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[Anon1974]

Columbo mentioned "your numbers make no sense. profit is calculated by more than just income minus expenses. you know nothing about inflation, base costs, investments, tax rebates, etc..."

These are Microsoft's profit numbers. Are you suggesting Microsoft doesn't know how to report profit/loss on their own quarterly updates?

[Columbo]

What profit numbers? You don't provide any of the info or how you calculate your 130% drop. You should be more thorough with presenting the information in your blog if you want users to believe you, instead of having them question your agenda, like on your news submission (which you didn't follow the submission rules by creating your own title and summary). Not everyone is going to look through a 50 page detailed financial document to find these numbers and calculate this %.

[xaviertooth]

@colombo: check my reply on the news section.

there, i calculated on simple mathematics how the 130% arrived. And as i have mentioned, it is noteworthy and i agree with what darkride reported since what matters to us are game-related issues. in this issue, he reported that loss in the Entertainment Division. so i am surprised alot of people cannot comprehend on the topic.

on for the sake of discussion, why is it that suddenly revenues are all that matters when a lot of commenters especially 360 owners are always talking about profit. now darkride opened up a can of discussion about profits and suddenly the title was edited to please 360 owners? talk about double-standard.

in the past, users are allowed to create news title by themselves and put a spin into it and yet it is not altered? i bet that if this is about sony, we will not see moderators putting an iron hand about it.

[Columbo]

"Do not add your personal comment or opinion to the news post, simply report the news in an easy to read and objective way. Always use the original headline of the source article for your N4G headline when possible."
http://n4g.com/Info/Posting...

Users have not been allowed to create their own titles in the past (unless you mean 16+ months ago). The title edit had nothing to do with 360 fanboys complaining. It was because the submitter didn't follow the rules.

[Anon1974]

Profit was down 130%. Anyone can look at the numbers and figure that out. Revenue was down 2%. Also easy to see. So you tell my why "130% profit drop" is unacceptable and needed to be changed to "2% revenue drop". They're both true based on the numbers Microsoft provided. Neither of them was the title of the original story which was simply "Microsoft reports 3rd quarter earnings".

If pressure from 360 fanboys isn't what persuaded the mods to temper the title, then what was it? I can think of no other reason they'd take two equally true titles and go with the 2% revenue story. Revenue streams fluctuate all the time, a 2% drop isn't news during a depression. 130% drop in profit following a 60% drop in profit over the holidays both since the 360's price cut is news.

Edit: Actually, I notice they updated the title a 3rd time on my submission now. It's now simply "Microsoft Reports 3rd Quarter Earnings." I guess the mods are following their own rules. Still, we see opinion forced onto articles reporting sales data all the time. Just look at what a gong show it's become around here when the NPD figures are released every month.

Edit again below: The point was originally they mods changed it to "2% drop in revenue" from my equally true title. At any rate it doesn't matter. This isn't the news, this is just my blog entry.

[Columbo]

It was changed because it wasn't the original title. The mods used the original title. Please read the rules & guidelines before submitting future stories.

[butterfinger]

is sensationalizing and inflating percentages. A more proper idea of what is actually going on with Microsoft can be found here: http://www.reuters.com/arti...

Microsoft is definitely have a tough go of it (like most companies right now), but they aren't going anywhere. As for gamers, by the time the next XBOX is ready to come out, the economy should be looking a lot better. We can only hope.

[Anon1974]

"sensationalizing and inflating percentages"?!

That's just a dirty lie. I even provided the link. Just because Microsoft doesn't point out in their summary that MS Entertainment's profits have fallen 75% since the price cut to the tune of $361 million doesn't mean it's not true. Of course they aren't going to draw attention to that fact.

The numbers are there and there's no inflating of those percentages going on. That's simply what they are. Do the math yourself.

[butterfinger]

honestly believe that you are the only person that would point out this fact if it was true? You are missing information in your analysis. I understand that you want this to be true, and it very well might be, but you are going about it without all of the pieces.

[Anon1974]

So because no one else is running with the storey means it's not true? I provided the link, simply look yourself.

The reason no one else is picking up on this is NO ONE CARES! MS Entertainment is such a drop in the bucket compared to Microsoft's larger operations that when earnings are released MS Entertainment is hardly ever even mentioned. When Ford announces their earnings you don't see articles that say "Ford Credit Profit down 60%" because no one focuses on individual divisions of a company in the headlines.

