SinCityAssassin
Member
He meant the gaming division as a whole, since he refers to it as such a few times in the quote.
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Tech journalist and Microsoft insider Paul Thurrott: "Xbox has never been profitable"
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He meant the gaming division as a whole, since he refers to it as such a few times in the quote.
Yes, this is exactly what I was looking for, thank you! I forgot that it had data for Sony and Nintendo as well. It'd be great to have an updated table with years 2010 through 2016/7. But for the covered period, it's pretty damning evidence of the massive overinvestment the Xbox line is/was for Microsoft. It's $1 billion worse than I remembered!
Perception is a powerful thing though. I remember telling my brother about the huge losses of Xbox back in the day, and he was like "no way, that's bullshit". To be fair, you'd expect something that's maintained, advertised and generally invested into for years with comparable sales to the competition, to be profitable, right?
Then again, this is "let's put half a billion dollars into the Kin smartphone"-Microsoft. You guys remember the Kin? Exactly.
I just thought it meant the business had positive operating leverage. It doesn't hurt them to sell a new Xbox the way it used to. Or maybe it doesn't when you take into account Xbox Live and software sales.
I don't think it was a difficult to interpret statement though and I think the financial press got it fine. Then again, none of them care about xbox.
I don't think it was a difficult to interpret statement though and I think the financial press got it fine. Then again, none of them care about xbox.
Pretty much
I mean they're getting 30% cut of every game sold, xbl, EA access, game pass, digital taking over so more money from games, microtransactions, Minecraft, sold the console at a profit originally, released a billion controllers with insane profit margins and a 150 dollar controller
There is literally no way they aren't profiting since the Xbox one. Not to mention all the studio closures aswell which should increase profits.
Nothing at all points to them losing money this Gen as a whole. On the console at times? Sure but no way the Xbox division. It just doesn't line up in any way.
Lastgengamer
Member
At the start of this gen Microsoft was expecting the console market to grow to be 500 million, or was it a billion in total hardware? That might put things into perspective in terms of what is needed for a healthy market.
Edit: I actually found out it was a billion!
http://www.ign.com/articles/2013/05/24/microsoft-over-1-billion-next-gen-consoles-will-be-sold
Edit: I actually found out it was a billion!
http://www.ign.com/articles/2013/05/24/microsoft-over-1-billion-next-gen-consoles-will-be-sold
Because I can state this with certainty: Microsofts gaming business is not profitable. In fact, its undergoing a digital transformation of its own.
Yeah, I'm not even sure what he is talking about here. A "digital transformation" only benefits Microsoft, since they are poised to gain all the revenue that used to go to brick & mortar stores.
Yeah, I'm not even sure what he is talking about here. A "digital transformation" only benefits Microsoft, since they are poised to gain all the revenue that used to go to brick & mortar stores.
Spyder_Monkey
Banned
Microsoft doesn't need to do anything. Their profit margins and investments are killer.
TangoAlphaLima
Member
Although this may be true, I never trust corporate accounting. They have incentives to cook the books at times.
Chobel
Member
Paul Thurrott knows his stuff and he's not stupid to report that former (useless) information, so it's the latter. But no, just because a business is not making profit doesn't mean it will never make profit in the future, that's why many companies don't rush to close/sell their underperforming divisions.
sublimit
Banned
Very hard to believe that especially during the XBX360 days.Hell people were saying that even the Kinect was a success for MS.
But if true then i really hope they manage to turn it around somehow.I dread to imagine a console future with Sony basically having no competition (Nintendo is going more or less their own way.)
But if true then i really hope they manage to turn it around somehow.I dread to imagine a console future with Sony basically having no competition (Nintendo is going more or less their own way.)
Microsoft has been publicly focused on a digital transformation and that is part of the context for Nadella's larger earnings call spiel, if you will. They've been focused on converting packaged good revenues into subscription revenues the way everyone else is. He's just saying the same is true for Xbox, which it obviously is-- they're moving away from hardware to a hardware-agnostic business that sells software and services.
I don't think it's hard to see a future in five years or so with no Xbox 2 or an Xbox 2 that is an extremely niche product. PCs serve their purpose just fine. They've already largely shifted their lineup into service-based games. Why do they make Xboxes again? It's not to "dominate the living room." That dream died like 10 years ago.
This is one of the worst most uninformed post I have ever seen. Microsoft is one of the most profitable companies in the world.
Uh, RRoD alone cost them a billion.
And then all the losses getting their foot in the door with the OG Xbox.
Yearsoflurking
Member
I seen this said a lot, but paul thurrot rarely says anything useful when it comes to xbox. His focus and rightfully so has always always been windows. He has gotten and misfired on tons of xbox announcements and information. Why do you believe he wouldn't report the former which is true? Going by his statement the entire xbox one from launch to now has not been profitable. No company is taking 4 years of straight losses without major change
sublimit
Banned
I know but i thought that their profits were so high that they evened out the RROD costs.
Chobel
Member
This isn't exactly about Xbox, this is about finance and I'm pretty sure he knows what "profitable business" means.
And like I said reporting the former is useless, anyone with even hint of financial knowledge knows that, because companies don't care about sunk costs.
There will be a demand for all-purpose set-top boxes for the forseeable future. There is a huge audience that is not interested in gaming with a desktop-class PC. Whether or not the Xbox remains a really rigid hardware standard is really the only question. I could see them building a platform around a minimum spec that all Windows machines could follow. Turn PCs into an Xbox, laptops into an Xbox.
Yearsoflurking
Member
Here's what he said
"Because I can state this with certainty: Microsofts gaming business is not profitable."
