Xbox division has $1.9 billion loss, blame red rings
by Alexander Sliwinski 
{ Jul 20th 2007 at 9:15AM }
For Microsoft's fiscal year ending June 30 the division which includes the Xbox posted a $1.9 billion loss -- $1.2 billion of that was from the fourth quarter alone when Microsoft owned up to the Red Ring of Death issues. The division actually climbed 28% over the year and may even be profitable soon according to Microsoft entertainment division lead Robbie Bach, who sold millions in stock just as the Red Ring of Death warranty issue broke -- but, that's just a coincidence.Microsoft says it shipped 6.6 million units of the Xbox 360 and now has a base of 11.6 million and manufacturing costs for the Xbox 360 continue to decline. They also say that revenue in games increased 19% to a total of $650 million. They're also expecting a blockbuster holiday with that little game called Halo 3 coming out along with some other highly anticipated titles. If it weren't for the RROD debacle Xbox wouldn't have actually had such a bad year. Now we wait for the price drop.
Reader Comments (Page 1 of 2)
el tonot @ Jul 20th 2007 9:20AM
I don't the 360 will ever have a price drop. MSFT is just to greedy of a company.
Christopher Grant @ Jul 20th 2007 9:27AM
Great argument
Jake @ Jul 20th 2007 9:28AM
You are an idiot. MSFT will drop the price BECAUSE they are a greedy company, you twit. All companies are greedy and dropping the price of your product can lead to more hardware and game sales that actually increase profits. If you ever find yourself believing one corporation is much less greedy than another corporation, hang yourself.
And let this Robbie Bach thing go. People pretend he dropped Games Division stock. Just shut up already. The stock he sold is worth a little more today than when he sold it. They didn't plummet in real life like they did in your fantasy world. So, if he was "insider trading", he did a really shitty job of it.
Or, maybe he wasn't insider training and you are a big waterhead. That is probably more likely.
Anam @ Jul 20th 2007 9:30AM
They're so greedy that they dropped a billion dollars to fix our Xbox's. Bastards.
FrankTheCrank @ Jul 20th 2007 9:46AM
They're so wonderful. They dropped a billion dollars to cover their own asses.
You guys act as if they are doing this wonderful thing by extending the warranty. Makes me sick.
They're extending their warranty because they knew a class action lawsuit was coming. They had no choice but to do what they did or face a mandatory recall.
This whole RROD thing is BAD for the 360. Nobody is going to risk buying a bad unit. Keep watching the month to month numbers. It's getting worse. The adoption rate is DOWN. Year over year numbers are bad as well. Last year this quarter they moved 1.8 Million units, this quarter only 700,000 units.
Sucks...I wanted to buy one, now I'm staying away!
Anam @ Jul 20th 2007 9:55AM
@FrankTheCrank
Who cares if they're covering their ass?
We wanted the issue addressed. They're addressing it. Should I be pissed off that they're doing what we asked them to do?
FrankTheCrank @ Jul 20th 2007 10:07AM
Personally, I don't care. I don't own the RROD 360 and won't take a chance. I'm waiting for revision 2 of the 360. There is no doubt that M$ is working on this and I'm sure they will let everyone know about it when it's released. At this point, we probably won't see it till next year.
alexy @ Jul 20th 2007 10:21AM
Lol Frank thats Funny because When My Ps2 Broke I remember a certain Company that left me down and dry...
Aberu @ Jul 20th 2007 10:21AM
Companies are not people buddy. They are greedy by design, companies are working machines that maximize their profits in the long term by doing everything they are legally able, and sometimes they bend the rules as well. So yes, everyone saying all companies are greedy are right.
Nintendo is showing how obviously greedy they are in contrast to Microsoft. The fact that they are making record profits on mostly just hardware sales, shows how overpriced their hardware is. All the other companies are making investments in their customers. Nintendo is just having them buy it for the short term.
In terms of company greed, Sony seems like a saint as of late. But they are still greedy by design, like all companies.
Alex K @ Jul 20th 2007 11:19AM
class action lawsuits cost millions, not billions. the warranty cost microsoft much, much more than the lawsuit would have. I've never seen an award of 1.9 billion dollars worth of hardware replacements for any kind of lawsuit.
Steve @ Jul 20th 2007 2:03PM
>> I don't the 360 will ever have a price drop. MSFT is
>> just to greedy of a company.
Wow. When you wrote "I don't the 360..." you weren't kidding. You're against thinking so much that you can't even bring yourself to write the word "think" in your posts! BTW, who taught you economics, Nancy Pelosi?
morganfell @ Jul 20th 2007 9:24AM
It can be spun any way people want and they can say HALO3 will wipe away all the issues. It won't. 360 shipped (not sold) shipped a markedly lower number of consoles. Sales increased on software, but the decision still had a large red mark even without the billion dollar bust for RROD.
