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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.

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IanVanCheese716d ago

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

HanzoHattori716d ago (Edited 716d ago )

The PS4 console didn't.

iamnsuperman716d ago

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

HanzoHattori716d 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.

OpieWinston716d ago (Edited 716d 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.

Ballsack716d 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

iamnsuperman716d ago (Edited 716d 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

chuckyj1716d ago

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

TheGreatAndPowerful716d ago

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

WHAT!?! MS investors do will not agree.

otherZinc716d 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.

horndog716d 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.

Provolone24716d 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 716d ago
Septic716d 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.

SoapShoes716d ago

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

choujij716d 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).

truegamerkt716d ago

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

Concertoine716d 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 716d ago
ramiuk1716d ago (Edited 716d 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

ThePope716d 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.

xer0716d 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.

ramiuk1716d 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.

ThePope716d 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 716d ago
Darrius Cole716d 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.

badz149716d ago

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

xer0716d 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_Elite716d 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!

PrinterMan716d 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 716d ago
aviator189716d 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.

randomass171716d 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.

KonsoruMasuta716d 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.

Ballsack716d 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

Goku781716d ago

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

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