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Microsoft 2008 CES Financial Analysts Call Transcript

This comprehensive, in-depth Q&A session of Microsoft's Xbox business between company executives and financial analysts may answer many questions you have about Xbox 360 and Xbox Live. Here Microsoft executives give answers that you would not be able to find elsewhere.

This is a full (and long) transcript of a webcast session between Microsoft executives and key investors on January 7. The Q&A session discussed many Xbox-related topics and information that had not been covered in Microsoft's CES 2008 keynotes. Microsoft Entertainment and Devices Division's president Robbie Bach and CFO Mindy Mount offered answers and insights into the strategy, direction, performance, competition and future of Xbox 360, Xbox Live, Zune and other related areas. Highlights of key topics from the transcripts:

• Microsoft's strategy of its IPTV and Media Room agreement with BT Vision service.

• The lifecycle for Xbox 360; why 360's lifecycle is expected to be longer than Xbox's, and why Microsoft artificially shortened the original Xbox's lifecycle.

• The business models and margin levels of Xbox 360 and Xbox Live.

• Xbox Live's subscriptions, challenges (i.e., outage issues) and future.

• Microsoft's internal (first-party) content strategy for Xbox 360; the ownership of Mass Effect is briefly mentioned here.

• What Microsoft knows about their competitors' next strategy consoles.

• Microsoft's plans for a portable gaming system.

• What kind of shape the Xbox 360 sales channels are in since the holidays.

• How Microsoft plans to evolve the Xbox Live subscription attach rate, which is currently at about 50%.

• The infrastructure issues with Xbox Live, and what Microsoft plans to do in the future to avoid those issues.

• Microsoft's direction with an Internet browser on Xbox Live, and the reasons why Xbox Live does not have a browser yet.

• A breakdown of the European business and penetration of the Xbox 360 in Continental Europe; the business and third-party support in Japan is also mentioned; and how Xbox Live differs in the European market relative to the North American market.

• The impacts of the economic slowdown on the video game business in the US.

• The Japan console market, and Microsoft's long-term plans and strategy there.

• The Zune and Zune Social; how the device competes with Apple iPod and evolves over time.

• Third-party publishers' development efforts and movement between the Xbox 360 and PS3 (as well as the Wii), in terms of time exclusive, lead platform and content.

• Microsoft's priority in building IPs through acquisitions and publishing relationships.

• Microsoft's invested interests in the format war between Blu-ray and HD DVD; how HD DVD (and its HDi technology) affects Xbox; and direct digital distribution on Xbox Live Video Marketplace.

• The carrier economics versus the Microsoft economics in IPTV and Media Room relationships with service operators.

• The parts of the Xbox business in which Microsoft started to integrate advertising services.

• The potential for motion sensitivity in the Xbox (Bach compares Nintendo and the Wii to Microsoft and Sony.)

• The potential and challenges for an Xbox console market in China, and micro-transactions there.

• The opportunity in mobile business and advertising.

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Captain Tuttle3479d ago

Good article, well worth a read. It's nice to see a meaty piece on this site, one that's not just flamebait.

Maddens Raiders3479d ago

Sorry sir, this is nothing but flamebait.

Gina-get-u3479d ago

This was a serious conference between senior management at MS and financial analysts concerning information that is relevant to investors. Many of these analysts work for investment firms that have sizable holdings in MS stock.

In other words, this was a serious dicussion among grownups about their business. No PR or marketing BS, because it wouldn't work with this audience. If you try to understand the transcript, a lot of what MS has done and will be doing with respect to its gaming division will suddenly make a lot of sense to you. But Maddens, I guess you kids can turn anything you can't comprehend into flamebait.

HarryEtTubMan3479d ago (Edited 3479d ago )

"One question on Xbox and two on Xbox Live. The 17.7 million units SHIPPED was Xbox, can you give us any gauge on what kind of shape the channel is in, since the holidays."

THE XBOX 360 HAS NOT SOLD 17.7 MILLION CONSOLES YET! PERIOD. It is around 16 million and the PS3 is around 9 million.

VG CHARTS IS RIGHT.

THE XBOX 360 HAS NOT ALREADY SOLD 18 MILLION UNITS THAT IS SOOO STUPID. THEY SOLD A LITTLE OVER 7 MILLION IN 06 AND DROPPED TO OVER 6 MILLION IN 07. IT SPECIFIACLLY SAYS SHIPPED OR "SOLD TO RETAILER". The Wii has barely sold 17.7 million.

You can lie but its not ture. The PS3 is onlt about 6.7 million behind now. It has closed the gap CONTINUOUSLY since October.It has outsold the 360 in worldwide sales since October. Yes, already and we know this. The 360 shipped 17.7 million and tere is a direct quote.

Silver3603479d ago (Edited 3479d ago )

Robbie Bach

Actually channels in the right shape, I would say probably, how would I qualify that? We had places getting right to the end of holiday where we were starting to run a little thin, so I think we finished up the holiday right where we wanted to.

Meaning shipments are not sitting on the floors in game shops, but that the sell through rate was in alignment with shipping.