Microsoft's Game Division Suffers $1.89 Billon Shortfall

Entertainment and Devices Division sees a 47 percent increase in its annual operating loss, thanks to $1.06 billion in warranty-extension costs and slowing 360 sales.

Besides decreased Xbox 360 console sales, the EDD's fourth quarter suffered a catastrophic blow when then-Corporate Vice President Peter Moore announced a three-year extension of the Xbox 360 manufacturer's warranty. Today, the company confirmed it took a $1.06 billion charge as a result of the unprecedented move, causing operating losses for the quarter to tally a massive $1.2 billion--a staggering 183 percent year-on-year increase. The company said the loss was lessened somewhat by "decreased Xbox 360 console manufacturing costs" and "increased Xbox accessories and video game sales."

[fenderputty]

Vista that saved them in their 4th quarter.

[Xeoset]

$1.2 billion of that was too extend the warranty to 3 years.

I wonder how much Sony are losing now they've dropped the price and the console still costs $700+ to make? Seriously.

Also, before you disagree with me using fanboy ways and such, save yourself the time to look like an idiot and just walk away from your computer, I'm sick of your kind.

EDIT: This isn't to the above profile either, I'm talking generally.

[Mr_Kuwabara]

inb4themassivebashingoffanboys

@PS360Wii

But nobody wants to waste millions (worst billions) on a console that has been around for quite some time and keep on losing money too just make a warranty or anything in particular on it. They want to gain lots of profit, not lose a whole bunch of the profit and win just a few if not anything at all.

Sure companies that make hardware devices tend to have these situations were there product is in need better there standards but they don't expect to lose a billion on fixing some errors.

That's why tests exist. The 360 was just rushed to the stores because MS wanted to be way ahead of the PS3. Which is a great idea for any company who does this, but if you don't make extensive tests of your products first, these situations tend to happen in a great loss. I never heard any news of the original Xbox having problems and it's because they stood there peaceful time testing what became a great console with hardly any defects.

MS just needs to be more alert on these things for next generation same as the Sony with there price. (But that's another story)

edit* Damn I can't belive I lost all my bubbles and I don't post anything fanboyish.....

[Maddens Raiders]

Sometimes, modicums as well as lengthy, intelligent replies can lead to answers that folks don't like hearing. That's been my learning experience on N4G. Now mix that with a little immaturity and who can predict how people are feeling on a given day? -- It's all in the hand of fate.

+1 bubble up

cheers

[PS360WII]

well I gave ya a bubble. That was a good post because it does seem like MS didn't give the 360 the testing it needed and the 2nd extended warranty is the proof.

I do however have to say that MS is not even close to ending the Xbox name. The users of Xbox love to buy games/movies/TV Shows/Extra Content/Arcade Games/ and any add-on they so choose to make. The profit is there to have it's just taking them a rather long time to get past the jitters of a new division. I don't think they are making money off of the Zune yet but they haven't pulled the plug on that(I did not check that out so if they did make money off of Zune I do apologize). There are many up coming games for the 360 that will be bought by the 11+ million out there and lets just see how many units are sold by the end of the year. No MS is not getting rid of there way into the living room not yet at least.

[masterg]

Did MS ever make any money on the first Xbox?
What did the total number add up to there in dollars.

[Shadow Flare]

$1.89 Billion in debt!!! I don't care if microsoft can afford it, no-one in that company will be happy about that. Will xbox 360 even make a profit? In all seriousness, on the whole microsoft does not know what they are doing when it comes to games. If they did, they would have made a profit. That IS the name of the game. They were in debt with the xbox 1, they have a $1.9 billion debt with the 360, i mean what the hell? If this were any other company, they would have cut bait and taken a hint a long time ago. It comes down to microsoft views the gaming industry like they view every other avenue of other industries: See what makes alot of money, copy it, buy everyone out...they don't EARN anything for themselves which is something Sony and Nintendo have respectfully done.

