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XBox (Games) Businesses The Almighty Buck

Xbox 360 To Profit Next Year, Says Bach 132

Posted by Zonk
from the bout-smegging-time dept.
An anonymous reader writes "Robbie Bach, president of Microsoft's entertainment and devices division, has stated he expects the company's console business to finally break even some time in 2008. After years of losses from the games division, this would be a significant breakthrough for Microsoft's efforts in the games industry. '"Xbox is the hardest piece of consumer electronics hardware to produce in the world, no debate," he said, admitting that "costs are a little higher than we'd like." Microsoft doesn't expect to make a profit on hardware alone, but "we'll probably be gross margin neutral on that over the life cycle of the product, and try to break even on that."'"
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Xbox 360 To Profit Next Year, Says Bach

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  • Disapointing (Score:3, Insightful)

    by HappySqurriel (1010623) on Friday May 04, 2007 @04:00PM (#18993779)
    Should it be news that a company is going to break even or start making money on a product line?

    I understand the loss leader strategy, but it seems a little insane that a company has to wait several years before they can start making money on a product.
    • Re:Disapointing (Score:5, Insightful)

      by Quila (201335) on Friday May 04, 2007 @04:35PM (#18994447)
      Long-term vision is so rare these days that people are surprised when they see it.

      Short-term Wall Street thinking wouldn't have allowed this. They'd say the XBox division was running a loss for 12 quarters straight and demand they stop the cash drain.
      • Re: (Score:2, Insightful)

        Long-term vision is so rare these days that people are surprised when they see it.

        Short-term Wall Street thinking wouldn't have allowed this. They'd say the XBox division was running a loss for 12 quarters straight and demand they stop the cash drain.

        Long term vision is not what I would call the XBox or XBox 360 ... A vision does not take 7 years to finally break even on a yearly basis after you have lost $6 Billion. As far as a return on investmet, the XBox brand may finally break even as a whole after 10

        • "A vision does not take 7 years to finally break even on a yearly basis after you have lost $6 Billion."

          First off, your numbers are off. The classic xbox launched 11/01. Work may have started earlier but you don't earn sales until the product comes out. Profitability is expected in 06/08, not 11/11. So you are off by 3.5 years when you say it took them "10 years" to make a profit.

          Also, the last stat I saw said an estimated 5 billion lost, not 6 billion. Finally, the hardware is now making a prof
          • by rtb61 (674572)
            How is the M$ stock going against it's record high, somewhere between a half to a quarter of what it was when they started the whole xbox failure.

            How much has the xbox hurt the M$ pc games division. Not only has it lost money but it is also causing other divisions to loose money. Does the xbox account for a licence fee of the windows operating system, or has that been written off as well. When they are talking about being in profit, is that overall or is that just for that year and overall they will still

        • Re: (Score:2, Insightful)

          by frakfrakfrak (1049468)

          Long term vision is not what I would call the XBox or XBox 360 ... A vision does not take 7 years to finally break even on a yearly basis after you have lost $6 Billion. As far as a return on investmet, the XBox brand may finally break even as a whole after 10 years making their profit 0% after 10 years (a pretty awful return) so investors would be right to be angry at Microsoft.

          Yeah, that's great, but what about 15 years down the road? Or 20? In 20 years, who knows if Windows will still be the cash cow

        • Re:Disapointing (Score:5, Informative)

          by Endo13 (1000782) on Friday May 04, 2007 @05:30PM (#18995349)
          Um... I would actually say they're doing pretty good to be making a profit that quick. According to Wikipedia it took Amazon.com [wikipedia.org] about 8 years to become profitable. And this [XBox] was just one branch of a much larger company; MS as a whole has still been quite profitable for their shareholders in the meantime.

          And hasn't their X-Box Live been profitable from the start?
          • by bogjobber (880402)
            Amazon didn't burn through $6 billion in capital during that eight years. And even though it's obviously possible that the Xbox division can post a profit now, is there any business in the world where you can't post a modest profit after six years and billions of dollars invested? They could've used that money to buy a 15% stake in Nintendo and made a real gain instead of being six billion dollars in the hole. Hell, they probably could've bought Sega completely and continued with that brand.
            • by Raenex (947668)

              They could've used that money to buy a 15% stake in Nintendo
              That would have been a bold, prescient move, but that's hindsight on your part. It also could have been a Kiss of Death for Nintendo.
          • by naden (206984)
            And hasn't their X-Box Live been profitable from the start? And hasn't their 120GB Hard Disk Expansion peripheral been profitable from the start? And isn't this completely meaningless given that the core XBox product is severely unprofitable? And shouldn't you be reading an How To Make Money In Business 101 book instead of posting?
        • by Quila (201335)
          It's worth it if in the end you're a major player in a multibillion dollar market where you previously had no product.
        • by KiLLa_TK (1030038)

          Long term vision is not what I would call the XBox or XBox 360 ... A vision does not take 7 years to finally break even on a yearly basis

          would you say Amazon.com has no vision? Amazon.com was launched in 1995 and did not post a quarterly profit until 2003. http://news.com.com/2100-1017-819688.html [com.com] Sometimes making money right away isnt the most important aspect of becoming a strong player in a market.

