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1Up: Heavy Losses for Microsoft's Entertainment Division

It's been a strange week or so for the folks at Xbox. Their best known spokesman just left for Electronic Arts, that whole disc scratching thing is moving into legal territory (again), and, to top it all off, on Friday your division posted a 1.9 billion dollar loss on its final year-end numbers.

Overall sales of the Xbox 360 were down across the board in the last quarter -- from 1.8 million units in fiscal 2005 to only 700,000 units in fiscal '06. Additionally, the division has been forced to absorb $1.2 billion worth of punishment for their recent upgrades to the 360s warranty and maintenance program.

Total revenues for the Xbox division in the fourth quarter stood at $1.16 billion -- a 10% drop, compared to last year.

In addition, Microsoft's software sales (Xbox and PC) fell 28 percent last year to hit USD 265 million -- which obviously doesn't help matters any. When all the unexpected costs are factored in the numbers represent losses 47% larger than last year's deficit for the entertainment and devices division (which also includes things like the Zune along with the 360).

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BubblesDAVERAGE3463d ago

They should at least try and maintain a second place standing in the console race because its costing them a lot of money to pay for the exclusives and making faulty hardware. I know what your thing there rich but MS is not a company to take loses for years like that.

marinelife93463d ago

Hang in there Microsoft. Gamers need you for good competition.

XboxIsBad3462d ago

Why does anyone care about Microsoft? If they lose $1 Billion, its like losing a penny to us. They hog our money anyway. And to think I would pay $250 for a 10 inch thick MP3 player.

Odion3463d ago

or they could keep doing what their doing, and keep Sony in last place which, frankly would cause far more damage to Sony then if MS was able to take first.

PS360WII3463d ago

Yea keep doing what they are doing for sure. 360 is here to stay and they are fixing the problems so it's only getting better

DJ3463d ago (Edited 3463d ago )

I don’t see how Microsoft could continue to conduct business with their Xbox 360 hardware. The rule of thumb in business is “if it’s not profitable, don’t do it”. The Xbox brand has not been profitable throughout its 6 years of business and, with current events such as the Extended Warranty taken into consideration, it most likely never will be. Microsoft knew that its new Xbox 360 hardware was inherently defective going into E3 2007, and it’s important to note that they laid out few, if any, plans for the future. They decided not to showcase game titles outside of 2007, which was quite strange considering that every other company did show plans for 2008.

Microsoft is at a definite crossroad right now. If things start to shape up for the console, they may continue to support it and may even continue development on its successor. If sales continue to decrease at their current rate though (and the brand continues to be unprofitable) don’t expect Microsoft to produce any more 360s after 2008. They’ll continue to support their userbase through software since that’s the only way they can help reduce their Entertainment Division's $6 Billion debt, but we have to face the possibility of only two companies coming out of this console war unscathed. I know a lot of people argue that since Microsoft as a whole is profitable that there's no reason for the entertainment division to be shut down, but Divisions are actually individual companies within a Corporation. They can't just throw billions of dollars around to help each other out. Most startup finances come from investors, and investors are very fickle.

TheMART3463d ago (Edited 3463d ago )

How nice to see you once in a while DJ. Talking the same sh!t like always. Let me brake it down for you once again.

The best proof is this link:

http://www.gamasutra.com/im...

The 360 outselling the PS3 constantly. The three last months double the sales of the PS3. Yes July is a good month to have a peak for PS3 because of the lower price, but those few fanboys that waited for such a price drop have now bought it. Expect the sales to drop again.

Like Eu launch on PS3. A great launch, with a strong, very strong dip afterwards. Even UK, former Playstation nation, sold more 360's week in week out fast after the launch then PS3's.

Then the rest of your nonsense:

"I don’t see how Microsoft could continue to conduct business with their Xbox 360 hardware. The rule of thumb in business is “if it’s not profitable, don’t do it”. The Xbox brand has not been profitable throughout its 6 years of business and, with current events such as the Extended Warranty taken into consideration, it most likely never will be."

Wrong. Business as big as this, world wide is the long haul. It's not about a short cycle. Its about winning marketshare, big scale economics. MS has announced, even with the current extra warranty costs, they'll be profitable this financial year, from July 2007 to July 2008.

"Microsoft knew that its new Xbox 360 hardware was inherently defective going into E3 2007, and it’s important to note that they laid out few, if any, plans for the future."

Did they? They have an extra heatsink implemented, the 'Falcon' 360 with 65nm GPU/CPU and redesign is coming up.

"They decided not to showcase game titles outside of 2007, which was quite strange considering that every other company did show plans for 2008."

OMG you are really a total retard... No thats their punch line. Right here, right now. Games NOW. Unlike the Sony This is Waiting concept. You know they have Mass Effect, Too Human, Gears of War 2, UT3, Halo Wars, Haze and all those other games for 2008. Really you are short sighted or just that dumb.

