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XBox (Games) Entertainment Games

Microsoft Looks To Cut Xbox Costs 42

Posted by simoniker from the gotta-lose-less-money dept.
Thanks to an anonymous reader for pointing to The Register's article on Microsoft's resolution to reduce the cost of goods sold in its Xbox division. This news is a byproduct of Steve Ballmer's recent internal Microsoft memo urging greater competitiveness, but the article elaborates a little - "Microsoft makes a significant loss - thought to be over $150 - on each Xbox console it sells... significant steps have already been made in slashing Xbox production costs, including moving manufacturing to China from Hungary, and replacing some components with cheaper alternatives." But this is about reducing Microsoft's financial loss per console, not reducing the amount the consumer pays, so, as the article indicates, "..further [Xbox] price cuts seem unlikely in the near future."
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Microsoft Looks To Cut Xbox Costs More

Microsoft Looks To Cut Xbox Costs

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  • Curses! Foiled again! (Score:3, Funny)

    by More Karma Than God ( 643953 ) on Sunday June 08, 2003 @05:43AM (#6142103)
    Now M$ will lose less money once I build my Beowulf cluster of Xboxes!

  • "Made in China" (Score:3, Funny)

    by Makoss ( 660100 ) on Sunday June 08, 2003 @05:57AM (#6142121) Homepage
    Now it the good stuff!

  • So They've Had Cheaper Components? (Score:3, Interesting)

    by portege00 ( 110414 ) <`npbradshaw' `at' `yahoo.com'> on Sunday June 08, 2003 @06:01AM (#6142128) Homepage
    What I'm wondering about is what came along in the last three years that made such a significant cost reduction as to merit moving manufacturing facilities to Hungary? Couldn't they have just used the cheaper components in the beginning and cut costs?

  • Hmm... (Score:4, Interesting)

    by Mmm coffee ( 679570 ) on Sunday June 08, 2003 @06:20AM (#6142153) Journal
    $150 per console loss and now they're trying to lower the price? They must be getting desperate after having their asses handed to them by Sony and Nintendo. I know that their long term goal is to stream content via the X-Box and gain their monopoly in the living room that way, and were expecting to have to slowly inch their way into the market. Them winning this battle in the long term is a significant part of their plans. But looking at their growing loss per console margins I don't believe that they expected to lose to Sony as hard as they have. As odd as it sounds I think Sony is one of their greatest hurdles to overcome before they gain domination of the living room.

    Looking at the PS3 specifications I believe that there's no way in hell MS will be able to even close to Sony. Until broadband gets common enough for MS to use their streaming content plans to dominate the market, I think Sony is going to be giving a merciless beating. But once they start streaming content I have a feeling that they'll start to nudge Sony off to the side. That's when they'll be able to flex their monopolistic muscles at full power.

    The PS4/X-Box 3 battle is going to be very interesting, methinks.

  • Sony, Nintendo, ... can SUE ms in Belgium now! (Score:5, Interesting)

    by Void ( 2442 ) <frankNO@SPAMlouwers.be> on Sunday June 08, 2003 @07:14AM (#6142213) Homepage
    If this is true, and MS confirms this, then Sony, Nintendo, ... anyone making game consoles can sue MS over this in Belgium. In our law, it is illegal to sell anything with a loss if you _know_ you are selling with loss the moment you sell it. (There are some exceptions for special sales, but not much!) So if Sony, Nintendo want to sue ... file a complaint in Belgium!
    • Nobody is going to file any kind of complaint on those grounds because Nintendo and Sony do the exact same thing.

      • Not true ... I think. I know Sony and Nintendo loose money, but at least the parts + assembly cost them less than the price they sell it for. The article about MS seems to indicate that the parts are costing them more than what they sell the x-box for.

        • Nah, spongebob's right. The GameCube almost certainly costs less than what it is sold for, and the PS2 might (I've seen conflicting numbers on this, but I think they're probably making a little money on each one sold). But that's _now_. Earlier in their lifespans, both cost more to make than what they were sold for. So, nobody's going to complain about it when all the console makers do it.