    • by Blakey Rat (99501)
      What bothers me is the fanboys using the amount of profit Microsoft makes as a justification of how much better Sony and/or Nintendo consoles are. As if I, as a consumer, give a rat's ass what the Xbox costs Microsoft to make... that's their problem, not mine.

      "Yeah, Xbox 360 might have better graphics than Wii and PS 3 but, uh, ... uh... Microsoft doesn't make a profit!"
      • Re: (Score:3, Interesting)

        by Applekid (993327)
        If a console isn't generating [enough] profit, it always runs the risk of being abandoned. That's usually bad for gamers*.

        That said, it's unlikely Microsoft would abandon XBox even if it didn't make a profit next year or even the year after. It's there simply to be in the market. The justification is likely the same as Windows: get enough people familiar with the platform and nobody will even consider the alternatives.

        The statement is nothing more than to pacify the shareholders on the recently news that Mi
      • by xero314 (722674)

        As if I, as a consumer, give a rat's ass what the Xbox costs Microsoft to make... that's their problem, not mine.

        it becomes your problem when you have a significant library of games and nothing to play it on because Microsoft decides to stop losing money and gets out of the console business. I'm not making a prediction, just pointing out that a companies profitability is important to the consumer.

        Yeah, Xbox 360 might have better graphics than Wii and PS 3 but, uh, ... uh... Microsoft doesn't make a profit!

        Allow me to fix this for your "Yeah, XBox 360 might have better graphics than Wii and about the same as the PS 3 but, un ... uh... Microsoft nor Sony make a profit on their current console sales."

  • So really... (Score:4, Interesting)

    by Tarlus (1000874) on Friday May 04, 2007 @04:02PM (#18993821)
    Nintendo seems to be the only company who is actually generating a profit from their system. And the demand is still so high that they predict it'll be selling out like hotcakes till 2008.

    I wonder if MS and Sony are learning anything from this... Not to say that breaking even would be a major financial loss to (especially) Microsoft, but are they really concerned one way or another about this?
    • Re:So really... (Score:4, Informative)

      by twistedsymphony (956982) on Friday May 04, 2007 @04:16PM (#18994065) Homepage
      to be clear MS is already making a profit [techspot.com] on each Xbox 360 console sold, and has been since last November (I'd be willing to bet they're making a killing with the Elite version)... 2008 simply marks the point where the Xbox division as a whole finally gets out of the red, most of that is making up with losses from the Xbox 1 which IIRC never made a profit on a per console basis.
      • Re: (Score:1, Informative)

        by Anonymous Coward
        No, that isn't correct. They expect to be making a profit quarter-by-quarter by 2008. No one really knows if the 360 is profitable yet, the article you link to simply points to another article that speculates about a profit. However, we DO know that the division as a whole still posts quarterly losses. This may be overcome by next year, but they won't come anywhere near paying off the $5 billion investment anytime soon.
    • by brkello (642429)
      I sure hope they are learning things but that they aren't thinking about following that model. Nintendo really lucked out that their controller was a big hit. It was a huge risk and it is paying off...good for them. But I also like what the Xbox360 and PS3 are doing. I like that they are trying to put cutting edge technology in to their boxes. It allows for a lot of graphical and AI improvements. Really, anyone can make a motion sensing controller now that it is known that people enjoy that sort of th
      • by Endo13 (1000782)
        I think you're missing part of the lesson to be learned from the Wii. That being that innovation in gameplay (not necessarily just in designing a radical new controller to change/enhance gameplay) can be a much better investment than simply more power and nicer graphics. In other words, it's good if games look nicer, but games have already looked pretty good for a few years now and there's a point where better gameplay is just a lot more valuable than better graphics. Most of this burden generally falls on
        • Re: (Score:1, Flamebait)

          by blackicye (760472)

          I think you're missing part of the lesson to be learned from the Wii. That being that innovation in gameplay


          I'm calling it a fluke. Judging from their last 2 consoles, N64, Gamecube..the innovation in Wii was part calculated risk and part sheer dumb luck instead of any revolutionary forward thinking.
          • by digi187 (73798)
            I honestly think a lot of the hype surrounding it still stems from a relatively bored gaming community, both on the developer and player sides. Gosh, the wiimote sure looks awesome and it could be used for some really cool things, but it isn't something that is going to be able to carry a system long enough to maintain profitability.