$2 billion may be a drop in the ocean or whatever for microsoft but its incredibly noticable to their business and shareholders. I think there was more to Peter Moore leaving then 'family problems'. And its quite the mess you've left the xbox 360 division in isn't it peter?

Maybe words won't do it, a picture may do instead:
Introducing...Microsoft's business model

[the_round_peg]

Microsoft financial data: http://finance.yahoo.com/q/...
-Market Cap = US 295.81 Billion
-Revenue = US $44.28 Billion
-Profit = US 36.63 Billion <= this matters more than revenue
-Debt = US 0 (= No debt!)
-Cash = US 25.48 Billion

Compare Microsoft to Sony:

Sony's financial data: http://finance.yahoo.com/q/...

Market Cap = US 51.65 Billion
-Revenue = US 67.78 Billion
-Profit = US 15.86 Billion <= this matters more than revenue
-Debt = US 8.96 Billion
-Cash = US 4.30 Billion

[DJ]

There was nothing said about Microsoft as a whole, simply that their Entertainment Division has suffered a 1.89 Billion debt this quarter. Divisions are autonomous companies within a corporation (Microsoft in this case), and the Entertainment Division is in danger of losing support from its investors.

[Vash_The_Stampede]

ktchong claims to be an adult and is talking about just throwing the figures out there, but he made a huge mistake of getting the figures of Microsoft as a whole and forgetting that the article is only talking about the Game Division. Microsoft is a powerful and strong company, I agree with that. It's just the gaming division that is taking the huge blow right now, money wise. CEO's are never happy when a single division loses that money, so stop coming in here trying to talk on behalf of microsoft.

@ The crying kid ktchong below:

Wow great comeback, especially after being proving to be an ass who has no time on his hand, doesn't get laid, and his console is in the shop so he has nothing but time to look up financial reports. Seriously man get a life. I'm out for the night.....peace! :)

[the_round_peg]

Shadow Flare claimed that Microsoft is "$1.89 Billion in debt!" I was responding to THAT particular statement made by Shadow Flare, which is just completely WRONG.

I'm just using FACTS and NUMBERS from VERIFIABLE SOURCES to point out that Shadow Flare is the misinformed (or uninformed). *Microsoft does not have debt.* That is the FACT. The financial statement shows it. The information is out there. Why don't you just go look them up?

http://finance.yahoo.com/q/...

That's the financial statement for Microsoft. Go down to the line that says "Total Debt"... it reads ZERO. It can't get any clearer than that.

That's not even my opinion here. I'm just using FACTS available from Yahoo Finance, and they are straightfoward figures.

Who's the moron? I say the idiots who can't even read financial statements. Come back and talk after you learn how to balance your bank statements and manage your investment portfolio, if you even have your own bank statements and a portfolio.

[Like a shadow I am]

Adults are supposed to care about finance and stocks and investments.

Are you just an ignorant little kid, and you are clueless about what adults do?

Or are you an adult who's uneducated, too poor and too broke to have any money to invest in the stock market?

Or are you an adult who's too dumb and stupid to set aside money and invest for your retirement?

So, which one are you, Vash? How old are you anyway?

Mrs. Chong does not have to show that he's an adult. By looking up and comparing financial reports, he has already show that he's an adult. That's what responsible adults do. It's Vash who shows that he's a spoiled little brat who knows nothing.

[Marceles]

Stick to the article...the game division lost Microsoft 1.89 billion. You can give your "at least their other divisions are doing well" cases all you want, but we're talking about the game division. This argument is almost like looking at stand alone hd-dvd selling well without realizing that blu-ray is still way ahead.

[bung tickler]

@ktchong + bubble for you sir. the rest dj, shadow ect... are on ignore...

[Lightning Mr Bubbles]

The article where they say MS made money this quarter and XBOX 360 fanboys are already jumping up and down.