I simply pointed it out because it's relevant to myself as a gamer and 360 owner but apparently other 360 owners don't want to think about it and don't want to discuss the potential consequences. It's funny, when Sony reports their numbers their no shortage of arm chair analysts weighing in on what Sony should do and what's fated to happen to SCEE but when it comes to the 360 you're not allowed to talk about it.

[soxfan2005]

"The E&D Division is composed of five main businesses: the Interactive Entertainment Business, home to the Xbox and Games for Windows gaming platforms; the Mobile Communications Business, which develops and markets Windows Mobile software, services and applications; the TV, Video and Music Business, comprised of Microsoft Mediaroom, Windows Media Center and Zune software and services; and the Specialized Devices and Applications Business, which includes the Hardware Group, Microsoft Surface, Office for Mac, Microsoft Auto and Windows Embedded software."

I have not read anywhere that the reduced profits are due to XBOX 360 performance. It seems like the E&D division has a lot of products other than XBOX that could have contributed to the numbers. Does anyone have proof that it was XBOX 360, and not any of these other products, that caused the reduction in profits? Is there any breakdown of the individual products in this division and how each contributed to revenue and profits? Otherwise, it seems you are jumping to conclusions about XBOX 360.

[Nineball2112]

You have a good point here.

It could be related to the Zune for all we know, but it COULD also be laid at the feet of the Xbox 360. We just don't have enough info.

One theory is as valid as the other....

[Anon1974]

Commodore 64 just provided me the following link which I had missed.

http://www.microsoft.com/ms...

Although Microsoft attributes the the partial decline to reduced sales of MS Office for the Mac (which for some reason falls under MS Entertainment) this blurb caught my eye.

"Cost of revenue increased $52 million or 6%, primarily driven by increased costs associated with the Xbox 360 platform, reflecting the increase in console and video game sales."

Increased costs putting a strain on revenue due to an increase in console sales? Does that not sound like MS is taking a loss on the 360 hardware?

[commodore64]

Oh dear darkie.

You are scratching in the dirt this time!

"Cost of revenue" = "Cost of goods sold"
http://en.wikipedia.org/wik...
"Subtracting the cost of goods sold from the amount billed when selling the goods (sales revenue) produces the gross profit on the goods.

The net income, what most people understand as the business' income or profit, is determined by subtracting the cost of goods sold and the indirect expenses from the sales revenue."

Any and all goods sold incur COGS (accounting 101).
The COGS refers to the production cost of the unit.
As less units are sold, COGS goes down.
as more units are sold, COGS goes up.

the unit sales of the 360 are up, hence COGS are up.
that is why the report states " ....reflecting the increase in console and video game sales."

If you look into a comparable ps3 quarter, you will note that as ps3 sales go up, the ps3 COGS also goes up, and vice versa.

It is unfortunately unclear from this article whether the 360 hardware is actually sold at a loss or a profit.

The COGS figure merely shows that, as more product was sold, the expense of producing the product sold rose in step with the units sold.

I know you have an agenda, darkie, but please, keep it real man!

[Nineball2112]

You posted: "As less units are sold, COGS goes down.
as more units are sold, COGS goes up.

the unit sales of the 360 are up, hence COGS are up.
that is why the report states " ....reflecting the increase in console and video game sales."

If you look into a comparable ps3 quarter, you will note that as ps3 sales go up, the ps3 COGS also goes up, and vice versa."

Yes, this is true. What we need to know is COGS as a % of Sales for each period to determine if COGS went up in a "normal" direct relation to the increased sales, or whether it went up higher than the normal % to sales.

If COGS is higher as a % to sales than prior periods, that could be two things:
1. the ACTUAL cost of goods sold increased, ie. higher raw material costs, higher labor costs, higher freight, etc.
OR
2. Costs of goods sold remained the same on a per unit basis, but the SALES PRICE is lower. Ding, Ding, Ding!!!

That would, obviously, also show a higher COGS as a % to sales.

[Nineball2112]

Interesting information and I have no problem with your submission.

I tend to agree with Columbo about the title (it IS tempting to use the most pertinant and/or interesting part of the articles as the title) but it's pretty much set in stone that you need to use the original title of the article. Again, I understand your reasoning, but the "rules are the rules" as they say.

The facts of MS's numbers are the facts. I don't understand why anyone would want to "downplay" them or "spin" them. Based on these numbers, the only logical conclusion is that MS is losing money on each Xbox 360 being sold now. Now, that might be one SKU over another, but we don't have that information.

Anyways, great read Dark...
Thanks.

[TheDude2dot0]

your just lieng about the sales bc u jelous we have a 360!