            When it comes down to it, Nintendo doesn't have a fully realized gameplan for this generation yet. Online gaming is still a complete mystery to them and looks to remain that way
      • by grumbel (592662)
        I don't think the risk was all that big, if any at all. The Wii is making money basically from day one, thanks to being based on Gamecube hardware, so even if the Wii would have completly flopped, there is a good chance that they still would have made money from it, since the development costs for the thing could be keep quite low. And even that would have failed they still had the DS being there as backup.
    • Honestly, I hope they don't follow Nintendo's lead.

      I *like* my 360. I *like* the graphics, the sound, the HDness.

      I *don't* want a Wii.

      I would much rather have diversity in the market. Some people like the Wii, some people don't. If all of the companies followed the leader we would have a homogenous marketplace and I don't think we want that.
  • So... (Score:4, Funny)

    by casualsax3 (875131) on Friday May 04, 2007 @04:03PM (#18993833)
    ... their games division is going to make +$5 billion between now and next year? I think he meant to say "in 2008 we expect that we will stop hemorrhaging cash out of every orifice."
  • by Vrejakti (729758) on Friday May 04, 2007 @04:05PM (#18993869) Homepage Journal
    ...I have to admit, they've made a lot of smart moves getting into the console industry. The original XBox faced many difficult challenges in gaining sales. However, they learned much from where things went wrong, and came out strong with the launch of the XBox 360. Perhaps their biggest advantage has been the availability of the XBox 360 at retailers during the times of Wii and PS3 shortages. Even if they haven't made a profit up to this point, the amount of market share they've picked up along the way leaves them with a very bright future.
    • by drinkypoo (153816)

      Perhaps their biggest advantage has been the availability of the XBox 360 at retailers during the times of Wii and PS3 shortages.

      I agree on the Wii tip, but the PS3? There were shortages for about two weeks and then it began sitting on shelves. Lonely. Alone. With no one but a bunch of other PS3s to keep it company. Many people didn't even bother to come get their preorders!

    • by Applekid (993327)
      I'd take issue with that biggest avantage. I'm not convinced that 360 availability in lieu of the Wii (and PS3 for, what, those two weeks?) was really that significant.

      I don't think people looking for a Wii and what it brings would be ok picking up a 360 instead. Likewise, people in the market for a PS3 aren't going to be satisfied with a 360. People don't want "a video game system", they ask for systems by name.

      Then again, maybe I should have asked a mall Santa Claus what the kids were exactly saying.
      • by drinkypoo (153816)

        I don't think people looking for a Wii and what it brings would be ok picking up a 360 instead.

        I don't have any statistics, so use the appropriate amount of salt, but I both know people personally and even remember comments here on slashdot where numerous people have said that they purchased an Xbox 360 because they either couldn't find a Wii or couldn't afford a PS3. The Xbox 360 has been the winner of MANY purchases simply by default.

        Is that the biggest reason? Hell no. The biggest reason is that they

  • Lessons (Score:5, Insightful)

    by hansamurai (907719) <hansamurai@gmail.com> on Friday May 04, 2007 @04:10PM (#18993961) Homepage Journal
    Microsoft and Sony are learning something this generation, mostly that throwing the most powerful hardware you can buy at the consumer sells systems, but not at the rate you could be if you lowered your costs. I think we'll see a change in at least one of these juggernauts next round.

    As for profiting, good for them, but seriously, just keep delivering good games and people will buy your system. I don't own an Xbox 360 but there's a few games coming out this year (GTA, Halo, Mass Effect, Burnout) that have me considering. I've owned a Wii, and it was great, then the supply of games I was interested in fell off, so I sold it to my brother in law. I'll probably buy another when the games I want to play start coming, mostly just Smash Bros. at the moment.
    • by drinkypoo (153816)

      Microsoft and Sony are learning something this generation, mostly that throwing the most powerful hardware you can buy at the consumer sells systems, but not at the rate you could be if you lowered your costs. I think we'll see a change in at least one of these juggernauts next round.

      I think that in the future we're going to see the various manufacturers/developers taking different strategies. Sony is the only company I'm puzzled about. Microsoft has already demonstrated a willingness to spend enough money

      • by Kelbear (870538)
        3rd category?

        Fast and innovative.

        It's not all that hard to imagine. The Wii itself isn't spectacular, it's main goal is being cost-effective with a small budget. It's the controller which is bringing the innovation and the controller has already been applied to various other applications.

