260°

Why It's Perfectly Fine If Microsoft Has Lost $400M On Xbox One

According to a recent SEC report, Microsoft's MSFT Xbox division revenue is now up to $1.7B annually, because of the Xbox One, but its costs are up to $2.1B, also because of the Xbox One. That’s yielded a collection of startled headlines about how Microsoft has dropped the ball with their new console by losing $400M already.

IanVanCheese3556d ago

TL:DR - All hardware launches incur massive costs, it's pretty standard.

HanzoHattori3556d ago (Edited 3556d ago )

The PS4 console didn't.

iamnsuperman3556d ago

Well actually we don't know. We know it made a profit last quarter and that is about it really

HanzoHattori3556d ago

Then it's safe to say that this statement, "All hardware launches incur massive costs," isn't exactly true, unless you're including costs for packaging, advertising, and R&D, all of which are costs that are mostly incurred before the release of the actual hardware itself.

OpieWinston3556d ago (Edited 3556d ago )

It includes the costs of Advertising/R&D/Packaging/ Production...The total costs were high.

And they made a profit in their gaming division.
$893 Million in profits off Surface/Xbox (Computing and Gaming Division)

They made over 9.6 Billion over the course of the fiscal year off their Gaming division, but costs were so high for X1 R&D and Surface Pro 3 R&D.

"Cost of Revenue" includes R&D Hanzo...It's expected for the first Fiscal year financials to make a loss, but Surface covered it.
Edit
@Iamnsuperman
http://www.microsoft.com/In...
They made a profit off Surface and offset the losses of the Xbox platform.
The Android royalties aren't part of "Computing and Gaming Hardware" division.
They made a profit off that division, $893 Million.
The Surface had revenue of $1.3 Billion and costs of revenue were $970 Million. Do the math...

If you're going to say the Surface is losing money...Take it from MS own financial reports.

Ballsack3556d ago

And counting the costs of kinect 2 development which has now basically been dropped...you can see why shareholders want to sell the division off, Xbox division is bleeding loses right now.

Fanboys wont like to hear it ...but facts are facts...

Microsoft face a uphill struggle but have some great games on the horizon not sure how much that will help but im stoked to play them anyway

iamnsuperman3556d ago (Edited 3556d ago )

@opieWinston

I don't think Surface covered anything. They have been loosing money on that for quite some time ( http://www.nasdaq.com/artic... ) . It is the biggest burner in that division. Something else is covering the cost of all this R and D http://www.businessinsider....

Edit @ your edit read this http://www.computerworld.co... . They use reports Microsoft supply. It is a mounting cost that doesnt just go away

chuckyj13556d ago

Sooo... How much was the Research and Development costs of the PS4? Or do you not have those numbers?

TheGreatAndPowerful3556d ago

"Why it's perfectly fine that the Xbone lost almost half a billion dollars."

WHAT!?! MS investors do will not agree.

otherZinc3556d ago

The "only" reason PS4 is making a $12 profit after losing $41 per PS4 sold, is the massive layoffs at every level & development studio at the PlayStation Division.

M$ has made a $71 profit off the XBOX ONE from the very fist day the XBOX ONE went on sale.

This is why the XBOX ONE Games Division suffered "zero" layoffs! The 200 layoffs XBOX ONE has, was from the short films division; not effecting the Halo Movies or Quantum Break Movie.

This Forbes Clown is a "contributor": to stir traffic.

horndog3556d ago

@hanzo.

Of coarse ps4 had its losses at launch its just made it back because it's selling so well. Unfortunately the ps3 cost sony how many billions?? 9 BILLIONS?! Shit! 400million doesn't seem so bad now son.

Provolone243556d ago

@horndog oh look, it's you talking about PS3 sales again. You never do that.

And did you literally just say "9 billions" plural?

There is no hope for you, my friend.

+ Show (7) more repliesLast reply 3556d ago
Gazondaily3556d ago

Well its hardly a great sign but yeah I think a lot of the costs are to be expected. But all those jumping on the 'Dreamcast 2.0' bandwagon are getting way ahead of themselves.

SoapShoes3556d ago

To be fair if it wasn't Microsoft behind Xbox it would be a Dreamcast 2.0

choujij3556d ago

The Dreamcast was generally a small success around the globe before Sega pulled the plug. If anything, Xbone is more akin to the Sega Saturn (even more so, considering their respective E3 disasters prior to launch).

truegamerkt3556d ago

The x1 will never be the dreamcast, it was actually a good console.

Concertoine3556d ago

I dont get this either. The losses on the first years of the Xbox and 360 were triple this number.

+ Show (1) more replyLast reply 3556d ago
ramiuk13556d ago (Edited 3556d ago )

ps4 recovered its costs didnt it already?

i expect most of MS R&D costs would be kinect 2 and cloud?
cant imagine it took much to think of the console itself because just like ps4,there simpler systems this time

ThePope3556d ago

It takes years to recover R&D costs. Plus according to an article I read the cost is levied against the company the year the console launched. So it incurred a huge amount of debt on day one. I'm sure Sony is no different.

xer03556d ago

That's right.

Earlier articles on here, already confirmed that Sony has recovered it's costs already.

They are selling each PS4 with a profit. And that's without any price cuts. They've also reduced the cost in developing the console already. That was reported a few weeks ago.

ramiuk13556d ago

@xer0 i thought i was right dude,because im sure it said something about because they made costs back there gonna heavily invest in psn??
upgrading the network or something.

ThePope3556d ago

Making a profit on the console and paying back the R&D budget are two very different things.

To make a profit on each console all that is for manufacturing costs to be less than the selling price. MS makes money on each console sold as well.

+ Show (1) more replyLast reply 3556d ago
Darrius Cole3556d ago

It's fine because it's not my money.

