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Tech journalist and Microsoft insider Paul Thurrott: "Xbox has never been profitable"
- Thread starter hydrophilic attack
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Rellik
Member
You think that's enough to make up for all the money they threw down the toilet on the Xbox brand?
But the entire 'set top box' future Microsoft was trying to stop Sony dominating never eventuated. They've spent billions tilting at windmills. They could have spent zero dollars and achieved the same outcome because the smartphone was going to come along and destroy the very notion of the box under the TV controlling everything.
Meanwhile, they completely missed the market on the biggest innovation in computing (said smartphone) since the PC.
I was under the impression that they'd been profitable for a good long while on a year to year basis (save for 2013, probably, due to launching the One). I don't doubt that they lost more money than they made back so far in their earlier years though... it might take another decade for the division as a whole to "break even". Just purely speculating though.
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.
In Service
Member
plagiarize
Banned
If that's what Thurrott is saying, fair enough, but generally that's not how it works. A division doesn't have to make back losses if they were already fully paid for (and in Microsoft's case they were). You've only got to pay back losses if you had to cover them with loans or what have you.
Once a division is turning a profit, it's not costing anything, even if it lost billions every year before *if you had those billions to lose*.
Can't believe nothing body has pointed this out. This is GAF after all.
12Dannu123
Member
PCs becoming Xbox IS the future, however it'll likely only push UWP/Windows Store. Similar to their Windows MR platform.
This first article from April 1998 is by Paul Thurrott about Microsoft working on its own game console, about 2 years before Microsoft officially announced X-Box at GDC 2000, and 3.5 years before XBox launched.
http://windowsitpro.com/windows-server/microsoft-reportedly-working-game-console
This second article (different author) is about 6 months before the official X-Box announcement.
http://www.zdnet.com/article/microsofts-x-box-fight-for-the-future/
http://windowsitpro.com/windows-server/microsoft-reportedly-working-game-console
This second article (different author) is about 6 months before the official X-Box announcement.
http://www.zdnet.com/article/microsofts-x-box-fight-for-the-future/
12Dannu123
Member
The hardware market actually in the future is moving to convergences. Meaning we will have adaptive devices that can become tablets, PCs or phones. That's a future where I see Microsoft and apple having a big advantage in. Microsoft and Apple despite Androids market share, are the only competitors in the tablet market and MS dominates the PC. Plus Microsoft cab already compete well with Android free OEM royalty with Windows 10 S
Sony should've never released the PS2, since you know the PS3 wiped its profits.
Ha good old Sony too.
Well Sony aren't in it for the money, but M$ are remember.
hydrophilic attack
Member
The transcript of the event where she made comments can be found here. This is what she actually said:
This was reported as though she said that XBox was profitable. Again, the quote is actually ambiguous. "Us" could in this context refer to either the Xbox business, or the gaming market in general.
Or if they're talking about Microsoft gaming specifically, "a business" could refer to a specific part of their gaming business, like XBL
Well it's a good thing this topic is about Sony and instead of addressing the comment at hand it's better to deflect and move goalposts /s.
Well I'll just ignore the head of the company, and the financial reports, and the sun by covering it with my thumb.
Or you could learn a thing or two about how companies operate, Sony does like money too.
Hypereides
Member
Reading some replies, its interesting that some don't think CEOs stretch the truth to maintain their company image.
This doesn't just apply to Microsoft. Sony, Nintendo, as well as a larger quantity of third party publishers tend to exaggerate their messages to maintain an image, sending a signal to their investors and shareholders that the company is operating optimally.
To add to the discussion, take it as you will, but a supposed insider allegedly claims the main reason Microsoft is still in the gaming industry is due to the taxation of businesses.
This doesn't just apply to Microsoft. Sony, Nintendo, as well as a larger quantity of third party publishers tend to exaggerate their messages to maintain an image, sending a signal to their investors and shareholders that the company is operating optimally.
To add to the discussion, take it as you will, but a supposed insider allegedly claims the main reason Microsoft is still in the gaming industry is due to the taxation of businesses.
The Albatross
Member
I thought it was relatively well known in tech that Microsoft loses money on all of their hardware -- Surface, Surface Book, former Windows Phone, Xbox, and any other hardware they've flirted with. They're not devices aimed at making a profit, they're devices aimed at getting Microsoft and MS licensed software into people's hands and homes.
I don't think a lot of people understand how companies will lose money on specific products in order to make money on other products. For instance, Google makes no money on Gmail, Hangouts, Google Docs/Drive, and Calendar. They lose hundreds of millions of dollars a year on these products, and they always have since these products existed. But, Google is a data company, and the data that they gather from Gmail, Hangouts, Docs, Allo, and whatever else, goes directly into their profit making products -- Ads and corporate.