        No reason why there can't be a fast and innovative category. Nintendo could do it themselves if they want to expand in that direction. Nintendo said it plans to compete using innovation instead by performance benchmarks. Bu
        • Re: (Score:3, Interesting)

          by drinkypoo (153816)

          I suspect that Nintendo's next system WILL be fast. Maybe still slower than the competition, but closer than this one.

          Innovation doesn't have to ditch the tried and true. Just like how new games aren't always good, and games that just do the same stuff with better execution can be a hit.

          by definition, the same stuff with better execution isn't innovative. it's just another iteration.

          • by Kelbear (870538)
            Sorry, that was my bad. My brain must have blinked.

            What I should have typed is "Innovation isn't the only benchmark for quality in gaming."
            • by drinkypoo (153816)

              What I should have typed is "Innovation isn't the only benchmark for quality in gaming."

              Well, I agree with that. There are several metrics by one which can measure. Innovation is definitely ONE of them, because let's face it, while many of us (including me) do enjoy some of the tried-and-true, we're also often looking for a new experience.

              We've pretty much gotten to the point where most games won't benefit from more impressive graphics, though. They could look more real, but it wouldn't improve the gamepl

      • I think that there is room for an expensive, powerful console. I just think Sony overestimated how expensive "expensive" could be.

        I think part of the problem Sony has hit here is that their competition isn't really the 360 or Wii. It's a PC, or an upgrade to an existing PC. Reasoning like: 'if I were to buy an Xbox instead of a PS3, what would I miss out on? If I instead spent the difference on getting a better video card and more memory in the new PC I'm going to buy anyway, what would I gain?'

        Sony's b

    • I think we'll see a change in at least one of these juggernauts next round.

      I'm not as sure. Nintendo's strategy is working so far, but I don't think either MS or Sony is likely to try and compete in the "fun" gaming category. (Read: budget category.) As a general rule margins are higher in the high-end regions (see: Dell v. Alienware) and I think the real problem is that MS and Sony have failed to really capture the excitement of gamers out there. I mean the hard, hard-core gamers (the ones who call the
      • by maxume (22995)
        Nintendo makes money each console they sell. They spend less money pushing resolution into their games. Your statement about better margins in the high end market is conjecture.
        • Re: (Score:1, Flamebait)

          Your statement about better margins in the high end market is conjecture.

          Yay for obnoxious Slashdot know-it-alls. You'd be one of the resident representatives of the anti-social branch of nerdom, right?

          My example (Dell vs. Alienware) is actually factually true. The general rule that luxuries have a higher profit margin is also pretty well-established. The idea that high-end consoles will have higher margin in the future and that that is why Sony and MS are chasing that martket segment is obviously conjec
          • by maxume (22995)
            Are you British? Cause if you aren't, 'Cheers' isn't a closing.

            [personal attack in kind just for having 'Mormon' in your user name omitted]

            I'm quite aware of the tendency for high end products to have better margins. What I should have said is that your statement about better margins in the high end video game market is bad conjecture.

            Clearly, Nintendo is doing a better business at the moment, and while there seems to be a certain amount of novelty wear off going on, they appear to have a very good position
            • Are you British? Cause if you aren't, 'Cheers' isn't a closing.

              1/2 British.

              [personal attack in kind just for having 'Mormon' in your user name omitted]

              That, by the way, is the reason I still go by this ridiculous user name. I used it innocently back in 1999 (in my first foray onto msg boards) and was so overwhelmed by the number of anti-Mormon comments I got within minutes of my first post (that had nothing to do with religion or even politics) that I made up my mind that I would use the name from that tim
              • Re: (Score:2, Funny)

                by maxume (22995)

                So thanks for withholding the comment, even though I'd say it's rather pathetic that you had one to omit.

                And yet you said:

                You'd be one of the resident representatives of the anti-social branch of nerdom, right?

                simply because you read my comment as narrowly as you possibly could. Do you use a ladder to get on that horse?

                • 1. I didn't read it "as narrowly as I could". I read it as written. The fact that you admitted you should have written it differently indicates your own assent with my previous reading. The most important change was the inclusuion of the word "bad". This changes it from a general criticism that I used conjecture at all (which is silly) to a specific beef with a conjecture I made (which is quite defensible).

                  2. There's a large difference between criticizing a person based on a statement they have made v.
                  • by maxume (22995)
                    Are you asserting that being a Mormon is not equivalent to making a statement? I'm pretty sure it is something people choose.
                    • I'm asserting that inferring negative characteristics about someone based on their religion is not the same as inferring negative characteristics about a person based on specific statements they have made. Do you disagree with this?