[tomfoolery]

YOU LITTLE SONY DIPS JUST GOT SMOKED!
BY THE WAY,GET YOUR PUNK ASSES BACK TO THE SONY EXPLODING BATTERY SIDE.

[PS360WII]

Yea MS as a whole still made money. This is just like when Sony said they had a loss in there game division but still made a profit as a whole

[BubblesDAVERAGE]

You take away that 1 billion and they did better then last time...MS will be profitable sooner then later.

[Mike134nl]

Sucks for them but they do still got enough money to buy some more exclusives. I will give Microsoft some credits for sticking with their xbox 360. not sure if they will make some money but I think they will break even in the end. What is the debt in the sony game devision by the way I can imagine that it's lower.

[mephixto]

Entertainment and Devices Division is in red since the first Xbox launched. Sony and nintendo always loose money with their consoles in the first year. If this continue microsoft maybe will pull out the plug of the Xbox consoles.

Don't expect a price cut for the 360 until next year.

Sony and nintendo always loose money with their consoles in the first year.

[computer]

I guess we will have to see how all this eventually turns out...
I still think the more competition the consoles have, the better it is in the end --> better games by developers who want the game to succeed on that particular console.

[CrazzyMan]

how many children of Afrika could buy food on this money..
i mean in my opinion, it would be much better if M$ would spend this money for them.

but anyway, as long as M$ will make price cut this year, and as long as M$ a going to fix 3 red rings problem, GAMERS really shouldn`t care about this.

EDIT:
i lost bubble for this comment? wtf???

[caffman]

how much Bill Gates gives out of his own cash to charity every year?

[Meus Renaissance]

You know what I find interesting. If this was Sony's Entertainment Division, although it would be bad news, I can honestly see them making a profit after all this.

Whereas with MS - we still do not associate them with gaming success.

Weird huh?

[ReBurn]

Bloomberg.com projected that Sony's gaming division will lose a billion dollars when the numbers come it. I would imagine that the price cut of the 60gb model is only going to add to the losses. While their revenuse have certainly gone up, that's 100 bucks they're not getting in revenue for each one sold.

I have to wonder how either of them get stakeholders to go along with any of this. I guess that the overall performance of Microsoft and Sony are still ok.

[the_round_peg]

Key statistics for Sony vs. Microsoft - 2006 fiscal year:

Sony: http://finance.yahoo.com/q/...
-Market Cap = US 51.65 Billion
-Revenue = US 67.78 Billion
-Profit = US 15.86 Billion <= this matters more than revenue
-Debt = US 8.96 Billion (a large chunk of Sony's revenue goes to refinance debts and making interest payments every year.)
-Cash = US 4.30 Billion (so, if you knew anything about finance, you'd know Sony's ratios are... as I call them, "un-enticing".)

Compared to:

Microsoft: http://finance.yahoo.com/q/...
-Market Cap = US 295.81 Billion (6 times of Sony! ... there are very few "mega-caps" - or so-called "mega corporations" - in the world, and Microsoft is one of them. Sony is not. Sony is a "big cap", one level below Microsoft.)
-Revenue = US $44.28 Billion
-Profit = US 36.63 Billion <= this matters more than revenue
-Debt = US 0 (No debt!)
-Cash = US 25.48 Billion (Do you see how much cash Microsoft has? Microsoft has some really NICE ratios if you know how to do the maths.)

I'm not gonna argue here. I'm just laying out all the facts and figures for everyone to see for themselves. Most of you are just little boys who don't deal (i.e., work) in the real world, invest in the stock market or have any idea on how to look up facts and data and numbers before you spam forums.

$1 billion are REALLY just pocket change for Microsoft... it's Sony that can't afford to throw away $1 billion. If you think the $1 billion are gonna somehow hurt Microsoft too much, then you're seriously misinformed (or uninformed.) Just look at their financial statements.

I'm not saying that it's good or fair, but that's just how it is. If Microsoft REALLY wants to play and win and crush Sony and doesn't care about anything else, (which will very fiscally irresponsible,) Microsoft CAN. From the financial and monetary standpoint, Microsoft that has all the advantages over Sony.