If he is, I suspect he is confusing overall profitability with periodical profitability. This was an earnings call he commented on, where businesses talk about profitability of a certain year or quarter.
I absolutely believe that MS will never make back their investment*, but I also believe that there have been many profitable quarters.
(*) taking interest into account
Unknown Soldier
Member
To be fair to MS, the dream died after they lost the antitrust trial but Ballmer kept on tilting at the windmills for a decade after that.
Nadella is the first CEO to finally acknowledge that MS will never "dominate the living room" and it's time to stop wasting money trying. That's why Xbox is probably heading the same direction as Windows Phone.
Chobel
Member
Exactly, he's talking about current MS' gaming business not the cumulative results of 16 years.
What does that even mean though? Not profitable since when? This quarter? This fiscal year? Since the launch of the Xbox One?
Outrun
Member
You don't know why it is so profitable, but know that MS needs major restructuring...
Chobel
Member
This quarter or this fiscal year.
I'm relatively sure they didn't buy Mojang and invest millions of R&D into Xbox One X if they were about to kill the product line.
Sangetsu-II
Member
I'm pretty sure they invested in Mojang and Minecraft to make profit actually.
bitbydeath
Member
cartographer
Member
Minecraft is going to make them loads of money whether Xbox is a thing or not. I don't think that really says anything about the future of the Xbox service, positive or negative.
The Giant
Banned
MS selling back Rare to Nintendo?
Mostly that Xbox isn't profitble today, allegedly.
Ahhh so Sea of Thieves will become a Switch exclusive. Smart.
Yea I know but it isn't really surprising.
Is it not a way of leveraging people into the Microsoft ecosystem? Depending on who you ask Minecraft PS4 is their nefarious plan to make people on Playstation get an Xbox Live ID.
Unknown Soldier
Member
Buying Mojang isn't because of Xbox, otherwise they would have discontinued all the other versions of Minecraft on other platforms.
Bone X seems like it's very much the last attempt from a heavily under pressure Xbox division to prove it's financial worth. It's unlikely to have cost much to develop since it's based on the same technology as the Bone and it has literally zero exclusive game support whatsoever so it's obvious it's being done on a shoestring budget.
If anything, Bone X is the last chance, if it fails to move the needle on hardware (which it probably won't) then MS will start winding Xbox down and probably exit the console hardware business at the end of this generation. There won't be an Xbox Two, instead they'll switch to pushing set-top form factor Windows PC's or something for gaming and remain a minority player in the software market with their few existing franchises.
Nightengale
Member
Xbox #nothingchanges
MS is a software company. Gaming is a huge part of the software business. Xbox is an important consumer brand and one of the few pillars to attracting people to the MS ecosystem. And even though it's in the red, there's a trajectory to profitability in the long run driven by a digital focused angle.
If the next Xbox ends up as a failure then maybe there's a tangible risk of Xbox being spun off. But in the medium term? Nah.
It's official, Microsoft is axing Xbox and going third party.
And it would have been, if wasn't for Mattrick and his strategy to turn long-time investments, especially game studios and a diverse set of franchises, into short time financial gains. His only horse was Kinect, and that fell flat on it's face.
And Microsoft was back to market entry strategies with the desaster the Xbox one turns out to be and I guess it's kind of hard to explain to higher-ups why the new money won't just fade away like the old one.
My guess would be that Spencer runs a lot of Xbox on his Windows store allowance, because still new and aligns with Nadella's goals.
cartographer
Member
The Microsoft ecosystem, maybe. That's going to exist with or without the Xbox service as we know it. They bought Mojang so they could sell Minecraft to everyone, which isn't really affected in a hypothetical future where the Xbox service model as we know it comes to an end. They are still going to be selling to other consoles, on PC, on phones, tablets etc. Not to mention the merchandising money. They don't need Xbox for any of that.
Ozzy Onya A2Z
Member
The Xbox division has always been lumped in other financial segments for MS and historically written off against R&D/losses offsets which is why it always appears to make a loss when in fact it is profitable the whole time. The guy's interpretation of Nadella's "and growing profitably" should be literal, it's growing and making more profit as it grows.
Misinterpretation at its finest IMO.
Misinterpretation at its finest IMO.
Unknown Soldier
Member
If you consider MS to be a "third party" for Windows, I'm not sure how to break it to you.
bitbydeath
Member
That statement can really only apply within America though where Xbox is a large consumer brand, I'm pretty sure MS does well in most countries though where this is not the case.
Xbox is a widely recognized brand, especially in North America.
Comparing the Xbox brand to the Windows Phone brand is so disingenuous it's laughable.
Of course, it's generally the same posters predicting Microsoft will get rid of the Xbox brand over and over again.
cartographer
Member
I... didn't say anything that you see to be responding to? Maybe the first sentence, but it doesn't relate all that closely to my post.
The "future" of the Xbox service is that it isn't going anywhere in the foreseeable future.
cartographer
Member
I didn't say it was or was not.
I doubt anybody at Microsoft is expecting a $500 console to be more than a highly profitable niche that represents less than 1/4 of total unit sales.
Why would they bury one of their most popular and most recognizable consumer-facing brand during a generational switch? That's precisely the time it can be reinvigorated. Set-top PCs are a dead-end, as Steam Machines have already shown. At least with an Xbox model, they take a healthy rake of software sales.
Mojang cost Microsoft $2.5 billion dollars and generates about $150 million profit per year. Need to wait a decade (and hope Minecraft stays relevant) until it starts making them loads of money.