Define 'throw down the toilet,' because the Xbox brand is one of the most well known brands in the US, Microsoft's primary market. For a brand that had 0 market penetration 15 years ago, it's now one of the most well known brands in the country.
I don't think a lot of people understand how companies will lose money on specific products in order to make money on other products. For instance, Google makes no money on Gmail, Hangouts, Google Docs/Drive, and Calendar. They lose hundreds of millions of dollars a year on these products, and they always have since these products existed. But, Google is a data company, and the data that they gather from Gmail, Hangouts, Docs, Allo, and whatever else, goes directly into their profit making products -- Ads and corporate.
Define 'throw down the toilet,' because the Xbox brand is one of the most well known brands in the US, Microsoft's primary market. For a brand that had 0 market penetration 15 years ago, it's now one of the most well known brands in the country.
Except the OP is in denial about the consecutive years of profit.
hydrophilic attack
Member
This comment by Thurrott was about the entirety of Microsoft's gaming business, not about the hardware specifically
I'm not sure exactly what you're talking about, but I addressed data showing marginal positive operating income for a couple of years in post #175
That's been pretty much common knowledge from the start. The higher ups at MS sure do like to spin it otherwise of course, but Xbox has been a bottomless moneypit (To go along with the legendary bottomless warchest of course
) from the start.
Sounds like the thread has sent the usual apologists predictably cray-cray though. I expect the standard concerted derailment with console warring and irrelevant "Sony too" deflections to lead to the desired locking which has become SOP for such threads.
if you're enough of a loon to think in such terms
Sounds like the thread has sent the usual apologists predictably cray-cray though. I expect the standard concerted derailment with console warring and irrelevant "Sony too" deflections to lead to the desired locking which has become SOP for such threads.
Dee Dah Dave
Member
Well yeah. They sunk billions in to launch the brand. Then had RROD, and more recently the launch XB1 disaster. Their recent yearly profits have never made up for that. But it doesn't really tell you much. The current Xbox brand value is probably similar to all the historic losses, so they are more like close to break even in the grand scheme of things. On the basis that if they sold the company today they would get all or most the money back.
Given the Xenon, Zepher and Falcon boards made up the 360's first three years and the failure rates of those boards, (particularly the Xenon) I find that very difficult to believe. The system, early on, had a ludicrously high failure rate.
Perhaps a profit on paper, but I doubt the refurbishment bill on those units has every really been talked about in concrete terms. not to mention the damage to the brands perceived value.
The gaming division also includes other things like the Zune.
Don't worry, that wasn't saving the division of you are wondering.
They wrote those costs off in the second year of the 360. Since then, it's been profit ever since.
If OP is still confused then I have some bad news for you since the PS3 killed all PS2 profits.
hydrophilic attack
Member
Also, no one answered my question in post #175 about whether operating income include write-offs due to RROD or not
Ace Harding
Member
What Nadella said can still be "true" even if the Xbox division has never been profitable.
He can say it's "growing profitably" if top line revenue is growing and recurring operating costs are lower than revenues. So profitable before all of the capitalized R&D and other launch costs.
You could also say that for every incremental $1 in revenue they are earning (for example) $0.20 in net operating profit, so it's "growing profitably."
It's a vague expression - not a GAAP measure or something.
He can say it's "growing profitably" if top line revenue is growing and recurring operating costs are lower than revenues. So profitable before all of the capitalized R&D and other launch costs.
You could also say that for every incremental $1 in revenue they are earning (for example) $0.20 in net operating profit, so it's "growing profitably."
It's a vague expression - not a GAAP measure or something.
sechsterangriff
Member
When you think about the Xbox business since its inception then it's not really surprising. They had many years of losses before turning a consistent profit with the Xbox 360. And in recent years it's hard to make exactly what percentage of profits actually comes directly just from the Xbox business.
The Albatross
Member
Yeah, I'd imagine the hardware, personnel, cost of running XBL would sink the entire division. Licensing and videogame software alone would never make up the loss in personnel (R&D), manufacturing, and infrastructure; the margins are just too slim in this industry. And even despite this, Microsoft is the 3rd most valuable company on earth. They're a company that can take risk losing money in multiple divisions because of the historic profitability in others.
Microsoft lead losses with Xbox and it's probably the company's most positively perceived brand from a consumer perspective (maybe LinkedIn is more positive?). For a company that has always struggled with brand perception, despite Microsoft's ridiculous profitability, the brand is worth it for them. But, was hasn't been clear over the last 15 years is how Xbox division's losses have contributed to the rest of the business. What we do know is if a division is consistently unprofitable and does not contribute to the rest of the business, Microsoft is quick to sell it off -- like the Microsoft Mobile division which was recently sold off to another company (HMD).
