Microsoft has lost 1.2 billion dollars on the Xbox this year.

[Trauma-san]

http://www.gamespot.com/news/6154413.html

The short end of it if you don't want to read: Microsoft has spent billions of dollars making the Xbox and Xbox 360, both systems sell well, but both systems lose money every time they sell one.  For whatever reason, Microsoft thinks this is a GREAT strategy (they certainly have plenty of money to lose however they see fit).  Over the course of the last year, if you subtract the money Microsoft home gaming division (xbox, AND xbox360) has spent from the money they have made, they have lost 1.2 BILLION (not million, BILLION) dollars over the last year.  I don't mean they've spent 1.2 billion, I mean they're BEHIND 1.2 billion dollars.  If they would have done nothing, they'd have 1.2 more billion dollars. 

GO MICROSOFT!!! YAY!!! THEY'RE KICKING ASS WITH THE 360!!!

[The Watcher]

they lose money on selling the consoles, but make money on the games

that's pretty common knowledge

[jeromechickenbone]

This is nothing new.  Cost of goods sold associated with manufacturing both Xbox and 360 are variable (which is good).  It's not like costs are spiriling out of control for no known reason. This means that these costs will only increase as long as they are selling systems.  They do eat losses with the production of the console itself, but they make it back via games and accessories.  It's like buying a printer - the unit itself might be $80, but the ink refills are $40-$100.  The money is made through repeat purchases, not the 1 time sale of the unit.

Xbox live Gold = $70 (over 3 million have this) An extra controller = $50, battery recharger =$30, wireless networking adapter =$99, faceplates=$20, memory card = $40.  Now, you don't need any of those things to take the 360 out the box and play.  But lots of people do buy those, which is like $310 in total.  

I mean, if you were to buy a core system for $299, thats only $50 more than the rumored Wii price.  So from a consumer standpoint, they kept it affordable, and also allows the consumer to supe up their system as they get more money.  You could transform it into a $650 badass, or stripped bare at $299.  

We obviously won't know if it was a good strategy until its all said and done, but I see their perspective.  

[Just Another Sunny day in California]

if you think Microsoft fucked up, look at Sony even though they are selling their PS3 at 600 bucks they stand to lose waaaaaay more than Microsoft.

[Trauma-san]

they lose money on selling the consoles, but make money on the games

that's pretty common knowledge

Read again, child.  They lost, anyway you look at it, 1.2. billion dollars.  They made no money off of games over and above what they spent; they are in the hole 1.2 billion dollars, and that's just THIS year. 

[Trauma-san]

This is nothing new.  Cost of goods sold associated with manufacturing both Xbox and 360 are variable (which is good).  It's not like costs are spiriling out of control for no known reason. This means that these costs will only increase as long as they are selling systems.  They do eat losses with the production of the console itself, but they make it back via games and accessories.  It's like buying a printer - the unit itself might be $80, but the ink refills are $40-$100.  The money is made through repeat purchases, not the 1 time sale of the unit.

Xbox live Gold = $70 (over 3 million have this) An extra controller = $50, battery recharger =$30, wireless networking adapter =$99, faceplates=$20, memory card = $40.  Now, you don't need any of those things to take the 360 out the box and play.  But lots of people do buy those, which is like $310 in total.  

I mean, if you were to buy a core system for $299, thats only $50 more than the rumored Wii price.  So from a consumer standpoint, they kept it affordable, and also allows the consumer to supe up their system as they get more money.  You could transform it into a $650 badass, or stripped bare at $299.  

We obviously won't know if it was a good strategy until its all said and done, but I see their perspective.  

See, you're trying to think logically.  You're wrong.

Microsoft, end of the day, after the receipts from games, xbox live, controllers, whatever you want to add in, has lost 1.2 billion dollars this year in their home gaming division. 

Bottom line, period, after everything, their entire 'xbox' experiment has lost 1.2 billion this year.  After everything, after every positive deposit from the system, accessories, license fees, EVERYTHING, they're still 1.2 in the hole. 

[Trauma-san]

if you think Microsoft fucked up, look at Sony even though they are selling their PS3 at 600 bucks they stand to lose waaaaaay more than Microsoft.

Yeah, Sony's another headcase.  Sony did, however, eventually turn a profit with the ps1, and the ps2.  They did come out ahead in the end, because in the months that they lost money, they made up for that and then a profit on top of it in the months that it was good.  The ps3 may be a totally different story.  Sony likes to make money on their movie division, and then use that to make up for the money they lose in their gaming and home electronics division.

Microsoft however is way in the hole on the xbox; there was only 1 quarter that the xbox actually turned a profit, and it didn't even come close to filling in the huge chasm they created when they sold the system, at a loss, for years.  Microsoft is in the hole billions and billions, and since they have billions and billions, they can do this with the hope that eventually, they will gain so much market share that they will make billions and billions in profits and eventually dig out of the hole, as well as turn a profit.

Nintendo's far more conservative, they rarely have a quarter that they lose money, and consistantly turn in profits quarter after quarter even during r&d stages.  Nintendo made a billion profit last year; Microsoft's home game division lost 1.2.  When Nintendo sells their consoles, they usually sell them for close to the development price so they can lose less on each system.  Of course though this means that their systems usually aren't as technically advanced as the other competitors, so their conservative strategy costs them speculative profits; I guess they'd rather keep it a sure thing though instead of taking the gamble.  This is one of the main reasons Nintendo is still around while sega, atari, snk, turbografix, etc. all went under, even with Nintendo coming in 3rd place in the last console war.