[Vash_The_Stampede]

Dude.....you care about this a little TOO much. Somebody get this guy a blind date!

[Like a shadow I am]

Unless you're just an ignorant little kid, or you're an adult who's uneducated, poor and has no money to invest in the stock market (or you're just too dumb and stupid to invest in your future.)

So, which one are you, Vash?

[razer]

He keeps posting hard numbers and all you can do is insult him like a child.

Give it a rest, if you can't talk with the adults here you need to go outside and sit at the card table with the other children and finish your meal.

MS has stated on several occasions and was also in Forbes that the Gaming Division of MS, even with this billion set aside will be in the Black once Halo 3 launches. Anyone who says they are going to kill the console is on some serious crack! Argh, here we go again another MS article and another fanboy fight..

[FordGTGuy]

"Vista Saved Microsoft"

Just because Microsoft has a gaming division doesn't mean they are a gaming company. Microsoft is a software company first and foremost. Considering that they used 1.15 billion on fixes that means they would've been $700k+ to breaking even and thats before a price cut or the AAA titles hit so I think theres a good chance they can turn a profit on the Xbox 360 at some point of time.

@ReBurn

Were refering to the Xbox 360 as hardware not software though.

[ReBurn]

But games are software. Microsoft Game Studios actually releases some good stuff. The 360's software is actually quite good. Sony's recent releases, in my opinion, are pretty lackluster. MotorStorm is fun, but it needs more tracks.

What Microsoft are not is a hardware company, which is quite evident. Sony's a damn fine hardware company, and I'm loving my PS3. I just wish it had more games. They're coming, though!

[power of Green]

LOL...

Did anybody not understand that MS lost money despite their earnings?; is this a response in hopes of some how MS not being able to price cut of the 360?. lol

EDIT #15.1 are you saying MS did not have to spend over a billion to redesign the 360's inards and set aside some of that money for the best warrenty in gaming history?. I'm going to have to click dissagree on your post 15.1. You may have missunderstood what i was saying.

THE WARRENTY IS STELLAR, THE RED RINGS INICATE MAJOR HARDWAR FAILURES NOT JUST HEAT RELATED ISSUES, 3 YRS, OFF THE HOOK!!!!!.

[ReBurn]

So how is $14.7 billion of net income on revenues of $51.12 billion losing money? I don't get that? They didn't make as much as they would have if the entertainment division broke even, but they still added $14.7 billion of net income to the bottom line.

You should really explain how Microsoft lost money.

[kewlkat007]

Besides the RROD issue which will be sorted out with the new "Falcon" chips, which will also reduce more cost.

If this is any indication of what the botton line is for MS and the and what they have to continue to do with the Xbox 360.

"The company said the loss was lessened somewhat by "decreased Xbox 360 console manufacturing costs" and "increased Xbox accessories and video game sales."

Then they are doing just that.

1. New "falcon" chip due soon(check)
2. Accessory Sales(check)
3. Sales have been steady(check)
4. Attach rate pretty high(check)
5. Very good Fall/Winter lineup(check)
6. Secret Price-Cut, wishful thinking(check)
7. MS is very profitable(check)
8.Uncle Scrooge McDuck = Bill Gates(check)

Besides that Warranty issue, what else could they be doing better...Since all of these will work hand-in-hand this Holiday season going into 2008.

EDIT - If some one disagree, at least write some substance, it's not like I'm totally posting junk here. What's so wrong with the what I said....hehe Am I lieing?

[THC CELL]

so Microsoft should of really give everyone a free x box

[power of Green]

I thought the PS3 fanboys were ignoring the earnings report post earilier because of pain I had no idea they were busy trying to debunk its importance, silly me.