[Anon1974]

Gamertag is Darkridehex66. Say hi sometime.
Nothing here is a lie. The financial data I provided a link to0, the questions I ask I don't pretend to have the answers for. I'd love you to point out where I've lied. It's all merely speculation on my part to here what other people have to say about the issue.

[TheDude2dot0]

You lied about that one part. Trust me.

[Bucky Sligo]

The big fail of this blog is the assumption that MS entertainment division is only the Xbox 360.

"If Microsoft is selling 360’s at a loss in what appears to be a giant fire sale, what does the future hold for the system? Aren’t these the questions as gamers we should be asking?"
1. You don't know if the Xbox360 is selling at a loss or not since the Xbox360 is not the whole entertainment division.
2. Consoles selling at a loss is nothing new. It certainly doesn't mean MS is about to drop the Xbox 360. I highly doubt that MS is selling at a loss since the hardware of the Xbox 360 is pretty cheap to manufacture.

[lh_swe]

However it does logical considering that MS has slowed the pace on exclusive game contracts, which could potentially be a result of this, sinc people investing in MS would probably be scared off, because even though MS is not making a profit on a product they throw hundreds of millions at it, which doesnt look good on a short term basis.

[Bucky Sligo]

Sure, but what does that say about Sony? They are in the same boat as MS when it comes to profits. They are selling an expensive machine in a recession.
This "giant fire sale" is inflating the userbase which means more software sales. Surely this must be good news for publishers?
Also, how certain are we that MS isn't making a yearly profit with the Xbox 360? I know they are still in the red when you look at the overall picture but I think there was an article a while back stating the Xbox 360 is starting to turn a profit per year. I could be mistaken.

[Anon1974]

MS Entertainment also includes the Zune, PC Games, Office for Mac, Mediaroom and software for Surface computer systems. The 360 is far and away the biggest contributer to revenue. Over the holidays the Zune brings in about 100 million.
And remember, we're not talking about a decline in revenue. Revenue is the same. It's almost $400 million in profit that's disappeared coinciding with the 360's price cut. Is it the 360's fault? I don't have the faintest idea - but you don't have to be a rocket scientist to start your search there.

Maybe Mac software is suddenly more expensive to make which would explain why revenue is the same but profit is down?

Or maybe R&D spending suddenly skyrocketed by $400 million. If that's the case, you still have to wonder what they could be working on that would cost them almost 1/2 a billion in 6 months.

As for Sony, that's changing the topic completely. Sony has their own, unique set of problems and you don't see my claiming it's all smiles and sunshine there.

[Bucky Sligo]

"If Microsoft is selling 360’s at a loss in what appears to be a giant fire sale,"
You seem to be leaning towards MS selling the Xbox 360 at a loss in your blog. Or at least that is what I understood.

I think the problem is that your take on the article is very negative towards the Xbox 360 when in reality there isn't anough evidence to point to the Xbox 360 selling at a loss or being responsible for the 60% drop in profit since last year. The last paragraph you where clearly pulling at straws and revealed a bit of animosity against the Xbox 360 fans. Add your orginal title to the news story you posted then it is not hard to see why there is a back lash against you.

[Anon1974]

The facts are the facts. MS Entertainment's profits are way down and just looking at those numbers you know that something is amiss. I imagine the first person to start to draw attention to Sega pulling out of the hardware market was probably criticized for focusing on a "negative" but that doesn't change the fact that Sega's withdrawal dramatically changed the face of console gaming and interested gamers should have been talking about it.

I don't know if the 360 is selling at a loss and I'm not saying that it is, but that theory would certainly fit the facts.

And as for having a bit of animosity towards other 360 fans, damn straight I do. This is happening whatever the reasons are and as 360 owners this could impact our community. The fact that other 360 fans not only refuse to talk about it and go so far as to actively attempt to censor me is infuriating. We're talking facts here, it's not like I'm making this up and anyone with half a brain can verify that what I'm saying is true. You can't tell me other 360 owners who are paying attention aren't wondering the exact same thing but I don't think we should be censored in talking about it because a few think that all gamers should just plug their ears and ignore what's going on.

[Bucky Sligo]

The above article consists of 50% factual numbers and 50% opinion and conclusions drawn from the factual numbers. It's the 50% opinion that I'm disagreeing with.

MS entertainment drops 130% - FACT
Xbox 360 is in trouble and selling at a loss - OPINION

If your logic applies to all consoles this gen then the only "safe" console is the wii.