      • Sorry dude, but at least in the US and Japan, Nintendo has never sold the Gamecube or Gameboy advance at a loss. That's actually why the GBA was lowered to $80 originally, cause they were producing them cheap enough that they could make a decent profit even at an $80 sale point.

        Microsoft and Sony were selling the PS2 and X-box at about a $150 loss at the beginning of their consoles lifecycles. Sony, having been doing it for longer, brought the price down (though prolly still losing money), while Microsof
        • I beleive that the comment I made about the big N might be wrong, but I am postive about Sony. They charge publishers an $8-$11 royalty on each copy of a game they produce. Note that's copies produced, not sold.

          Either way, the console manufacturers are getting their money back in the long run anyways. If it cost them more to do it than they made, how could gaming be Sony's most profitable business?

    • IANAL, but I believe the same thing is true in the US. But it wouldn't be Sony or Nintendo's responsibility to bring about the lawsuit. The Federal Government would probably have to file the suit, and since the DoJ is much nicer to MS then in the Clinton administration, I doubt a case would be brought about.
      • IANAL, but I believe the same thing is true in the US. But it wouldn't be Sony or Nintendo's responsibility to bring about the lawsuit. The Federal Government would probably have to file the suit, and since the DoJ is much nicer to MS then in the Clinton administration, I doubt a case would be brought about.

        It's not illegal in the US if the market strategy in use shows a return based on the ownership of the item being sold at a loss. In other words, MS (and every major console maker) expects to make $X p

  • Money (Score:4, Interesting)

    by clu76 ( 620823 ) on Sunday June 08, 2003 @08:46AM (#6142369) Homepage
    Microsoft doubled their loss [reuters.com] on the Xbox this past year, losing $190 million before taxes. But I'm faily sure that Microsoft more than made up for this loss in their other divisions.

    Sony made a profit [reuters.com] of $964 million for the fiscal year. "Sony (SNE) shares are down 40 percent this year, following declines of 8 percent in 2002, 35 percent in 2001 and 51 percent in 2000. " [ctnow.com]

    Nintendo made a profit [canada.com] of $553 million. Their shares are also down, at around 35%. Not bad considering the competition.

    • Re:Money (Score:3, Insightful)

      by burns210 ( 572621 )
      Microsoft went into the console market with 2 billion dollars set iside... they said "ok, we got 2 billion, buy a cool console and sell it to as many people as possible, we can make money later"... the plan worked, and they are number 2 in the game market.
      • Microsoft went into the console market with 2 billion dollars set iside... they said "ok, we got 2 billion, buy a cool console and sell it to as many people as possible, we can make money later"... the plan worked, and they are number 2 in the game market.

        I'd say the plan worked once MS actually starts making money off of the XBox instead of losing boatloads of cash. The tombstones of console companies is written with the epitaph "We we were second place!" Sega comes to mind as an example.
        • The thing you and hundreds of others are missing is that they don't NEED to make money on the console. They are doing this to make inroads into the consumer electronics market. They only have to look successful in the console market, which they can do by constantly throwing money at the problem and blowing up their Xbox balloon with hype. Eventually they'll be selling a super-Xbox which works as a PVR and for which they can get more money, amongst a ton of other devices. Eventually they probably WILL make t
  • I thought that Microsoft was producing Xbox goods in Mexico. When the Xbox was first released, there was a big commotion about how Microsoft saves money by having the hardware produced in Mexico (or some other nearby country).

    Did Microsoft shift production from Mexico to Hungary? If so, why?
    • The Guadalajara plant makes XBoxen for the US market. The Flextronics plant in Hungary produced for the Japanese market, then for the European launch. This has now been relocated to China.

  • X-laptop (Score:4, Interesting)

    by angryflute ( 206793 ) on Sunday June 08, 2003 @11:01AM (#6142929) Homepage
    I've wondered, have they considered going to a laptop motherboard manufacturer to make the innards of the Xbox?