"If sales continue to decrease at their current rate though (and the brand continues to be unprofitable) don’t expect Microsoft to produce any more 360s after 2008."

Go back to the link I just gave to you. And BTW. Your music stinks

@ masterg

Dude, VGchartz is down right now, but has numbers normally. Articles have been all over N4G also. Where UK is shown to sell the 360 more then PS3, where PS3 has some strong sales in Southern Europe.

The latest weeks I can remember, the 360 sold 29k and the PS3 sold 18k or so. I'll see if I can digg up some articles from N4G for you. Because its like that. After launch, the PS3 declined so far under the 360 sales.

power of Green 3463d ago

"$6 Billion debt"???, MS isn't in debt. Whats wrong with this guy DJ!? he goes through phases of malice driven anti MS rants that are easy to see through yet he keeps going on trying to twist facts if he thinks people don't know any better.

Its like a game or what mentally sick people play when they know what they're seeing and saying isn't true but they no longer care.

masterg3463d ago (Edited 3463d ago )

@TheMART

There you go again with your false statements without facts.

Show me where you get the information that the 360 is selling better in the UK. Ohh wait you can't. Prove me wrong please. I beg you prove me wrong.

Microsoft making profit of the 360 from July. Are you kidding me. They have had 6 straight years of loosing money. It's not gonna stop now. And certainly not with the hardware problems they are facing right now.

@power of Green
It's their gaming division which has a $6 billion loss.

BIadestarX3463d ago

DJ, you lost every credibility on anything you said when you got to this, " $6 Billion debt".... One thing is to point out that maybe microsoft entertainment divisions is not bringing catch to the already making lots of cash company... but to not know the difference between not making money as a division... and microsoft being in debt... it is simply embarrasing... sad...

Boon Tarkas3462d ago

Well-written.
Scary though, as I own a 360.

+ Show (2) more repliesLast reply 3462d ago
kewlkat0073463d ago

http://www.n4g.com/industry...

Now it is 1UP's turn, instead of Gamepro.

The Zune, was a relatively new device entering the market, but I think it sold what MS wanted it to. The xbox 360, while having a high game attach rate, accessories bought, and Xbl content delivered have fared a lot better than what most people thought.
As far as PC gaming and sales, Right now there is a big shift from XP to Vista/DX10, while manufactures optimize their Drivers for DX10 games coming out. Were dead smack in the middle of this shift, so PC gaming has not gone anywhere the last few years.

For the Xbox 360, like I stated, MS has been doing just this down below, and continues to, even though sales did slowdown from the holiday last year, well were on the verge of ROUND 2.

1. New "falcon" chip due soon, to put RROD issue to rest Hopefully(check)
2. Accessory Sales(check)
3. Sales have been steady, while sluggish(check)
4. Attach rate pretty high(check)
5. Very good Fall/Winter lineup(check)
6. Secret Price-Cut, wishful thinking(check)
7. MS(the company) is very profitable(check)
8.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.

Of course, I'm talking about the console. Let's not forget most console are not profitable till like year 3, unless you have been Sony the past 10 years or Nintendo with the wii(a league of their own). MS has been loosing money on the franchise for like 5-7 years now but,I they will be profitable with the 360 in 2008. If it wasn't for the Warranty that put them in the RED.

DrRage773463d ago

okay, so if revenue for the fourth quarter was $1.16 Billion, a 10% decrease from last year, and this was AFTER taking a $1.2 Billion dollar hit in the fourth quarter for the warranty write-off, then the xbox division is actually NOT bad as everyone is making it out to be.

think about it, this years fourth quarter revenue was down 10% from last year......AFTER taking a $1.2 Billion dollar loss on the extended warranty policy THIS QUARTER...that means that the xbox gaming division actually made quite a bit MORE than they did last year if you don't figure in the $1.2 Billion dollar write-off....

but every single sony fanboy only reads what they want to read, instead of looking at the REAL NUMBERS.....let's compare numbers for next quarter and it will show the true numbers of what the gaming division is making and i guarantee you that they will have a BIG increase over the previous year

kg053463d ago

I think u have a misunderstanding here. Revenue only accounts for sales and anything that makes MS Gaming Division money ie. Selling consoles and licensing among many others.\

The article states that MS Gaming division had a loss of 1.9 Billion dollars.
The equation to get this is simply put Revenue - Expenses=Profit/Loss.

So the Revenue which fell 10% FOR EXAMPLE went from:
(2005) 1 Billion to (2006) 900 Million <- these ARE NOT REAL NUMBERS
but represent a 10% drop in REVENUE.

The one thing I do agree with you on is that MS is going to see a large increase in revenues due to Halo dropping this winter. Enjoy ur halo helmets in the 4 or 6-disc Collectors' Edition.
(i think its 6 discs no?)

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