[TheColbertinator]

This article is a joke

[Jinxstar]

Correction "To Steven Colbert this BLOG is a joke"

I think he did some good research and made it fairly unbiased for an article that screams "FLAME ME". However everything can be flipped and twisted any way you like it. Wait til we See MS's presentation at E3 it wont be "We made X $" it will be "We sold X consoles" and sony will be the other way "We made X dollars" and not sold "X consoles" So they both come out looking great. It's just numbers and an OPINION. Thats why it's a blog. I do think he's doing more then rambling and did a good amount of research. Good job Dark.

No matter how you look at it everyone is doing just fine. All that matters is that they aren't going anywhere anytime soon. What do you want with your hard earned buck? I prefer my PS3 and PC. So yeah... You prefer your 360. Make an article about Consoles sold then...

My only big opinion in the matter is MS's customer support and consumer confidence are going the way of toilet water not just with the 360 while Sony is gaining ground. However in a piss poor economy and otherwise people will skimp and scrape so yeah... most people would feel Blu ray is a "Luxury" and DVD's and a great cheap alternative... So it really doesn't matter...

Good job dark have a bub bro.

[thor]

Darkride -

Everything you have said is pretty much true.

I have to agree with the mods on changing the title of the article you submitted - you said yourself that you changed it to sound "punchier", which is actually against guidelines.

Still, the numbers are there, but it's important to remember that the Xbox division is just one part of the entertainment division.

Of COURSE they make less money on each console sold - they dropped the price! It's unclear as to whether they are selling it at a loss, but it doesn't look like it was a very profitable decision for them. All they are doing is increasing the sales to improve brand perception and get a larger install base in order to get more money from game sales.

It's clear that another price cut would have a very damaging impact on their profits. Seeing as their agenda seems to be "destroy Sony at any cost", and considering the rapid loss of support of the original Xbox, I wouldn't have great hopes for the longetivity of the console. At least Sony are trying to build brand loyalty by customer satisfaction. MS seem to do it by knocking their competitors out of the way.

[raztad]

@thor

You said it very well. If you drop the price your profits go down, it wouldnt happen if for example the sales of the console dramatically increases and the revenue with it, but then the revenue actually dropped 2%. Not good for MS.

I think their price cut strategy was a short sighted one, maybe they just panicking after the PS3 outsells the 360 for almost the whole year, but whatever the reason, MS now is trying to push the sales of a new bundle (360 elite + Halo+Fable) in order to attract potential costumers to the most expensive SKU. Not sure it will works, the same strategy is being used by Sony, "PS3 gives you more for your money" and people just choose the cheapest console.

[torreyjs]

yeah dark your totally right xbox is doomed and Microsoft is the harbinger of great and unreversible evil. since this is only a Q3 reading I wonder what, at the end of the year, counting Q1-4 the story will be.

Either way this article fails

[Coolrah]

Way to much. Darkride isn't saying that microsoft is doomed or the 360 is the cause or there gonna go out of business. All he's asking is that the money is disapearing somewhere and we want to know why.This isn't good news for Microsoft as that means that their losing money somewhere. We don't know if it could be the xbox or zune or anything else. All darkride is poised a question saying "maybe" its the xbox since they lowered the price. Its not a completely far-fetched reason and he supported with possible reasons. Also people saying this article is phail are just too stuck up to accept the truth. Look the numbers and the facts are there. Its your choice if you wanna be logical or illogical about it. anyway good read darky....Bubs for joo

[MUNKYPOO]

im with you darkride!

[JasonXE]

The Zune and other stuff counts towards MS Entertainment Division, not just xbox 360.

[Anon1974]

We touched on that above. MS Entertainment consists of the XBox, MS's PC games division, Office for Mac, Zune, Windows Mobile Device Platform. To simplify things a bit for you - MS Entertainment brings in about 8 billion in revenue a year. The Zune will account for approx 200 million of that, Office for Mac about the same.

By far the biggest driver of revenue is the Xbox. XBL fees alone you have to figure must bring in almost 500 million a year (MS won't say, but out of 17 million XBL users, if even half are using gold that's about $500 million, and XBL sure doesn't cost 1/2 billion a year to run).

There's no doubt that changes in sales with the Zune or Office for Mac can have an impact but for profit to drop 75% in 2 quarters on the exact same revenue? That can't not be Xbox related. MS sorta touched on it but didn't give any details (see my link a ways up there) when they said "Cost of revenue increased primarily driven by increased costs associated with the Xbox 360 platform."

Anyway, I've reached my bubble limit. Hope y'all found this interesting. It was an exercise in looking deeper at the business side of our favorite hobby and while I don't pretend to have all the answers, I certainly enjoyed talking with everyone.