What isn't as clear with the Xbox brand, versus Microsoft's other divisions, is how the losses on Xbox contribute back to their other profitable (or future profitable) divisions. For instance, it's really obvious why Google chooses to lose money on Gmail, Docs, and most of their products, because the data they gather is worth many times more for their profit-making divisions than the losses they incur to get that data. With Microsoft, and Xbox, it's not as clear, it isn't even as clear as it is with Surface... An obvious profit loser, but Surface exists to give a benchmark to other hardware makers who license Microsoft's software and package it into their hardware. The data from XBL is certainly valuable, up until Microsoft's purchase of LinkedIn, it was their most valuable social network and still one of the most valuable user networks in the US. It's unclear how the rest of the brand fits into that profitability, though given that Microsoft has hung onto the division while they've been quick to slice off unprofitable divisions in the past suggests that it's got some tangential value to the company.
hydrophilic attack
Member
Do you have a source?
Or do you have sufficient understanding of financial terms to understand my questions about the difference between operating income and net income and how each would deal with large write-offs for RROD in post #175 (genuine question)
panama chief
Member
Microsoft looks like good guys here. creating tech that keeps up with current gaming demands (outside of PC), tossing out a game every now and again AND not even breaking even?
youll get there one day MS....
youll get there one day MS....
Jaguar Victory
Member
In hindsight they've provably sold 20 - 30 million controllers by now so that's wn R&D cost of $3-$4 per controller and shrinking every day. They must have a good margin on those things.
Papacheeks
Banned
Tales from MY ASS AGAIN i see.
Go back and look at the financial repirts, it says it clearly.
hydrophilic attack
Member
Can you quote the relevant text in these reports? Same way I've linked and quoted relevant sources throughout the thread
That article is nonsense I think. Gaming is considered a core business at Microsoft. It generates a sizeable portion of Microsoft's total revenue. They don't make much money on selling the hardware. The money mainly comes from Xbox Live subs, game sales and digital marketplace transactions. To say that the gaming business is not profitable makes no sense. Do you think MS would be coming out with the Xbox One X if that was true?
tales from your ass? well at least you're admitting something because you seem like an expert in that department from what I've seen of your posts, admittance is the first step
we really gonna sit here and pretend the xbox division isn't profitable since the xb1's release? lmao what exactly are they losing money on in such large amounts to offset all the money they gain?
You can't Google MS quarterly financial reports?
But you can dig up all sorts of other BS.
Sounds legit.
hydrophilic attack
Member
As I already told you in post #175, mass layoffs in Europe, due to closure of European studios, cause high costs up front (but will pay off in the form of lower salary costs long-term)
Primethius
Banned
I've always operated under the impression that they weren't profitable until the XB1 gen. Just too many things that they've had to sink costs in over the years (such as the RROD fiasco).
With XB1, I assumed profitablity a year or two in. But maybe a combination of factors makes that not so (continuous R&D, firesales, less than stellar overall volume being sold both HW wise and in their SW)?
With XB1, I assumed profitablity a year or two in. But maybe a combination of factors makes that not so (continuous R&D, firesales, less than stellar overall volume being sold both HW wise and in their SW)?
Dreamwriter
Member
Microsoft bought their way into the game industry, they went into the original XBox with a plan of losing $1 billion on it (and ended up spending more). The hope was that the XBox 360 would be profitable enough to eventually make that worth it. Unfortunately, the RRoD killed that idea, as they lost another billion+ on just that problem. Its estimated that as of 2012 the XBox brand had lost a total of $4.1 billion, which means they need that much in net profits since then just to break even, and thats a steep hill to climb.
One thing to watch out for, Microsoft likes to hide losses by combining profitable divisions with losing ones; for a while the XBox division was shared with the division making bank on patent licensing to Android devices (MS owns patents on some of the things in the Android OS).
One thing to watch out for, Microsoft likes to hide losses by combining profitable divisions with losing ones; for a while the XBox division was shared with the division making bank on patent licensing to Android devices (MS owns patents on some of the things in the Android OS).
hydrophilic attack
Member
That's not how it works. If you make a statement the burden of proof is on you. If it is so clearly stated as you say, finding it should be easy for you
Let's take the hypothetical scenario that what you said was a tale from your ass, would it really be fair to expect me to prove the absence of proof for your false statement?
Uno Venova
Banned
It seems the most people do is think you're absolutely crazy for suggesting they aren't profitable, but they can never post the direct sources to this.
What? Layoffs are exactly that.. layoffs, they aren't getting paid any more lol
You mean the rent costs of the studio Lionhead was in? Assuming they're still in contract and own the building
If that's what's the decider between MS losing money and profiting.. What exactly were they developing the game in, buckingham palace? Shit, not even that would offset all the money they make from Xbox.
hydrophilic attack
Member
Did you read what I said in post #175?
Mass layoffs are expensive in Europe, where labour rights are a thing (in contrast to the US) due to stuff like severance packages