The Xbox turns a profit!

by Christopher Grant { Jan 24th 2008 at 9:55PM }

In the last six years, there's been one constant when discussing Microsoft's foray into the strange and seductive world of video game console manufacturing: they had yet to turn a profit on any of it. No more, with today's announcement of Microsoft's second quarter earnings which showed a relatively impressive six-month income of $524 million (compared to a $423m loss during the same period last year) from the the Xbox's Entertainment and Devices Division.

Before you go thinking that was all thanks to the Zune and PC game sales, the company's 10-Q filing states that the EDD's increased revenue was "primarily due to increased Xbox 360 platform sales." During the last six months they say Xbox platform and PC game revenue increased 35% as a result of "increased Xbox 360 console sales, video game sales led by Halo 3, Xbox Live revenues, and Xbox 360 accessory sales." (Sounds like EDD bossman Robbie Bach nailed it).

The 6.1 million Xbox 360 consoles and 4.82 million copies of Halo 3 sold in the first half of fiscal '08 sure helped, but so did "decreased Xbox 360 manufacturing costs" and "a decline in Xbox 360 platform marketing expenses" – it's costing less to build them and less to promote the brand. But they'll need to hold on far longer than one quarter to make their sojourn into the living rooms of America worthwhile; for the rest of fiscal '08 they "expect revenue to increase due to increased sales of Xbox 360 consoles and related games, accessories, and services." Yup, that sounds about right.

[Via GameDaily]

Tags: BreakingNews, EDD, Microsoft, MSFT, profitable

Reader Comments (Page 1 of 3)

Kristina @ Jan 24th 2008 10:05PM

Xbox is finally turning a profit because Microsoft continues to screw the consumer by not replacing game discs defective 360s scratch the hell out of. It's happened to me TWICE.

Xbox has got a good thing going with quality games, but with an unstable Live service and the vast array of problems 360 owners face, it doesn't really deserve to be on top.

Vegeta (aka Ska Oreo) @ Jan 24th 2008 10:33PM

TWICE???

My god what a catastrophe!!!! SOME ONE SHOULD SUE!!! SUE I SAY SUE!!!!

Knight Marquise @ Jan 24th 2008 10:39PM

Damn, I'm sure glad I'm not one of those customers MS is screwing to turn a profit! How in the hell did you get on that list?

/sarcasm

Kristina @ Jan 24th 2008 10:40PM

Yes, twice. You think it's fair I've got to re-buy two $60 games because of Microsoft's faulty hardware?

CaptCaveman @ Jan 24th 2008 11:05PM

I have a scratched disc. I also have the form to send the disc back to MS for a replacement for 20 bucks.

I don't know what the other companies do for scratched discs but I would guess that they have something similar in place.

Delgado @ Jan 24th 2008 11:10PM

God forbid a large company is seeing success! I hate anything that is popular!

Why is it that the only people I ever hear complaining about the 360 are ones on the internet? (rhetorical question...)

Honestly though, all of my friends IRL have never had problems with their systems. That is about 9 or so boxes, about 4 of which are launch systems. I don't know, I guess all of us are in the vast minority.

As for the disc scratching; happens once, shame on them; happens twice, you're an idiot. Doesn't the saying go something like that? Either way, I think it has to do with learning from your mistakes, right?

As for non-user related errors, their warranty program and compensation for downed services seems like a well deserved profit to me.

colin @ Jan 24th 2008 11:15PM

were you moving your 360 while the drive was spinning? it has happened to me, but i just got the disc resurfaced. most mom and pop cd/dvd shops can resurface your discs for about a dollar. if you are nice to your local blockbuster clerks, they might do it for you as well. i'm not talking about one of those disc buffers you buy at gamestop, the stores use a pretty big machine that sounds like a dishwasher.

T3H WICKERMAN (TMNT DF) (BWF) @ Jan 24th 2008 11:56PM

Dont try and argue around here the company is always right. Fanboyism is rule 1. Check out the consumerist.com for one poor bastards 360 problems. Think its on the second page.

Draken Stark @ Jan 25th 2008 5:02PM

*Off topic, note: my user name is not my real name*

Ok, I get that you're having problems, but you said that Xbox has good quality games. You also said that cause the consule faulty that it doesnt deserve to be on top. Well my friend, this is just further proof that games make the system and not the other way around. *points at PS3*

Markez @ Jan 25th 2008 1:21AM

Not saying I don't feel your pain, pal, but my 360(s? I know, ouch) I have never had a scratched disc. The array of problems 360 owners have faced ranges from minimal to extreme.

I think most of us are tickled to death when we get that console back from support. It's a heap of garbage, admittedly, but I love the damn thing. To me, that speaks volumes of the 360 loyalty.

At the same time, I would love, absolutely love to play Ratchet & Clank or Drake's Scrooges Money Bin or whatever it's called. Sorry, tearful childhood reference there. I want to swim and dive through all those coins... People have got to realize on here that gamers on this site have the whole range; small to big salaries, but we all love games. It's not console specific you flamer moroons, we just like the games.