                      Is proclaiming membership in a religion a statement? Of course it is. But in order to draw negative inferences about the person based on that statement you have to condemn not only them, but their entire religion. I guess if you feel comfortable writing off entire religions i
                    • by maxume (22995)
                      I find Catholicism to be among the most progressive of religions. Weird huh?

                      And if you think condemning the practice of aggressive proselytization is bigoted, then yes, I am a bigot. But condemning actual behaviors is not bigoted, so I'm not losing any sleep over it. I don't hate children that are born to Mormon parents, I don't hate Mormons for existing, I simply disagree with their practices(and from what I can tell, 'Mormon' is not a shades of gray designation, part of being a Mormon is following the dog
                    • If you are really saying "gee, I just disagree with the Mormon practice of proselyting" then I have absolutely no problem with that. That's a practice. You disagree with it. I agree - no bigotry there.

                      However, I'm really not sure how a statement that was restricted to "I disagree with proselyting" would have any relevance to this discussion, and so I'm extremely skeptical that that is really the comment you ommitted. I suspec that "I disagree with proselyting" is nothing more than the rationale behind a
                    • by maxume (22995)
                      I don't think it makes you an idiot. I think it means that your fundamental world view is flawed, because for me, the idea that something that is unknown to us today made itself known to a very select(and characteristically charismatic) few in the past defies all credibility.

                      And I probably would have come across as being actively hostile to proselytizing.
                    • I think it means that your fundamental world view is flawed, because for me, the idea that something that is unknown to us today made itself known to a very select(and characteristically charismatic) few in the past defies all credibility.

                      So this has nothing to do with proselyting at all. You just think religion in general is too far-out to be true. Which, I think, gets us back in the direction of bias and bigotry.

                      As a religious person it's easy for me to understand a secular view point, an atheist viewpo
                    • As a religious person...

                      I should specify that I didn't mean to imply there's anything special about theism that makes it superior to atheism in this regard. I mean that I happen to be a theist and I can appreciate theist, atheist, secular (which I distinguish from atheism in that it simply ignores God as opposed to outright claiming he doesn't exist), spiritualist (Buddhism, Wicca, and other non-materialist world views that lack a traditional God-figure) viewpoints. Just as an example: I have a very high
                    • by maxume (22995)
                      Why are you asserting I don't understand religious viewpoints?

                      Remember, the thing that got us here was you bucketing me as antisocial, I don't think I need to pass a relevance test.
                    • Why are you asserting I don't understand religious viewpoints?

                      Because of your stance on proselyting. It's something that only makes sense to criticize wholsesale if you can't picture the position from the other point of view. If you look at it form the point of view of an evangelical - Mormon or otherwise - then they know something that you don't and it would be duplicitious for them to attempt to "love thy neighbor" and yet remain silent on the knowledge they believe they have.

                      Now you may find methods of
                    • by maxume (22995)
                      I can picture it from the points of view you speak of. I understand that their world view includes sharing their knowledge/beliefs/etc with other people. This is why I stated my earlier criticism as I did; I can understand it without accepting it as being desirable. Again, if this is bigotry, I fail that test, but I'm pretty sure it isn't bigoted to disapprove of other people's activity.

                      Try to understand my point of view. If someone comes to my door to explain to me what they believe, I immediately assume t
                    • If someone comes to my door to explain to me what they believe, I immediately assume that they have an opinion about what I believe.

                      Well that's just your paranoia. There's no other word for it. Do you assume that every time you see a commercial for a Honda Accord that Honda thinks you prefer a Camry? It makes no rational sense to infer from the fact that someon is tellingy you x that they think you believe not x. From my own experience a lot of people have no opinion on on it, or are actively curious to
                    • 1. How annoyed at a personal attack can you get if you (mistakenly or not) provided reason for that personal attack? Read your original post again. Note how you criticized me for making a conjecture, as if the act of conjecturing was somehow inherently wrong or irrational. Contrast with your restatement subsequent to that where you said, essentially, oops - I didn't mean you were wrong for making a conjecture, but that you didn't make a good conjecture. See the problem here? I'd wager if someone had co
                    • What aftermath? Is this going to make Faux News?

                      We're still talking, aren't we? That aftermath.

                      And I never attacked you.

