Robbie Bach,
president of Microsoft's Entertainment & Devices Division, smells profits a'comin. Speaking to eWeek, Bach said that the Xbox 360 "[is a business that will be profitable next year -- we'll make money next year and that will be the first time, which is pretty exciting."
As to where the profits will come from, exactly, Bach offers this explanation:
- Software, both first-party games and third-party title through royalties
- Xbox Live: Bach relates this to an amalgam of subscription, ad-based, and download-based business models.
- Peripherals (e.g. camera, controllers)
Concerning the hardware itself, Bach asserts that they will probably break even in the console's lifespan (i.e. as the cost come down, the profits from the units will eventually compensate for the
losses Microsoft endured in the system's early years), although he also notes that the price of memory "
goes up and down seemingly like a yo-yo."It will be a landmark event if Microsoft begins to turn a profit, since as Bach noted they have
yet to do so in the in almost six years since Xbox One debuted.
Reader Comments (Page 1 of 1)
qbix @ May 4th 2007 8:10PM
Look, an 80 points bill.
Smoke_Dawg_187 @ May 4th 2007 8:24PM
Yea for profits!
James @ May 4th 2007 8:26PM
Where do the profits come from?
Nickel-and-diming customers for everything.
LongshotX @ May 4th 2007 8:30PM
Hey James where do PS3 games come from?
Smoke_Dawg_187 @ May 4th 2007 8:30PM
STFU James. I'm not nickel & dimed on anything. Whatever I purchased was my CHOICE.
Skippy @ May 4th 2007 8:35PM
The fact that this statement even has to be made is completely hilarious. Jeez, Microsoft, amazing you're finally making money after spending five years digging a hole. How many billions did you lose? Just remember guys, if you guys weren't rich as shit your system would have died a long time ago.
James @ May 4th 2007 8:48PM
I'm pretty sure most purchases are by choice, Smoke_Dawg. Where's my choice of playing games online without paying $50 a year? Where's my choice of a non-overpriced hard drive upgrade? Where's my choice of not paying $100 for goddamn wi-fi that *every* other system has by default (even the DS)? When it comes to choice, MS is really no better than Sony, just less standardized.
At least Nintendo (and Sony now) are upfront about their pricing and standardized with their features. Microsoft's tactic is to cut out a bunch of stuff so they can lower the initial price and then sell you that same stuff later at incredibly ridiculous prices. And quite a bit of people fall for it, convinced that the 360 is cheaper because they haven't looked at long-term cost.
FrankTheCrank @ May 4th 2007 8:50PM
Skippy....right on!
If it weren't for their MONOPOLY called WINDOWS, and that other MONOPOLY called OFFICE, the money would have run out a long time ago. At face value, the XBOX has been a failure, totally in the red. The only reason it's still around is because M$ keeps pumping money into it.
These guys have so much money they could get into any space and finance it till hell froze over.
Developers are obviously seeing green or they wouldn't be developing games. It's M$ that's taking the big hit. Investors have got to be pissed that their, well, pissing all that money away.
No wonder their charging $179 for a 120 GB drive and $79 for 256MB card.
Joshua @ May 4th 2007 9:01PM
Yeah, I have recently actually started thinking about getting a 360 or a PS3, and the more I think about it, the more the price of the 360 seems ridiculous compared to the PS3. Granted, both are very expensive, but there really isn't a difference in price that would make 360 seem better.
I'm torn between the two, though, because each is missing something the other has that I want, like a certain game or feature...And my Wii has been sitting with hardly any good games available for it. Just a little while longer until I get Galaxy and Brawl, though! In that sense, do I even need a 360 or PS3?
Wait, what was the topic?
Slaziman @ May 4th 2007 9:03PM
Hey James, I got your choice not to pay 100$ right here asshole:
http://www.newegg.com/Product/Product.aspx?Item=N82E16833176105
GJM @ May 4th 2007 9:17PM
Frank, seriously, you make me embarassed to tell people I own a PS3.