[ElementX]

MS makes money on Live subscriptions. If there were only 5 million subscribers, they'd make a billion dollars in 4 years. 5,000,000x$50=$250,000,000. $250,000,000x4=$1,000,000,000. There are more than 5 million subscribers, so they'll make that money back in less than 4 years.

[Greysturm]

The cost of maintaining the xbox live up and running which would deduct a lot of the 50 dollars per person given. So it will take them a bit more :)

[DJ]

And he thought he was being all smart, multiplying numbers and sh*t.

[ElementX]

Fine, then add another million paid subscribers who would cover the costs. MS says they have 6 million Live users. Lets say most of them pay for service and aren't using Silver. The 6 million mark was a month or so ago.. It's higher now. So basically, all those new users would be paying for the cost while the original 5 million are making profit for MS.

EDIT: Just checked, XBL have 7 million users, those 2 million past the "original" 5 million are more than paying for the costs. So yeah, in less than 4 years MS will have made that billion dollars at the current rate of new subscribers.

http://www.computerandvideo...

[kewlkat007]

ElementX forgot to mention, not only the price to subscribe but the "Content" that is bought on a daily bases which they rake in plenty of dollars from too.

As stated:

Collectively, Xbox gamers have racked up over

1. 2 billion hours online (that's 332,000 years),
2. with over 2 billion game sessions initiated.
3. over 11 billion Gamerpoints
4. unlock 466 million achievements

Thats to show you the amount of time, gamers spend time on there, which will only lead, to more content being brought and probably more users subscribing, if their friends are on. Also more people getting broadband connections, in the coming years, which helps.

So MS will be making money off:

a. Advertisement
b. Live Arcade downloads(45 million Xbox Live Arcade downloads so far)
c. IPtv is set to debut sometime(more content)
d. Gaming extra, Maps and such, even Mods soon.

So you take those 4 years of $50 XBL live subscriptions and think about all the content that will be bought, well you see where I'm going here. They will make money, a little faster than you think.

Not disagreeing but there was more to it.

[Adamalicious]

I think the XBL users stat is inflated by the free trial month you get when you buy a new 360 - it's pretty standard actually, satellite radio gives service away with a lot of cars for a trial and they count them, I'm pretty sure Apple counts free download of the weeks as songs "sold" (sold for $0).

Just putting that out there.

[Covenant]

It is interesting to note that before the billion-dollar repair deduction, their gaming division was actually pretty close to profitability. With the repair costs deferred to last quarter, and with a massive lineup of games this fall, plus a decrease in production costs, expect the forecast of a profit in FY 08 to come to pass.

That's the good news.

The bad news is the loss of public trust and goodwill generated by failing consoles. Winning that back will be hard, but an undeniably great batch of games will help, as would a price cut. Put the Pro at $299, and that's an HD system with a large catalogue of games and a better-than-average warranty (the result of some very hard-earned lessons) at just $50 more than the Wii, and half the (expected) cost of the PS3.

That will go a long way towards winning back public trust, and make '08 profitability attainable. (Halo 3 won't hurt, either).

[power of Green]

For the most part i'm going to agree with your post but the bad news part i dissagree with Sony was forced to come clean by law and PS2 still ruled due to their line up.

[Greysturm]

It was obvious that the whole company wasnt going to go red on the xbox alone but its gamind division might. So far its been a white whole for all the investment placed on it. I guess they will either keep investing on it until they make a profit or start to rethink their strategy. The other two companies are more used to the game and their gaming divisions keep in the black by subsiding their new projects with the revenue from the other products so they will really need to push the games for windows in order to cover the losses from the xbox.

[PS360PCROCKS]

I'm not concerned about their finances as I am not Microsoft's personal accoountant, just bring me games and reliable hardware and we're good...

[Bathyj]

I've notice a couple of interesting things from this report, but please dont flame, I'm trying to stick to the facts here.