ZippyDSMlee @ Jan 25th 2008 1:41AM

Agreed the 360 hardware wise is a mess no wonder its taken them 3 years to turn a profit on the 360, the piss poor design and refusal to fix....

Jake @ Jan 25th 2008 3:29AM

Indeed, only 40% of those original 11 million faulty Xbox's have yet gone wrong. There is still the other 60% that WILL fail in the 3 year RROD warranty. Hell, even the current Falcons have 10 in 100 failures, according to Microsoft insiders.

Don't think for one moment this blip in profitability is here to stay, it's another couple of years at least, until the faulty XBox issues are behind Microsoft.

Leonidas @ Jan 24th 2008 10:07PM

Achievement Unlocked:

Turn a Profit
5 points

Christopher Grant @ Jan 24th 2008 10:11PM

Haha, image updated.

CB @ Jan 24th 2008 10:49PM

I saw that and I thought I actually got an achievement this time, even though I always see people post the image. I've been playing on my 360 for too long.

Jerk Face @ Jan 25th 2008 9:10AM

That picture is so full of win, lol!

NATO_Duke @ Jan 25th 2008 10:08AM

Nice Leonidas. +1

On another note,

So Bill was right in the end. Love em or hate em - MS is in a good position now that they have the large install base, warranty issues being worked out, and profit to reinvest in the system.

Nobody expects you all to be 100% happy with MS, and lots of people will bitch and moan when they don't have everything as they want all day long, but thats the reality of consumers. If it wasn't an XBox it would be a toaster or some other product - MS still has made it a success.

Finess @ Jan 24th 2008 10:08PM

Yeah goOo Microsoft...now uh...can you make Live free now.

GRANTED @ Jan 25th 2008 10:21AM

they turned a QUARTERLY profit. but did they turn a net profit yet?

ill trooper @ Jan 26th 2008 2:50PM

Exactly what I was thinking... Stop charging us for LIVE.

Joe @ Jan 24th 2008 10:10PM

Capitalism in motion.

kingofwale @ Jan 24th 2008 10:10PM

Microsoft sold 6.1 million xbox360 in the first half of Fiscal 08?

That's a joke right? They shipped 11 million xbox in end of 06. and now sold about 16 million (according to VGchartz.com)

That's more like 6.1 million in last fiscal YEAR, not half year.

Christopher Grant @ Jan 24th 2008 10:12PM

"We shipped 4.3 million and 6.1 million Xbox 360 consoles in the second quarter and first half of fiscal year 2008, respectively, as compared to 4.4 million and 5.4 million Xbox 360 consoles in the second quarter and first half of fiscal year 2007, respectively."

kingofwale @ Jan 24th 2008 10:17PM

I still dislike using "shipped" number as "sold" number, it's way too confusion.

Especially when there are about 4 million 360s sitting in the warehouse at the back of stores everywhere.

Christopher Grant @ Jan 24th 2008 10:19PM

Well, they sold them to retailers ... it's not an entirely erroneous metric.

Trickob @ Jan 24th 2008 10:30PM

touchet

hvnlysoldr @ Jan 24th 2008 10:33PM

touche

Anticrawl @ Jan 24th 2008 11:41PM

Shipped numbers are an accurate way of determining a console's sales unless it is during the launch of the console. Do you think retailers would keep buying them and more each month if they didn't sell? That's simply moronic. There is no "exit poles" for people buying consoles dude, and in the US it is pretty difficult to determine how many consoles have reached consumers hands.

Easo @ Jan 25th 2008 9:17AM

Have you ever asked yourself how VGCharts knows exactly how many people purchase an xbox 360 every second of every day. Adding the NPD figures for the year will likely get you 6.1 million consoles sold, and thats just in North America. This alone would imply that the guys at VGcharts use a lot of personal opinion when determining their numbers.

Lone Starr @ Jan 24th 2008 10:14PM

Epic flamewar thread incoming?

Lone Starr @ Jan 24th 2008 10:19PM

If you were a companion cube, I would so want to make portals with you for that comment.

Win.

Lone Starr @ Jan 24th 2008 10:21PM

Damn reply. That was to Leonidas....

PointyThings @ Jan 24th 2008 10:19PM

Is it weird it's taken this long? I dunno, it's hard for me to be congratulatory, it's Microsoft. The 'Box has totally proven it's worth, I own both and enjoy em (Sweet, sweet Otogi), but to me it seems like if MS is making money, something is going to go very, very badly for consumers.

Vegeta (aka Ska Oreo) @ Jan 24th 2008 10:35PM

because god forbid a company does what it's supposed to do and make money. That's just horrible.