MS would not have had a good year with that billion dollar hit either. That is just wrong. Had they not eaten that number, customer dissatisfaction, a hell of a lot more lawsuits, and MS attempting to lie in the face of the obvious would have sunk them even more next quarter.
And people wonder why Peter Moore bailed.
Alex K @ Jul 20th 2007 11:21AM
well, software makes money, not hardware (except for nintendo)
Watership @ Jul 20th 2007 9:27AM
"I don't the 360 will ever have a price drop. MSFT is just to greedy of a company."
You sir, are the reason the internet sucks.
Anam @ Jul 20th 2007 9:34AM
Somebody just got downed by Watership.
...
Yeah, I know that was corny.
Vidikron @ Jul 20th 2007 10:43AM
@Anam
I LOL'd.
JonnyBoy2U @ Jul 20th 2007 9:27AM
Fony trolls...
What does greed have to do with it? If anyone is greedy its fony sony.
WHY should MS lower its price? Its selling perfectly fine at the current price and with the high volume of high quality games coming out this fall for the 360 sales will probably increase.
Keep lying to yourself. The only greedy company I see here is sony and its $600 priced system.
Christopher Grant @ Jul 20th 2007 9:29AM
Microsoft should lower their price since they missed their *already reduced* sales forecast by 400K units. When a company shows off Scene-It and Wiiva Pinata, they're serious about a larger audience. My Mom isn't buying a $400 game console.
JonnyBoy2U @ Jul 20th 2007 9:32AM
Yes MS may want a bigger audience but I don't think they should have to lower the price of the 360 to do that.
I haven't studied their sales figures and goals (and I honestly don't plan on doing so either) but if what you say is true then perhaps they will.
However I don't think they need to. Especially with the great lineup this fall.
Anam @ Jul 20th 2007 9:32AM
Wiiva Pinata?
You're gonna get in trouble with the fanboys, Chris.
ishred @ Jul 20th 2007 10:55AM
lol...if you buy a 360 and the HD drive BAM, $600 system.
Shockgamer @ Jul 21st 2007 12:59AM
Then it's a good thing I don't give a snap about Blu-Ray and HD-DVD!!
Phew! Dodged that bullet!! :)
Cutriss @ Jul 20th 2007 9:29AM
The RROD loss is to be taken across three years, starting with FY07. Therefore, the loss included in that figure is approximately $350M, not $1.15B.
Jake @ Jul 20th 2007 9:55AM
They are counting it all right now. They are setting the money aside. This will help their next year numbers look extra rosy.
blueman @ Jul 20th 2007 9:31AM
"You sir, are the reason the internet sucks."
What a quote :)
vidGuy @ Jul 20th 2007 9:32AM
How are the failure rates for the newly manufactured 360s? I bought mine last summer and it red ringed a few months ago, at around 9 months old. A few changes and it was fixed, screw sending it back to MS.
I wonder if MS is going to get smart and add a better heatsink and a couple more tweaks to the motherboard. Maybe add $5 to the massproduced cost and there won't be any more RR due to heat.
For the record, I'll predict a $100 price drop for the premium and elite in late November / early December. MS will get rid of the core package. A $299 Premium is a better deal than a $199 Core anyway.
morganfell @ Jul 20th 2007 9:44AM
Not sure. My launch console died, sent it back, got a refurb that was DOA, sent it back, got one that has frozen 3 times recently. I don't even want to turn it on. I know I might as well get over it and prepare for another box. And people wonder why I seem pissed.
In the teleconference from a few days ago Robbie Bach used the term 'engineering flaw'. I personally think he shouldn't have let that out with all of the lawsuit talk. But since they know it is a flaw such knowledge implies they can fix it.
The repair outsource company that made the news recently by refusing 360s (Micromart) stated it was an inherent motherboard design flaw. That means retooling, not slapping a heat sink on a chip. Either way the ball is in Microsoft's court now.
vidGuy @ Jul 20th 2007 9:51AM
Maybe so. In that case I wonder if they are working on a solution or what their plan is. I know my console RRed every hour of play after 9 months, and for a while I couldn't even get it turned on. I put a slightly bigger heatsink in (as much as there was room for) and pasted it all up and haven't RRed since.
Jake @ Jul 20th 2007 9:32AM
I just had an idea. The 360 has not gotten a price drop for an unprecedented amount of time. Perhaps MS wanted to keep sales slow until they had the reliability up to par. Several execs now have claimed to have a fix implemented in all new consoles and a way to retrofix consoles that are sent in. Once they are very confident in the reliability, and this sick fall lineup has run its course, they will drop the price.