Yes $179 is too much for a hard drive but guess what? $600 is too much for a game console too. Is hasn't stopped us from buying one though.
a dirty bastard @ May 4th 2007 9:21PM
@11 so wuts your point
a dirty bastard @ May 4th 2007 9:27PM
why complain that $600 is too much for a game console, obviously its worth it cuz u bought it.
James @ May 4th 2007 9:31PM
Ha ha Slaizman got all worked up.
Does NewEgg sell discount Xbox Live subscriptions and 360 Hard drives too? How about 360s that actually come with useful things by default rather than crap I already have (I already have a bluetooth headset and HD cable, thanks).
Economist @ May 4th 2007 10:01PM
Remarks about Microsoft taking too long to make a profit on the Xbox division are utterly retarded.
Guess what guys? People think about business in the long term! That's right! You know Amazon.com, the most successful retailer on the Internet? It took them -eight years- to finally make a profit on that company.
Gee, imagine if all enterprises made microeconomic decisions based on short term yearly profits instead of long term investments: "It's over. Amazon is finished."
Lord Chako @ May 4th 2007 10:16PM
"Where's my choice of not paying $100 for goddamn wi-fi that *every* other system has by default"
Does *every* other system have a wifi adapter that is a/b/ and g compliant? Ever look up the cost of those? The last time I checked, they were about $75 for a name brand.
"At least Nintendo (and Sony now) are upfront about their pricing and standardized with their features."
Like a $500 console that you can't buy anymore?
"Microsoft's tactic is to cut out a bunch of stuff so they can lower the initial price and then sell you that same stuff later at incredibly ridiculous prices."
Yeah, you're right.
Sony didn't cut out legacy memory cards, only to sell you the transfer kit back at a ridiculous price, which you'll only need to use once.
They didn't cut out infrared, only to sell you a console specific bluetooth remote control for the ps3.
Talk about adding shit 100% of the owners didnt want or need.
Thanks sony, now in addition of my $250 universal harmony remote, I have to buy that piece of shit.
Sony didn't cut out the HDMI cable (TruHD, and composite cables?), only to try and sell you one back.
Which incidentally, I never knew sony made HDMI cables, until the ps3 came out.
Sony didn't cut out replaceable batteries for the sixaxis, only to sell you a new controller once the battery finally dies.
I guess nintendo didn't cut out a wired ethernet connection, only to sell the adapter to us.
(Which anyone who games online knows, a wired connection is much more reliable)
I could go on, but I won't.
Point being, they are all guilty of cutting stuff out, only to sell it back to us. For some reason, you just have a hatred for microsoft, when all three companies are guilty.
waves @ May 4th 2007 10:21PM
James,
I've heard things about a hard drive tool kit for replacing the laptop drive inside the proprietary enclosure.
I just got a 360 and I'm having fun with it, but I have to say that the amount of lock down on the system is pretty obnoxious. I should really be able to use my own photos for gamerpic and themes. Paying for it is ridiculous, and the the content is all super tacky.
I like the idea of the openness of the PS3 (which I don't have). The ability to add an external drive or replace the internal with standard equipment is good. The web browser and media capabilities are nice. You can even put Linux on it and go nuts with customization!
Little big planet is another example. If it really includes the youtube-like ability to share levels for free, that's going to be awesome, and I just can't see Microsoft allowing free exchange of user created content. Hopefully they'll prove me wrong on that one...
nick @ May 4th 2007 10:59PM
"Investors have got to be pissed that their, well, pissing all that money away."
Not really.
Microsoft's profit margin is something like 28% versus Sony's profit margin of almost 2%.
Microsoft enjoyed 65% quarterly earnings growth. Sony is -5.2% earning growth.
Microsoft's gross profit is 36 billion, with zero debt on the balance sheet. Sony's gross profit is 19 billion, and they currently have 11 billion dollars worth of debt.
Smoke_Dawg_187 @ May 4th 2007 11:31PM
Please ban FranktheCrank. He is such a troll.
dsub @ May 4th 2007 11:53PM
Some people here understand.
Take ANY business class. The first thing they will tell you is that when starting any sort of business, you shouldn't expect to turn a profit within the first 5-7 years.