People say EDD might make profit in the next year or so but,....
They have lost 3.17 Billion on X360 in under 2 years.
They lost about 4 Billion or more on XB1.
For EDD to be profitable it means more than just making money per machine or for one year. Let say they cut cost and start making $100 on every X360 sold. They still need to make over 7 Billion dollars to break even, before they can claim to be profitable. Theys no telling how much this warranty thing might cost in the coming years and it would take a MASSIVE turnaround not just to stop losing money, not just to start breaking even, and just to start making money, but making enough to actually be profitable overall. I dont see it happen this generation and I honestly wonder if M$ (shareholders not Bill) will continue to tip money down a bottomless pit for what seems to be Bills expensive little hobby. This could be the last Xbox.

The second thing I noticed is they've only just shipped 11.6 million consoles. Shipped, not sold. Since stock is everywhere you would have to think there are 1 - 2 million units either in transiant, in wharehouses, on shop shelves etc, etc. So maybe 10 million are actually sold. Now add in the fact that 25% (I believe is a more acurate number than say 33%) have failed and that leaves about 7.5-8 million WORKING X360 in peoples homes.

I have not flamed, insulted, or put down anyone or anything so dont give me a hard time please. I have XB1, XB360 and if we ever see another one I'm sure I will get that too. But I'd like to know what people think, especially about Xbox being too expensive to continue forever and the amount of units actually in home right now.

Thanks.
Vile fanboy rants need not reply.

[kewlkat007]

you are basing all MS profits on just the Xbox 360 console alone. When there are are other factors that contribute to profitability, like I posted before. Also MS's "Entertainment and Device division" does not only contain Xbox.

As stated:
***************************** ****************************** * ************
The Entertainment and Devices Division will consist of four business groups, including two new businesses:

1. Entertainment Business (responsible for the company's music, TV and video efforts) and the Interactive Entertainment Business (responsible for controlling the company's Xbox and PC video game businesses).

2. The other two businesses, for mobile devices and consumer software, already exist and will remain unchanged.
***************************** ****************************** * *************

So when they talk about the EDD group, if your gonna talk about it being in the "RED", you have to look at all the other products that help it make money, even though we know, the original xbox and xbox 360 have made it loose money and has kept it in the red by 1-2 billion dollars a quarter.(only if there was no RROD they would of had it)

"For the year, the division suffered a $1.89 billion operating loss, a 47 percent increase from the $1.28 billion hit the division took the prior year. The shortfall came despite $6.08 billion in annual revenue, 28 percent above the $4.76 billion it took in the year prior."

Ok lets say you are "somewhat" Correct about the

1. Consoles sitting on shelves or lost
2. Consoles not working
3. the Xbox 1/360 losses

a. Thinking ahead, I think the Xbox 360 will sell very well this holiday season. With their fall/winter line-up and Halo 3, them consoles you speak of will move, trust me.

b. Well you have to remember "consoles" that are not in people home because they are broke, are most likely being fixed, so they will return to people homes, regardless, if it was because of the RROD issue. They are now Covered and Because the are covered, it will cost MS "EDD" to be in the "red".

c. The consoles themselves have not been profitable because they have always sold them at a lost without not much profits coming in from the Console division, but thinking ahead and look at what I posted ABOVE:

These will help the "console division", (notice I said "console") to start making money in the long run.

So MS will be making money off:

a. Advertisement
b. Live Arcade downloads(45 million Xbox Live Arcade downloads so far)
c. IPtv is set to debut sometime(more content)
d. Gaming extra, Maps and such, even Mods soon.
e. The new "Falcon" chips to make profit on units sold.
f. Xbox live subscriptions
d. Games Games Games(High Attach rate as it is)

"This is all the factors that is suppose to bring the "Console Division "money, but this is a long-term deal, which might take 10 years if you ask me.

So all of this, they believe in 2008 will help get the EDD "out" of the red, even though it has been the Console side that have gotten them deep in the "RED" 2 years in a row, every quarter or mostly fiscal year.