                      Oh please. Writing "I'm not going to call you a fat moron because that would be a personal attack" is a personal attack. Actually omitting an anti-Mormon comment would be one thing, writing "[anti-mormon attack ommitted here]" is the same as my "fat moron" example - just less explicit. That's exactly the kind of passive-agressive attack (like the Faux News barb above) that may help you
              • by maxume (22995)
                Oh, and it's worth noting I probably would have commented on proselytizing, not the rigid belief that Joseph Smith dug up the words of God on golden plates somewhere in the hills of New York. I don't have a problem with going to foreign places and doing good works, but knocking on my door isn't a good work.
  • Hardware Repairs (Score:5, Informative)

    by alvinrod (889928) on Friday May 04, 2007 @04:16PM (#18994071)
    I recall reading an article a short while ago that suggested one of the main reasons that they're currently not profitable is because of the extended warrenty that they offered and the number of console replacements that they've had to make. I don't know how prevalent the problem is, but I've heard stories of some people having to send the console in for repair three or more times. I'm not sure how much of this is true, or if it's just Sony or Nintendo fanboys trying to rip on Microsoft.

    I do believe that the main problems are faulty DVD drives that result in a scratched disc due to a missing component in some of the drives by a certain manufacturer and either a solder point failing or some component on the motherboard becoming unseated after the board warps slightly due to cooling related issues. I don't know if the Elite solves any of these problems by adjustments to any of the components, but I'd like to think that as they transition to 65 nm chips, they'll solve some of these other issues as well.

    I haven't seen any hard figures, but I'd have to say that based on what I've read, the Xbox 360 is running into some of the same problems that the PS2 had, namely cheap hardware that fails early in the products life cycle. The disc drive on my PS2 has recently started to go bad, but I've had it for several years, but if it had happened early on Sony wouldn't have covered it. At least Microsoft is providing some good customer service. I think that everyone could save some money, however, if they'd spend more time designing and testing the product to begin with and not buying the cheapest parts available.
    • by hibiki_r (649814)
      Good customer service? I guess you never had to call them yourself. They'll argue with you about having to pay for the box, about your console being in warranty, and lie about what you're getting back. I have friends in their second replacement already, because the repaired box they got lasted a whole two weeks!

      And, if your console's problem is not 'it doesn't work', they'll probably tell you that they won't replace or repair anything. The drive is going bad and sounds like a vacuum cleaner? It fails to rea
    • Re: (Score:2, Interesting)

      by Anonymous Coward
      Don't you ever equate the pathetic 360 hardware with the PS2 again.

      There are 110 million PS2s out there and they have been running for the past seven years without reports of units dropping dead. Never have people reported problems with PS2s outside of DVD lasers that eventually got dirty or needed to have the focus adjusted with the nob inside the machine. It was not until the massive 360 defect problems started to become public that we suddenly starting hearing stories where, amazingly, 360 owners claimin
      • by jalet (36114)
        > The 360 hardware defect problem is a shameful and completely unprecedented aberration in the console market.

        I'd say Windows XX (yes, any of them) defect problems is a shameful and completely unprecedented aberration in the operating system market.

        But what else could we expect from Microsoft after all ?
      • I agree wholeheartedly.

        As popular as it is to bash Sony, the PS2s' lasers would go out but the system didn't constantly fail in other areas. I'm on my 4th Xbox 360 ( Two Pros and Two Elites) and my girlfriend is on her 5th one ( All Five Pros). Not only does the system fail in all sorts of categories (mainly overheating and disc scratching), but the first Elite 360 I received, did not even recognize the 120 GB HDD. My current Elite has video connection issues because when you move the wire a certain way w
    • by tgd (2822)
      And they'd be even less profitable if the replacement units had year warranties instead of the warranty ending at the end of the first unit's year.

      They're going to be profitable because of everyone who has replaced one a time or three under warranty now having to buy new ones.

      My second warranty replacement died last weekend. Now I'm out of warranty.

      Worst part is, even if I buy a new one I have to beg them to refund my XBLA purchases so I can get them on the new box... or spend $100 buying them again, too.

      Th
    • Re: (Score:3, Interesting)

      by cgenman (325138)
      I'm a huge fan of the 360, so take this as you will. But that thing does fail more often than it should. In addition to what you've listed, you can add power supply failure as a major problem.

      I went through 3 PS2's and 2 PS1's in their lifespans, and I got in pretty late on the PS1. I wouldn't be suprised at all if the first batch of 360's didn't last more than two or three years average for even casual gamers. Hardcore gamers: expect to replace a few.

      I don't even want to know what PS3 fail rates are go
    • That makes sense given the anecdotal evidence I've seen. Out of the 4 friends who bought a 360 all of them have gotten replacements units. One of them is on a third 360. I thought it might be locality. Maybe the truck that brought these up here hit a lot of bumps. As a side note one of my friends has gone through 3 PS2 as well. Same guy who is on his third 360. For him I chalk it up to cats, lack of 1337ness, and a short temper. He is the only person to replace PS2. All of the rest of the circle is still wi
    • by Dan Ost (415913)
      Purely anecdotal, but a guy at work is on his 4th 360 (well, he's sent a 360 to MS 3 times, I don't know if they replace it each time or if they tried to repair it and send it back). It still doesn't work properly (freezes randomly every so often), but it works well enough that he's not going to do anything about it unless it gets worse.

