of biggest Playstation dominance (PS2) wasn't bad for gamers at all.

That's because Sony entered that gen as a wary sophomore cognizant they'd be dealing with a more prepared Sega and Nintendo along with a newcomer representing the biggest tech company at the time and whom they had always considered their endgame rival. There was no time to get cute, and despite their initial success it was too late at the point to leverage it into practices contrary to consumer interest as policies had been cemented by that point. We saw how the real Sony behaved in the suceeding generation after Sega exited the race and Nintendo/Microsoft were no longer deemed threats.

 

[Beer Monkey]

That's because Sony entered that gen as a wary sophomore knowing they'd be contending against a more prepared Sega and Nintendo along with a newcomer representing the biggest tech company at the time and whom they had always considered their endgame rival. We saw how the real Sony behaved in the suceeding generation after Sega exited the race and Nintendo/Microsoft were no longer deemed threats.

Not to mention that the PS2 controlling 80% of the global market resulted in a $600 launch PS3 ($727 in today's dollars).

 

[JusDoIt]

That's because Sony entered that gen as a wary sophomore knowing they'd be contending against a more prepared Sega and Nintendo along with a newcomer representing the biggest tech company at the time and whom they had always considered their endgame rival. We saw how the real Sony behaved in the suceeding generation after Sega exited the race and Nintendo/Microsoft were no longer deemed threats.

Why is the PS3 era "the real Sony"? Have the other three generations of PlayStation been the fake Sony?

 

[Replicant]

That'd explain their reduced expenditures with Xbox One.

 

[Uno Venova]

#TheRealSony

 

[bitbydeath]

Can the real slim Sony please stand up.

 

[IndoAssassin]

In the end who cares whether one company or multiple companies are making games, people will still play them. I don't get what the big deal is?

Sure I'm more heavily invested in MS eco than in Sony's or Nintendo's eco. But if MS bows out, I still have options to play elsewhere. I spend more of my time plaýing new games than revisiting old ones anyways.

I just prefer having Nintendo and one other company around, than 3, don't care who it is either, as I'm tired of having multiple consoles, while 2 collect dust waiting for the next exclusive.

And I have a hard time of selling the seldom used consoles because the next exclusive I'm interested in is coming.

 

[NintendosBooger]

Why is the PS3 era "the real Sony"? Have the other three generations of PlayStation been the fake Sony?

Yup. Competition has kept them in check. No more rhetoric of getting an extra job or mentions of a handheld ghetto. My only regret is witnessing how spectacularly they failed in that market so I'll never see a $99 3DS any time soon.

 

[JusDoIt]

Yup. Competition has kept them in check. No more rhetoric of getting an extra job or mentions of a handheld ghetto. My only regret is witnessing how spectacularly they failed in that market so I'll never see a $99 3DS any time soon.

I respect you doubling down on your absurd position.

 

[Beer Monkey]

I respect you doubling down on your absurd position.

There's some truth to it along with the hyperbole.

 

[ethomaz]

Jez is tweeting about it now too: https://twitter.com/jezcorden/status/897273549022482432

Jez being Jez... shocked.

 

[Diprosalic]

I said this for a while now and people laughed at me

 

[demigod]

Jez being Jez... shocked.

What did he say about scorpio again?

 

[Mexen]

With their current line-up but still in the business, you would think MS was actually surviving on past profits.

 

[Shin]

What did he say about scorpio again?

I forgot but some of his information was wrong yet he kept insisting it was true, so yeah.
Also we know they are working on their next-gen console (as per Phil Pencer interview).

 

[harSon]

Good stuff. But all this consolidation really kills any chance of doing analysis on just Xbox numbers.

Doesn't Microsofts EDD contain stuff like Windows Phone, Zune and the Surface over the years?

 

[Gitaroo]

I am surprised those xbl sub did not make them a lot of money to even cover the lost.

 

[Chobel]

Jez is tweeting about it now too: https://twitter.com/jezcorden/status/897273549022482432

Insiders wars. Whom to believe?

 

[Colbert]

...

You may update update your chart with some numbers for net income "Other Personal Computing" which includes the whole Gaming/Xbox business for

2014 with a value of $5.605b
2015 with a value of $5.095b

Sources:
https://www.last10k.com/sec-filings/msft/0001564590-17-014900.htm#fullReport
https://www.last10k.com/sec-filings/msft/0001193125-16-662209.htm#fullReport

Thank you for taking the time to gather the info. As said those numbers are consolidated numbers containing unknown variables from other product lines which makes it hard to confine the Xbox share of it. The only possible way to actual evaluate this is to read the damn annual reports.

After reading the Annual reports from between 2015 & 2017 - the whole text and not just the numbers - I cannot share the conclusion Xbox was never profitable at all as I did not find any hint on that in the remarks made.

I also think it it is on Thurrot to prove his claim with some details other than his vague statements and not the other way around like some suggested here earlier in the comments.

Kthxbai

 

[TheQuickBrownFox]

Insiders wars. Whom to believe?

Here is the problem, knowing how much these companies profit shift globally (Ozzy Onya A2Z alluded to it), unless their insider is the upper echelon of snr mgnt I doubt anyone would know.

Cindy from accounts certainly wouldn't.

Apple is King of it. Hell, they amazingly can keep a $30billion 'off the books' using shell companies and creative accounting.

Last I recall MS use a 'hub' method. Eg MS AUS buys software from Singapore MS at next to Cost and then resells it at that price effectively earning little to no profit.

 

[TBiddy]

I highly doubt that anyone on this forum is capable of actually coming to a conclusion on this, even if they were given access to detailed numbers from Microsoft.

Whether or not Thurrott is right or wrong, noone knows. There are likely not that many people who actually knows if Xbox is profitable or not.

 

[hydrophilic attack]

Insiders wars. Whom to believe?

Probably not Jez. He is clearly full of shit. This is an article he wrote recently

https://m.windowscentral.com/xbox-m...able-business-more-first-party-investment-way

This article contains the following gem:

Sony might be leading the race in terms of console units sold, but there are tens of millions more Xbox Live subscribers out there, in a world where platform engagement is becoming increasingly important.

I really doubt this. Of course, since MS doesn't share subscription numbers, we can't be sure. But we can look at numbers to see how likely it is. Sony has 26.4 PS+ subscribers out of 70 million MAU total, as of June 2017

If XBLG were to have "tens of millions" of more subscribers, it would have to have in excess of 40 million subscribers. As I said we don't have XBLG, but we know that total XBL MAU was 53 million in July 2017. So for Jez's "tens of millions of subscribers more" statement to be true, 75% of Xbox MAU need to be gold subscribers. Back in 2010, 50% of Live users paid for Gold. Since then, XBL has added users on PC and mobile that don't have to subscribe to play online. Having had gold adoption rates increase from 50% to 75% during that time sounds highly unlikely.

TLDR: Jez has clearly been full of shit or ignorant with secret MS numbers he has written about in the recent past and shouldn't be trusted

 

[TBiddy]

TLDR: Jez has clearly been full of shit or ignorant with secret MS numbers he has written about in the recent past and shouldn't be trusted

Or it could be a mistake. Mistakes happens. You could write to him and inform him about it, instead of going all ad hominem on him.