    I never understood why the Xbox's design seems to be that of a PC scaled down, when it seems like it would make more sense to design it as a laptop minus the LCD screen. It would also greatly reduce the size of the Xbox. Laptops today have processors well over 1GB, and on-board 3D graphics chipsets that are just as good as the Xbox's.

    Or is it just too expensive to manufacture the Xbox this way?

    • Re:X-laptop (Score:3, Informative)

      by RzUpAnmsCwrds ( 262647 )
      No, but seriously changing the hardware design would break quite a few games. The only thing that they could probably do safely would be to switch to a NForce2 chipset board with a custom IGP (it needs to support shaders at least as well as the GeForce3.5 in the XBox). The XBox is actually quite similar to the NForce platform.
    • Actually, I tried to do the same with an embedded system we developed at our company.

      Thing is, laptop design and manufacturing is orders of magnitude more expensive than typical PCs. The motherboard design has a completely different approach, as there are other elements to care about, like the type of packaging for the chips (TSOP and such), the thermal design, power consumption, case design, etc. Then there are things like Pilot Runs and Engineering Verification Tests, which are three or four steps for a
  • "Microsoft makes a significant loss - thought to be over $150 - on each Xbox console it sells..."

    Hmm... maybe I should buy one after all >:)

  • The loss per console is "thought to be over $150"? Has anyone ever posted the true spec sheet showing cost of manufacturing and assembling of parts? All I keep reading are either people who are a cousin of a sister of a brother of an uncle who works there or some know-it-all just looking to sucker punch Microsoft.
    • Indeed, indeed. That $150 number that they list as being "thought" to be accurate is the number from launch. It seems to stretch credibility that the number hasn't gone down since that time.

      Of course, I don't see the reason for the story in the first place, except as an excuse to point out once again that Microsoft is losing money on Xbox consoles (something that was part of the MS plan from the beginning). Any hardware manufacturer is going to look for ways to cut production costs - those who don't ar

      • The price has probably been going down, but they've also been forced into repeated price cuts in order to keep up with Sony. Is Sony's prices have gone down $100 since launch, it would be reasonable to assume the same of Microsoft to, in which case they'd still be losing $150 per console at the current price.

        It's news because the reason they're doing going to such lenghts to do so at this particular time is the _huge_ losses they're taking, far in excess of what they predicted, and the shareholders, and t

        • Why would shareholders be upset? They're up almost $3 at $23.68 a share since their past-year low of $20.70 last July. Their overall profits still exceeded forecasts in the last quarter, beating analyst forecasts by a penny per share (that's a lot of pennies). All this despite being in the middle of a big, toothy bear market.

          Don't miss the forest while staring so intently at this one Microsoft tree.

      • I completely agree. The cost for manufacturing the consoles parts has (Beyond a shadow of a doubt.) gone down since launch date. I just wish someone around here would have the hard documentation to back this article/post up before we go scrutinizing their business model.

        It just seems like everyone around here wants to ink the Xbox's death and destruction. Kinda reminds me when the Dreamcast was a major competitor.
    • Has anyone ever posted the true spec sheet showing cost of manufacturing and assembling of parts?

      Sort of [portelligent.com], but you'll have to pay.
    • http://www.eetimes.com/sys/uth/OEG20020326S0044

      It's a slightly older (~1 year, possibly older because I remember seeing it in the print version around the time XBox was released) article, but it is free. You could probably price out the major parts for yourself from the listing, but overall it's still going to be an estimate without MS releasing the prices they're getting for the parts. Then there's the whole manufacturing process itself...

  • As of 30 May 2003, the prices of both Xbox [xbox.com] and Playstation 2 [playstation.com] in Australia dropped to AUD 329, from AUD 399 previously. (You can get a Gamecube with Metroid Prime for under AUD 300. Of course, the 'Cube isn't marketed very well and has struggled here.)

    That said, most of the shops here would sell you a console with a big pile of stuff bundled in: Gamecube plus Metroid Prime; PS2 plus movies; Xbox plus Halo (still), Amped (still) and discount vouchers.

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