      I've got another friend who got a 360 when it first came out. He hasn't had any problems (at least none that he's admitted to).

      Just thought I'd share that.
  • Good news (Score:4, Interesting)

    by Sciros (986030) on Friday May 04, 2007 @04:19PM (#18994133) Journal
    Well, things are going according to plan it seems. Microsoft knew they'd lose a lot on the Xbox generation but would position themselves for profit in the next, and that's exactly what they've done.

    Microsoft has LOTS of money, and can afford to make long-term investments that are in the billions-of-dollars range. Keyword: investments; they are not just throwing money away here. Their business model seems to be working, so good for them. (As long as it means I get to play good games on my 360 ^_^ otherwise I don't care)

    I wonder what position SONY is in... is SCE looking to break even on the PS3 at *any* point in the future? Maybe, maybe not... the money they've spent on marketing alone, coupled with the losses on each console... the PS2 is probably covering a lot of that but I doubt it's anywhere near all of it.
  • Microsoft doesn't expect to make a profit on hardware alone, but "we'll probably be gross margin neutral on that over the life cycle of the product, and try to break even on that".'"

    "Probably be gross margin neutral" ... "try to break even on that"

    Unless, they have to lower hardware prices in response to pressure from a desparate Sony division.
    Or sales continue to drop off, and not get picked up next christmas. Xbox had a GREAT christmas 2006 simply because PS3 and Wii were nowhere to be found -- next chris
  • by Anonymous Coward
    Every year whoever is the latest person to be running the Xbox stuff says 'next year we will finally break even.'

    The failure rate on Xbox 360s somewhere in the 30-40 percent range - and right from the latest quarterly report Microsoft indicates that having to extend the warranty period for current 360 owners and the cost of replacement units is a huge cost. The move to 65nm has been moved back to later this year and it remains to be seen if that will finally keep the 360s from failing. It has been a year an
    • "The failure rate on Xbox 360s somewhere in the 30-40 percent range..."

      I seriously doubt that number.
      • Re: (Score:1, Interesting)

        by Anonymous Coward
        I don't doubt it at all. I've seen so many reports and first-hand accounts of Ring of Death 360s that I'm surprised any of them work.

        Plus they still don't have the simple matter of protecting a CD/DVD from getting scratched when one moves the console, something *every other* manufacturer has pretty much solved. Hell, I would move my Sega CD around while it was playing a CD looooooooong back in the days where optical disk-based consoles were new, and it never made a scratch on it the way the 360 does (it e
        • "I don't doubt it at all. I've seen so many reports and first-hand accounts of Ring of Death 360s that I'm surprised any of them work."

          You've seen 5 million reports? You've talked to the other 50% that have operational units? You think ANY company would have a defect rate that high and NOT stop production until it's fixed?

          "And still people defend Microsoft. I don't get it."

          And people still attack Microsoft sans-common sense. I don't get it.
          • by Rakishi (759894)

            And people still attack Microsoft sans-common sense. I don't get it.
            Welcome to human psychology, it's always the other guy whose an irrational zealot and never you.
            • "Welcome to human psychology, it's always the other guy whose an irrational zealot and never you."

              Well... I suppose you've got a point, depending on which way public opinion swings. Still, though, accusations of irrational zealotry can be combated with evidence or rationale that doesn't rely on characterizations of people/companies that only Warner Brothers would be suited to animate.
        • Re: (Score:1, Insightful)

          by Anonymous Coward
          "And still people defend Microsoft. I don't get it."

          There are usually two camps those people fall into:

          1) The "Microsoft is always teh winner!" crowd. These are the people who constantly say "LOL! Bill Gates will just buy out such and such company with pocket change" when things are going poorly for the latest attempt for Microsoft to branch out from their OS and office software monopolies. If if they think the Microsoft product sucks they still feel an emotional attachment to Microsoft as some sort of prox
          • There are also those of us enjoying our working 360s. I know that doesn't fit into the worldview, though, so I'll just keep quiet.
    • by Anonymous Coward on Friday May 04, 2007 @05:30PM (#18995355)
      Kindly provide well founded evidence for the following of your claims:

      - 30% - 40% failure rate of the XBox 360

      - That failing elite units are a common occurance, more so than just the standard defect rate for any other electronic hardware

      - That Bluray production prices have dropped "dramatically"

      If you'd kept out the pro-Sony stuff, you could well have squeezed your pro-PS3, anti-MS troll post through, however the pro-Sony stuff is absolutely laughable, to suggest the PS3 has any chance at all of breaking even in the next few years - even if it starts selling is a complete joke. The fact that the PS3 loses far more per unit sold than the 360, and sells far less games per-unit as well as not making anything from it's online service demonstrates how utterly daft your claim is.