The Playstation brand was a rare occasion in which a company had the ability to manufacture a product in house with there own components that was just released in the right place at the right time. Ever since then it's just been a huge success. Alot of people forget that unlike Nintendo and Sony, MS is NOT in the hardware manufacturing business. They have to BUY all the components and then pay someone to put the whole thing together. Which means they are already paying someone over cost for the stuff to begin with.
Whereas a company like Sony can make the PS3 entirely in house AT COST. They already own the factories, they control the cost from top to bottom.
If Nintendo had decided to go with a more powerful platform, they'd be in the same boat as MS. However, as a company that doesn't have the manufacturing resources of Sony, they opt to make all of there consoles profitable from the get go. They have top-notch engineers and product designers that enable them to do so.
The problem is, MS doesn't have that luxury. Sure, they've got the engineers, they've got the designers, but MS set out to attack the best from the start, rather than get themselves established first. Nintendo was already established, MS was not. What better way to get yourself established than to make your brand a household name and keep pumping money into it until becomes a success. You see, that is the only way that MS (or any other company for that matter) COULD become a success in the game market.
Do you actually expect me to believe that if Panasonic announced tommorrow that they'd be creating a game console for the next gen, people would be excited about it? I doubt it. Gamers are close minded people, and your blatant fanboyism is only proof of it. The only way MS could make the XBOX a success was to cram it down your throats until you accepted it. That's what they knew they had to do.
The 360 was designed to be profitable, first and foremost. It will be. Without a doubt.
sonicyouth @ May 4th 2007 11:59PM
15 and 16,
You guys are really reaching. Pathetic. I wish that Microsoft would invest in some QUALITY CONTROL! They sure as shit can afford it. Then maybe they could compete, which would be a good thing for everyone, especially the consumer. Do you honestly think they will dominating over Sony in 5-10 years after their non-stop fuck ups?
Lord Chako @ May 5th 2007 12:56AM
dsub,
you said panasonic, but my money is on samsung attempting to enter the video game console market next.
They seem to be following in sony's footsteps.
"dominating over Sony in 5-10 years after their non-stop fuck ups?"
I agree, sony has messed up a lot lately. Releasing a $600 console being the prime example.
Pathetic.
MB @ May 5th 2007 1:36AM
So what happened with thei rbold claims from a while ago, that they we're making profits on each 360 sold?/ Guess they lied about that just to put pressure on ps3 eh. Kinda like how hdmi was not needed, as 1080p, and that 5/600 was too much for a console ( elite anyone?)
Rod Oracheski @ May 5th 2007 2:40AM
"So what happened with thei rbold claims from a while ago, that they we're making profits on each 360 sold?"
Making a profit on each console sold isn't equal to turning a profit on the brand as a whole. Making a profit on each console sold is how you GET to turning a profit on the brand as a whole.
If math is hard, try coloring.
FrankTheCrank @ May 5th 2007 9:03AM
@11
GJM...dude, thanks for getting me kicked off. You must have complained like a little bitch.
You know I'm right. And that's what pisses you off more than anything. You little douche.
blowstiq @ May 5th 2007 10:39AM
@#24: "Making a profit on each console sold isn't equal to turning a profit on the brand as a whole."
Read the article. Bach is stating pretty definitively that they are still NOT making a profit on each console, and that they're still trying to get their cost down to the point where they will. Once that happens, the console itself can be "revenue neutral", and they'll supposedly be in "profit" land.
As #23 and others have pointed out, this pretty much squashes those wishful speculations of a couple of months ago, that they were no longer losing money making consoles. And I eagerly await MS releasing ANY information on the number of defective units they're having to replace, as clearly this is a HUGE number, and represents a huge cost.
The one place they're not able to hide this number is in the division's financials. Isn't it obvious?: if the console was already at break-even, then surely they'd be in the black, given that all that XBL revenue and all the other micro-transactions have got to be taking in more money than they cost.
Digi Smalls @ May 5th 2007 10:57AM
everyone take a deep breath and read 15 and 16 again.
.