Nobody who loses 400 billion dollars of their own money is "perfectly fine" with it.

GW2123556d ago

Million, not billion.

badz1493556d ago

MS spent $500mil marketing the 1st Kinect. so, why any of you think that a $400mil is such a big deal to them?

xer03556d ago

A company that leaks a lot of cash, won't last long.

Apple learned this, and they are making huge profits, while Microsoft try to copy them.

MS has squandered money on all of the following, and lost a tonne of money:

- Windows Phone
- Surface/Tablets
- Xbox (as reported in this article)

Source: http://www.pcworld.com/arti...

They still have Windows and Office, but Windows isn't the huge cash cow it once was.

It's just a matter of time until the party is over.

ATi_Elite3556d ago

Let me be really really clear when i say this!

$400m to Microsoft is NOTHING! to Nintendo and Sony those are huge numbers but to MS losing $400m is like me or you losing a handful of pennies!

Microsoft plays follow the leader and still rakes in $2b (b= BILLION) every 3 months.

No innovation, no leadership just do what the other guy does and pull in $2 Billion.

besides that $400m will be made up by EA Access, some Xblive titles for sale, and or Halo!

Kinect was already paid for so that extra $100 on Kinect XB1 sold was money in the bank for MS!

MS may do stupid things but they are not DUMB!

PrinterMan3556d ago

I disagree. Microsoft is DUMB. The problem is many consumers are even DUMBER because the keep buying their crap. MS is a magnificent PR/Sales company. The old saying ...they could sell ice cubes to eskimos. One day all those 400 million dollar loses will catch up to them.

Just my opinion.

+ Show (3) more repliesLast reply 3556d ago
aviator1893556d ago

Better than the billions lost over the rrod mess of the xbox 360.
I guess we'll have a better picture of xbox financial as the years progress.

randomass1713556d ago

I wouldn't call it perfectly fine. That's a lot of money to not make back. But at least Microsoft seemed to have learned their lesson and will have greater focus on gamers.

KonsoruMasuta3556d ago

It's not PERFECTLY fine but it isn't as bad as some people make it out to be.

I'm sure they predicted that they might have some losses when they launched their new peice of hardware.

Ballsack3556d ago

Bet they didnt predict having to have a kinectless sku less than a year into its availability... They way it was touted that one cant work without the other by microsoft

Or

to be getting spanked in sales in its home territory

Ms need a new halo and fast ...that sucker will shift consoles

Goku7813556d ago

Either start over with a better product and better customer service or leave the console buisness altogether.

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110°

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It sounds like you’re just an eldenring fan and not so much a fan of games by and large. Which theres nothing wrong with.

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170°

Let's Be Real, There Is Nothing "Micro" About Microtransactions Anymore

Microtransactions have gotten ridiculously overpriced in recent years, with titles now offering cosmetic skins worth more than some games.

Terry_B1d 5h ago

Yup..this is 100% the sad truth

z2g8h ago(Edited 8h ago)

The elephant in the room tho is personal accountability. It’s easy (albeit basic) to blame the big, bad corpo, but microtransactions wouldn’t be where they are if gamers didn’t spend money on them. As it stands the MTs usually make more than the game. Publishers know raising game prices will cause backlash, so they do MTs to compensate. But the adult conversation is consumers determine the success of products with their wallets. So if MTs are a huge thing, it’s because we as consumers told them we like them by giving them a lot of money for them. So if you don’t want them to be a thing, convince your fellow gamers to stop buying them and expect that games will be decently more expensive. You all can disagree all you want, but reality is a bitch, and eventually you have to live in it.

anast6h ago

Trying to convince people is the least realistic thing. If we are trying to be adults, actual action is what changes things not "convincing campaigns" on platforms owned by the people 'you' are going against. It's madness and idealistic.

ApocalypseShadow1h ago

Easier said than done. I've told gamers for years to not buy micro transactions, expensive dlc, etc. Gamers bought it anyway. Didn't fit on a DVD that would have fit on a Blu-ray disc.

I also told some gamers to not pay for online like Xbox Live because it would force the rest of the industry to only offer playing online if you pay for it. Told them not to support a broken console that Red Ringed. To not support Xbox One because Microsoft tried to take away game ownership and how you play your games. To not pay for a console by one manufacturer where a, now 3 trillion worth, didn't make enough games at the level of Nintendo or Sony who are worth less money.

How much of that did you support anyway with your money then go back and read your comment again.

isarai21h ago

I mean except for the amount of content you're paying for.

Hugodastrevas10h ago

There never was, the only time I paid for a microtransaction was on Blacklight Retribution (PS4) and it was because I enjoyed the game a lot so I felt the devs should get something for all that entertainment (€5 "membership")

-Foxtrot9h ago

The devs wouldn’t get that though, that shit goes straight to the higher ups who do f*** all let’s be honest.

Hugodastrevas8h ago

Probably, but I wasn't as cynical back then and €5 wasn't a big ask to get the guns with grinding instead of renting them, and the game was good (still is on the PS5/4)

CrimsonWing698h ago(Edited 8h ago)

I couldn’t believe what Blizzard charged for horse armor and cosmetics in Diablo 4…

I remember back in the day when a season pass was $15 and you got everything included in it. Now, I see them at $60 and you still don’t get everything.

CantThinkOfAUsername1h ago

That's just Blizzard. Unlike Bethesda's $0.99 horse armour, Blizzard's first microtransaction, Sparkle Pony, cost $15.

Shane Kim8h ago

As soon as gaming wasn't deemed nerdy anymore, and reached the casuals this happened. We're smart, but casuals play mobile games and other stuff, and don't really have anything to compare. They think gaming is supposed to be like this and pay for in game purchases.

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