next-gen.biz — After its third fiscal quarter ended March 31, 2006, Microsoft CEO Steve Ballmer issued an internal e-mail that stated, "The cost of producing Xbox 360 consoles was higher than expected...? In fiscal 2006, ended June 30, 2006, the division lost $1.26 billion, mainly due to Xbox 360 launch expenses.
Oct 12, 2006 View in Crawl 4
superkendallOct 12, 2006
So here's the thing - if you add in the losses from the XBox, that means you have about five billion dollars lost so far.Sure you can sell at a loss for a while and then start making it back. But how much more will they loose before they even start to earn a profit? At that point they have to climb out of the multi-billion dollar hole they have dug, and it's a long way back up from 5 billion much less whatever the final losses are when they do make a turnaround - if that day comes. When the PS3 actually releases that will mean Microsoft will have to incur more marketing expenses.You mention that the 360 only has a problem if they are still in the red five years from now - if they are only just starting to make any kind of profit in 2008 you can pretty mcuh say for certain they will be in the red five years from now, because they will have roughly four years to earn back about six billion dollars. Not impossible, but it's a rough road ahead. And is the console lifespan even five years long? If not, that's more R&D costs they have to incur against the next model...Meanwhile Sony is still making money hand over fist on the PS2 and will continue to do so for some time as they slowly ramp up PS3 manufacturing. XBox sales pretty much were terminated as soon as the 360 came out.
superkendallOct 12, 2006
So what if the majority of consumers really do want a game system that has a high storage capability, and a media player for HD media? What does that personally offend you? You seem rabid with hatred yet what does it matter to you if that is in fact what people really want?It's one thing to critize SOny for building something that no-one actually wants, that would make sense. But to critisize them for building something popular - that is insanity!
dj4siteOct 13, 2006
One of the major reasons MS lost money on the original Xbox (and look likely to on the 360) is the simple fact that hackers were able to break their security and thus use copied games. It's hard to recover hardware costs when very few people acually buy the games!
Closed AccountOct 13, 2006
I agree with you in most cases, but there is no way Apple ever took a loss on the iPod, even though it was a completely new market for them. Even the Store, which they admitted didn't make a lot of profit at the onset, did not LOSE money at launch. They started out selling a million songs a week. Now they are selling 3 million songs a day. Nice graph here:<a class="user" href="http://maddogfog.blogspot.com/2006/02/itunes-song-purchases-plotted-on-graph.html">http://maddogfog.blogspot.com/2006/02/itunes-song-purchases-plotted-on-graph.html</a>
luisfmarOct 13, 2006
I think the biggest single mistake M$ made was phasing out the 'loved and faithful old black Xbox', they not only lost a revenue stream but also neglected an entry point for 360 'to be' gamers, not saying that also waved good bye to an installed base, and buried a way to compete with Nintendo Wii, a console that is going to be very popular with the casual gamer. Again, M$ is making the same mistake over and over again, not applying the golden rule of consumer business : segmentation. May be M$ needs some lessons from Apple and even from Nintendo :-)Besides, the 'fate' that M$ is putting on Zune looks out of context, is just another defensive move, that BTW, is poorly aligned with is core business. Buying a Zune is like going to Wall-Mart and buying a 'white brand' Cola, instead of a Pepsi or a Coke, that's only justified if you are saving pennies, and believe me, that's not the case of an iPod buyer (did I say iPOd or mp3 player ? I just want to see a rep showing a Zune to somebody who asked for an iPod...)
judremyOct 13, 2006
spikyface:I know there are some, but I highly doubt most people use their video game console as a DVD player anymore. You can get one with progressive scan for $20.As for the copying issue. PS2 games are easy enough to copy without a chip mod. Just need swap magic 3. Dreamcast games were easy to d/l and burn to CDs. The SNES was just old and the PS1 had FMV sequences (FF7) and other things that just made it the winner.Technology advances all the time, the problem with the current "next-gen" systems (I know that sounds odd) is that they are pushing it too far, too fast. The Wii seems to be cheaper to produce which is why it isn't going to lose money on each console.MS & Sony should learn something from this.
staticneuronOct 16, 2006
The defense of MS losing this much money on a system is BS. No company has ever lost so much so quickly ofer the lifetime of two consoles. This kind of loss is what forced sega to exit the market and I am damn sure if sony took these losses they would have left the market as well.