      I'm not sure what you're on about when you suggest the 360 has extremely highly priced peripherals either, the 360 controllers are actually the cheapest out the lot, here in the UK a 360 wireless controller can be purchased for £19.99, a Wii-mote for £24.99 and a PS3 Sixaxis for £27.99. The 360 HD-DVD drive can be purchased with the premium console together for less than the PS3, in fact the only addon for the 360 that is rather extortionate is the wireless adapter which is a fair point.

      XBox live is indeed pay for, congratulations on recognising that, but it's also a much better service, the term "you get what you pay for" really couldn't be more appropriate, pay nothing and get shite, pay something and get a decent service, seems like a fair compromise.

      You do have some valid points, but unfortunately they're points that don't have anti-PS3 counter-arguments. It's not as if the PS3 is exactly default free when it also suffers overheating issues (which I'd argue is worse, at least MS' consoles outright fail so you can get them replaced, good luck getting an intermittently crashing PS3 replaced - you just have to live with it).

      The irony of your closing statement is rather amusing, of all the players in this generation that are having to look at closing shop in the console business it is undoubtedly Sony, with the uncertainty as to whether they can turn a profit or even aquire a feasible userbase. Whilst Microsoft is starting to make money with the 360 and their general gaming division, Sony is beginning to lose it, and lose it fast.
      • That Bluray production prices have dropped "dramatically"

        That Blu-Ray pressing costs have fallen is pretty obvious just from the number movies and games pressed - with greater numbers comes lower costs.

        However we have evidence not only of cheaper disc production costs but also cheaper drives - Pioneer has announced a $299 external Blu-Ray drive (reader, DVD writer only). That's much cheaper than any external Blu-Ray drive sold to date. It's easy to imagine by next year even consumers could buy an externa
      • by demon (1039)
        I can believe that kind of fail rate with the 360s; I have two coworkers who have Xbox 360s (and I have one as well, bought more recently than theirs), and so far, both of them have had to send theirs in due to failures. (One is having to send his in a second time; both times for DVD drive failures. The other's showed red lights and wouldn't start up normally.) It seems that it's a pretty common thing; I'm just wondering how long it'll be till mine turns up dead of something.
      • I thought you UK'ers typically paid more than us. Around here a 360 controller is $50, while a Wiimote is $40 (ofcourse the nanchuck is $20 more). Frankly both prices make me sick, it's a fucking controller, but at least the wiimote is different enough to make me forget the extortionate price for a moment. I don't even know about a ps3 controller, I don't have $600 to even start thinking along those lines. Then again I don't have $400 for a 360 either. I had XBox Live for a year on the original xbox and it
    • Every year whoever is the latest person to be running the Xbox stuff says 'next year we will finally break even.'


      Maybe they are assuming they will break even when the Linux desktop dominates the market? Perhaps it's all planned: when Microsoft doesn't dominate desktop computers any more they will monopolize the gaming industry. </tongue in cheek>

  • '"Xbox is the hardest piece of consumer electronics hardware to produce in the world, no debate,"

    Huh?? How's that?

    Can somebody explain to me just what is so groundbreaking about the xBox that makes it so hard to produce?

    • Re: (Score:1, Funny)

      by Anonymous Coward
      it requires a specically genetically modified hamster to run the wheel. those creatures require lots of TLC and biscuits.

    • by MooseMuffin (799896) on Friday May 04, 2007 @05:36PM (#18995429)
      You think its easy to build dvd drives that loud? Its not like they just buy drives off the shelf, none of them can meet their required noise level. They have to go to each dvd drive manufacturer and pick through their defect bin by hand to ensure that every 360 has that trademark sound. And we 360 owners reap the benefits. Clearly, my 360 must be super fast and powerful if its louder than my car.
  • Xbox live &c? (Score:2, Interesting)

    Correct me if I'm wrong, but aren't they making a huge pile of cash off of XBox Live? I thought the idea was to sell the console below cost, and make money off of games and services. So whether or not the hardware is making money isn't really news?
  • Not to mention, it will be the year of Linux on the desktop. Hurd is finished. And Vladimir Putin goes out of office!
  • by BlueFiberOptics (883376) on Friday May 04, 2007 @11:27PM (#18998607) Homepage
    "Xbox 360 To Profit Next Year, Says Bach" It's always good to see a world famous musician forecast when Microsoft's XBox division will become profitable.

Never put off till run-time what you can do at compile-time. -- D. Gries

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