PointyThings @ Jan 24th 2008 10:55PM

As a matter of fact, corporations are constitutionally bound to make as much money as possible, no matter what, for their share holders, but this is very rarely a good thing for consumers, or anyone except the share holders. I'm not saying Microsoft is going to go into peoples houses at night and rape them, but some would argue they've already cut enough corners to bone people out of their cash. I hope there aren't more we haven't found out about, is all I'm saying.
Really though, "Achievement" is an understatement. With all the 360's they've had to repair, ect, they had to have sold a lot of hardware.

Scotto @ Jan 25th 2008 12:40AM

I enjoy the ironic juxtaposition of you trying to act socially enlightened about corporate America, yet admitting that you own and enjoy both consoles.

Microsoft made a console, and charged a price for it. You thought that price was reasonable, and so you bought it. Since buying it, you say you have enjoyed it. Where did you, the consumer, get screwed here?

- Scott

Markez @ Jan 25th 2008 1:45AM

Scotto, I don't think what you're saying actually makes any sense?

Obviously as a 360 owner (myself included) we've been screwed by faulty hardware. But have enjoyed the games we've had... That might make me an idiot as well, but I don't care? I've got Wii and DS backup, which has been great. But for the sole PS3 owner, there's a cuppla games? Flame on idiots, I'll take any game the industry will throw at me when my finances provide (I hope! :)

PointyThings @ Jan 25th 2008 1:56AM

I do enjoy my Xboxes, my point is that it's really fucking weird that it's just now turning a profit. Not even just the 360, the entire Goddamned brand. I'm not qualified to say whether it's hardware sales or them cutting costs somewhere shady. I don't have that information, but I'd believe either one.

Scotto @ Jan 25th 2008 2:44AM

"Obviously as a 360 owner (myself included) we've been screwed by faulty hardware. But have enjoyed the games we've had..."

His point was the sheer fact that the XBOX division is posting a profit was proof that the consumers were getting screwed, some way, somehow.

Microsoft didn't turn a profit by selling consoles that RROD. Quite the opposite - it cost the division a billion dollars. And either way, Microsoft has done pretty much all a company can do to recitfy the problem - extend the 1yr warranty threefold, and release an updated hardware revision, with cooler chipsets. I would expect the same accountability from Sony, if it were the PS3 having this problem.

Scotto @ Jan 25th 2008 2:45AM

PointyThings: They turn a profit, because of several things.

- Licensing fees from developers who have made successful XBOX 360 titles. There have been several hit games this year, that sold at least a million units. That brings in big money for Microsoft, given that they have an approx. 6.9 attach rate per console.

- Optimized manufacturing techniques

- Falling cost of components. As time goes on, the cost of the console's components falls dramatically, just like all computer parts do. That Pention II of yours was worth hundreds of dollars in 1997, but it isn't anymore.

The sales of Halo 3 and Mass Effect (which MS produced), probably contributed greatly to their profitability, on their own.

- Scott

PointyThings @ Jan 25th 2008 3:18AM

Alright, that's a pretty good list you've got there, I apologize for making this sound conspiratorial. You defended your points well.
Also, making a cheap shot at a man's processor doesn't make your point any more valid. I have an AMD X2 4600, thank you very much.

vidGuy @ Jan 24th 2008 10:21PM

Cool. I was originally pissed that MS was entering the video game market and that mammoth controller gave me reason to hate on the console. But I've really come to enjoy the XBOX and 360. And as long as MS is willing to compensate consumers for mishaps (warranty program extension, free XBLA games), I'm happy to have them in the market.

naxe @ Jan 25th 2008 12:14AM

we pay for LIVE. in my book that means NOT FREE.
sure it helps a little but can we honestly say that 360 is supreme? most defective electronic to date. on my third console in 8 months. RROD issues.

So again i paid 480 for my elite to have it being serviced on and meanwhile i sit xbox-less for 3weeks at a time.

we deserve more then a free arcade game. how about a discount on some up and coming games?

we the consumers are always the expendable for every user they lose they gain two more. word of mouth has shot xbox through the roof. how many of us got ours because only because our friends had one?

NATO_Duke @ Jan 25th 2008 10:51AM

Naxe - for God sakes man - read! Vid said "free XBLA games" regarding the network issue recently - not free Live service. He also was saying they extended tha warranty to aid in RRoD issues. He was right - they did do those things to compensate.

vidGuy @ Jan 25th 2008 11:15AM

And I presume naxe was saying that since we pay for LIVE, we paid for the "free" game with the money that should have given us LIVE service. And while I respect his opinion here, especially about hardware issues and the frustration they cause, we've got to remember something. This is the situation Microsoft is in. Hardware is failing, LIVE service was down. What's the company to do? Microsoft has done a lot more and been much better to their consumers than they could have been.

Now, the PS2 didn't have SUCH widespread issues, but it did have a fail rate. My first PS2 died after about 14 months. Sony sure as hell didn't care. Do I think MS should get off the hook for selling bum hardware or letting their service drop? No. I'm just saying that MS has acted respectibly throughout, in the face of these problems.