[Bathyj]

I admit I didn't really think about how many other contributors there are to EDD besides Xbox and I was pretty much talking about Xbox only and whether it can make money someday. All those other things surely will help but they also have start up and running cost of their own and may or may not make a big difference. In some cases it could even cost them more building this sort of service if it doesn't take off as they hoped. I dont really know. All those things you mentioned might bolster profits, or they might just end up being more mouths to feed (overheads.) We'll have to wait and see.

I think you'd agree but, like I said early, it will take a massive turn around for XBOX to start making profit let alone make back what they have already spent. I just wonder how much time they have left as I honestly dont believe they will do it this generation. I hope there is an XBox3. (And I hope they call it that instead whatever stupid name they might come up with this time.)

Also youre right that a unit repaired still counts as a unit in a home. I hadn't really thought of that because twice mine have broken I've been lucky enough to get a brand new one each time from EB Games, thanks to their extended warranty. (Incidently thanks to the HD recall and all the returns EB will not offer that warranty anymore.) :( I wonder but, since I've seen refurbished units for sale where these units come from if everyone who hands one in for repair get one back. Some people must be getting new units and the broken one goes away to be fixed and then go on sale.

Anyway, the next couple of year aren't going to be boring.

[SofaKingReetodded]

you can't suffer a 183% increase in operating losses over the year before and think "yeah things will look better next year", You mean to tell me that the massively popular Gears being a console seller has only resulted in massive losses for the gaming division. Like someone said, Microsoft has swum into deep waters with very little experience and directly challenged the O.G. of console killers in the Playstation. Not a smart move IMO.

[razer]

I think competition is a good thing for all consoles. I think all gamers should be thankful there are multiple players in the business. Think how much each has influenced the other and how it's brought about innovation.

It will be very stagnant if there was just a Sony or MS or Nintendo.

[StrboyM]

a lot of bickering at who loss this and whos an adult..

it seems like every time some new news comes out, people find a way to sugar coat it with something else. last time i checked 1.89billion lost was bad, i dont give a F$#k how much money i have.

bottom line is the 360 is going downhill, and the ps3 is gaining momentum.this may turn out ugly folks stay tuned

[Bloodmask]

has stated many times that they are in the console business for the long haul. And won't see profitability for some time.

I think they will actually be in the black faster than they thought.

[Adamalicious]

I just wonder how long is too long. One would hope that they would get better - find a way to be profitable. But the longer their games division is around the more money they are losing. At this rate will the 360 ever be profitable? If not they're looking at a decade of losses on the division (Zune certainly hasn't helped either). I think that MS has, and will have, the cash to stay in the business for probably as long as they like, but if they keep posting these sorts of losses how long will stockholders tolerate it? How long until the executives say "well that was a fun idea, but let's move on."

I'm all for competition in the gaming industry - it's the only thing that moves things along. I believe that a lot of the great things about gaming today and tomorrow are resulting from the Xbox's entry into the market - can you imagine if there was just Wii and PS3! If MS's games division can't find a way to be profitable, and let's be honest - they've never shown any indication that they can, it would just be sheer vanity to continue for generations to come. And Halo 3 is not a strategy.

[Skynetone]

looks to me there going to paying out more billions in the furture just to fix broken 360s, we might just see the 720 sooner then we expected

[Dragonopolis]

But you can bet it put a stopper on any console price war MS was planning. As long as Sony Smart enough to keep the Playstation out of the $399 range you can bet Microsoft won't blink on lowering the Xbox 360. Besides,
$499 really isnt bad and is the Magic number for Sony. Not to high where we consumers find the $599 questionable even as a blu-ray player/game console. Not to low to give Sony Execs ulcers. Plus doesn't put too much pressure on MS to drop the price of the Xbox 360 drastically. MS is smart the won't drop the xbox 360's price with all that financially trouble it has given them.

Fade: Picture of a Sony Exec drying sweaty forehead in relief.