I really think the 360 would over double in sales if it were sold at $300.
JonnyBoy2U @ Jul 20th 2007 9:36AM
You're definitely right.
It amazes me how great it sold over the last year or so despite RRoD. Imagine if there had been NO issues such as that. Sales might be at 15 million if not more.
And if a price drop does occur (say the Premium is $300.00 and the elite is $380.00) then I am pretty sure that MS would have a field day this fall and winter in terms of sales.
Anam @ Jul 20th 2007 9:39AM
Agreed.
Get rid of the core, drop the price on the others, walk over the competition, and make an evil laugh. (Too bad Peter Moore's not with them anymore, I bet he could do a good evil laugh.)
mike @ Jul 20th 2007 9:36AM
listen, I dont care how much money Microsoft is losing on the system. I dont own MS stock or anything, I would rather have a great system, which I think the 360 is (quality control now being handeld properly)
I always read stuff like when joystiq posts about how Nintendo is making maony off each wii sold and everyone shouts horray, and MS and sony are losing money and everyone says "OMG" Well you know what. I would rather have my consoles company not making a big profit off the console. This shows that I the consumer, am getting a better deal. If the company is making money off the console, that means I the consumer, am paying more for hardware then I should be (Or at least paying more then the value of the product in comparison with the competition).
So yeah, why are nintendo fans happy that each wii sold is a profit for nintendo. You should be angry they dont take a loss like their competition does on hardware sales. Then you can pick up a wii for $50-$100 less.
Im just saying people often forget about themselves here, and get cought up in fanboyism that they think a happy company is more important then a happ self.
JonnyBoy2U @ Jul 20th 2007 9:40AM
I can't speak for anyone else but as Wiifanboy I'm happy that Nintendo is making a profit...
Why you ask? Because in my opinion they absolutely deserve it. And I trust that Nintendo will use the money to create even better games and programs for both casual and hardcore gamers.
Anam @ Jul 20th 2007 9:42AM
mike, the reason we're happy that our favorite company is making money is because that insures that the company will continue making the things we want.
If Microsoft and Sony never make money on their consoles, they'll eventually give up and focus on the other divisions in their companies. So if you're a Microsoft or Sony fan, you should want them to make at least some money.
vidGuy @ Jul 20th 2007 9:43AM
I don't care about them making a profit or not. But I do care that they sell consoles at a high rate, because that means they will get more attention from 3rd parties and more games worth buying will come out for the console.
Matt B @ Jul 20th 2007 10:39AM
If the wii was sold at a $50 loss, it would cost less than the DS.
If the 360 and PS3 were sold for profit, we would see roughly $700 and $1000 consoles. They sell them at a loss to make the price more attractive.
Of course, leave it to Johnyboy to be the first one to bring hate for sony in a thread that has nothing to do with sony. I'm half tempted to buy and ship you a PS3 just to show you haow full of it you really are.
Konny @ Jul 20th 2007 9:38AM
Halo3 and the gaming and merchandising spin-offs should give MS a good cash injection... still, they are losing a lot of money considering that (unlike Sony) they:
- had already incurred their launch expenses (R&D, pr, etc),
- reduced console manufacturing costs so that they are profitable on each console sold,
- charge for XBL and have a video on demand service that they like to tout,
- had a lot of 1 million hit sellers, etc.
So, where are they bleeding? RRoD.. the $1.15 billion is for UPCOMING costs.. not those already incurred for fiscal '06. Cant think of anything else.. they should have made money last year.
Gyntcrbkllr @ Jul 20th 2007 9:51AM
actually the 1.1 bill is for the last financial year not the upcoming one, and it is a chargeback so if they don't spend a billion, then they can push that forward to next years profitability.
They have a solution in place for fixing the rrod's and they are looking at being the main development platform for the majority of next gen games (now including japan).
Also for anyone who thinks that they aren't in a good position I'd like everyone to pay attention to the actual overall profit and revenue figures for Microsoft. yeah a company that makes 50 billion isn't interested in a 1-2 billion loss in one of their divisions its a loss leader for now and they can afford to bankroll it until our great great great grandchildren are downloading on the way to school.
jsn @ Jul 20th 2007 9:50AM
props to the noob who posted first for showing everyone that he has zero business sense. The Winnar is you!
DarthDavid @ Jul 20th 2007 9:51AM
This is why I never got a 360, as a video game collector (14 systems, over 300 games & 21 years of gaming =) I can't imagine having a brand new console red ringing after less than a year....and sending it out more than once. Yea, its free + three years, but for a reason...the Micro$oft Xbox division is losing a TON of money. This and the class action suit will KILL the 360 & Xbox division...I don't see Micro$oft ever making MONEY/PROFIT in the hardware biz...its a shame =(
Gyntcrbkllr @ Jul 20th 2007 9:53AM
christ...see my entry above...then please read a financial times...Microsoft might lose a little money for now but I bet that bill gates wont stop wiping his ass with 100 dollar bills because of it.
FrankTheCrank @ Jul 20th 2007 9:56AM
I for one think COMPETITION IS GREAT.
I hope that all three console companies continue to do well. Because the consumer wins when these guys compete for your dollar.
As a PSWii owner, I'm itching to own a 360 and as soon as M$ can get out 360 v.2, I will be a PS360Wii owner.
Burritoclock @ Jul 20th 2007 10:15AM
Same here except I am waiting on the PS3 to give me a reason to pull the trigger (so far little big planet and the oft talked about heavy rain or the ones) Imagine a world without a 360, what would be Sony's reason to drop their price? Imagine there is no PS3, why would MS hurry to drop theirs. Imagine no nintendo, both would be bleeding us dry.
I think everyone over 18 gets this concept, they also have jobs and can buy more than one console and more than one game a year...
MONGO @ Jul 20th 2007 10:07AM
Bunch of Microshaft trolls the bunch-o-ya....
Just like professional sports team owners, Microshit is lying, as they do about most everything. They would have you believe they are losing money, just so they can continue to sell you more horse armor, rims for Forza cars, and internet play. Believe what you want, but I’ll pass on their tripe.
I went through 2 of those piece of crap 360s, along with thousands of others like me, and you all just give Microcockinmyass a pass. You’re all gluttons for an anal reaming, and you deserve your stone-hearth sized power supplies.
Have a great weekend, and BEER ME!!
Aberu @ Jul 20th 2007 10:36AM
Is this guy serious? I mean does he think he's clever or funny by reinventing the company name? I may not like Microsoft all the time, but just because it's popular to rework the company name and use it to insult them, doesn't mean you are funny or clever in how you are doing. Seriously stop wasting my vision by posting lame stuff such as this.
DarthDavid @ Jul 20th 2007 10:17AM
Gyntcrbkllr:
Yes......we all know that Micro$oft has ENDLESS money, but to make a noisy, hot, unreliable console that scratches your games is UNEXCUSABLE...you know who pays in the end? YOU DO with the constant inconvenience.....trust me I don't have to read the financial times to know that + I was taking about the gaming division of Micro$oft who's yet to make ANY money on hardware...not the whole company. I smell a fanboy prick.......
Gyntcrbkllr @ Jul 20th 2007 10:34AM
the only prick is the corporate one shoved down your throat. the point that i was trying to make that you so elegantly ignored, is that they have a huge financial imperative to go after these sorts of markets so they can afford to loss lead so a small loss in one of their divisions is a small price to pay for them for long term success read up a little on Microsoft they have done similar things in lots of markets and they aren't exactly failing.
The fact that they are becoming the lead platform across the board, and they are now getting back consumer confidence with the steps they have taken. which if you know anything about consumer retail is unprecedented.
They have hardware that whilst has been in the past seen as unreliable they have taken great steps to minimise the fall out from that and are in fact using that as a sales tool.
And yes I might as a consumer have a little inconvenience (lets face it if it is such a major tragedy for you that your games console dissapear's for a few weeks then the console isn't your biggest problem now is it?) i do feel that if 2 years down the line i get any trouble Microsoft are willing to sort it out for me, then they are getting my dollar.
This isn't just my view and is an indication of what clever little buggers there are at a multi billion dollar organisation. However DARTH i would warrant that you have a different view...why don't you illuminate our lives with your knowledge?
mn @ Jul 20th 2007 2:32PM
You're right. You don't need to read the Financial Times. However, I would suggest the "Chicago Manual of Style" or a dictionary.
paul246 @ Jul 20th 2007 5:26PM
@Gyntcrbkllr
the xbox division hasnt turned a profit in over seven years(xbox+xbox360). So how long does the XBOX division have to take a lose for it to MATTER to microsoft? Acorrding to you and the Financial Times, I guess it's THEIR 10 YEAR PLAN.
Mike-453 @ Jul 20th 2007 10:30AM
I really hate the way Microsoft has handled the hardware in the 360, so unreliable. But being someone only being able to afford to keep with a single console I choose the 360 because of the great software.
Just need to sort out the fucking hardware problems, i'm one of the few that has a launch 360 working fine (live in UK), but it still crashes a couple times a week.