[Itachi]

xbox franchise has never made money 7 years in and still not a penny

[Daewoodrow]

It's just not fair for us Xbox fans. It doesn't change the fact that I enjoy playing my Xbox 360 games console, but Microsoft have been making it really difficult for people like me to support them. I still prefer the Xbox over the PS3, and I doubt that will change.

Nobody likes to think there's a chance their favorite console will cease production. And the doubts are there for me. They have sold very well, a good number of units per month, they should be turning a profit by now, they would've had profitable quarters already were it not for the warantee extensions. If they had just produced a working console in the first place.

I don't mind sending my console in for repairs, it has been free for me both times, and I certainly wouldn't pay, but I do care that they're squandering their lead like this.

[sjappie]

Even if they don't sell them anymore, the established userbase alone will get them out of the red. 7 million paying live members, market place transactions and off course all the games coming out are going to bring in enough money the coming years to atleast break even this generation. In the end MS wants control of the living room and has a plan that stretches over more than a decade and their not gonna give up due to losses somewhere along the stages.

[Daewoodrow]

I know, they have alot up their sleeve. I know halo 3 will be a big source of income for them, I think they may even manage to pull a profit that quarter from it, judging by the sales boost the original box received for halo 2. But, it just worries me, they have investors who want to see evidence of long term gain, and so far they've got little to show for it.
Anyway, i'll just remain optimistic, i'm sure it's just a bad month, it would be nice to hear good news for a change.

[JasonPC360PS3Wii]

1 billion was for the warrenty, any idiot that can count 1 2 3 knows that. (Accept maybe a Droid I kid, I kid)

[chelcho]

I think that MS EDD (xbox part) will be profitable if their console is alone and without competition. MS style of lead business is cut competitors off and establish monopoly.

[PS360WII]

Well you're all saying that the extended warrenty is to blame. Well if you get rid of the 1 billion loss from that they would still be .89 billion in the red. They wouldn't of made a profit even if they didn't extend the warrenty.

I'm not saying I'm just saying

[JasonPC360PS3Wii]

LOL I like that.

EDIT: kewlkat007, "It will prpobably take around 10 years to become even for the whole Xbox franchise" What are you smoking? because I want some, if it makes you see sh!t like that. I could smoke some of that and not need a console because I could just game in my head.

[kewlkat007]

that 890+ million would not be a reflection of the "Console Division". I'm sure Zune and a lot of ther products and services within EDD have lost money too.

I guess it' is the console side that is keeping them in the RED.

It will prpobably take around 10 years to become even for the whole Xbox franchise, if they continue to do those things I posted above. Now for the Xbox 360 to break even, I think they will sometime in 2008, as they are no longer loosing on each units sold.

[dale1]

i thought the article was about the games division we all know microsoft make sh*t loads on software ,vista etc put the games division no not a penny profit
i cant see them making any profit 2008 theres just to many issues in the hardware once bitten twice shy springs to mine
also with recent court cases still pending over other problems with the hardware this too could cost serious money
the 360 hardware will cost more to produce with extra heatsinks etc

[tk]

If a business division goes nowhere - it gets pulled. The XB360 is just MS defense against losing the living room - and with it the future PC market against the PS3 with Linux.

They have to do it - otherwise Linux with PS3 becomes the de facto platform for the future - people having their first computing experience with Linux, and staying with it. They will throw billions into defending their version - which is to sell you a XB360 - at an enormous loss - but making it dependent on Vista for full home entertainment functionality. But they will first have to fend of PS3. For that a 2 Billion loss can be made up with Vista sales easily. But if investors feels that it is going pear shaped - they will pressure MS into abandoning the console market. They might not have the same perspective. And that could have a long term effect. That is why MS is happily throwing Billions into the fight. They are protecting a different much more lucrative turf. And the PS3 with Linux threatens it. They dare not lose, because the loss will be at their core revenue - Windows. XB360 is a loss leader for the Windows segment - make no mistake about it. If they secure the demise of the competition in the console market, they will abandon the console market and focus on Vista.