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Microsoft XBox (Games)

Xbox Sees Earnings Lag, Stronger Sales 58

Posted by simoniker from the not-terrible dept.
Thanks to GameSpot for its article discussing the Xbox-related financial results from Microsoft's Q4/annual 2004 earnings, released yesterday. The article notes: "The Home and Entertainment Group, which includes the Xbox division, had a $339 million operating loss for the quarter on revenue of $499 million and anemic revenue growth of 3 percent - the lowest growth rate of any of Microsoft's seven business segments. Though Microsoft doesn't break out separate results for the Xbox, it's pretty clear that the console business is still a strategic investment, not a profit center." However, it's not all bad news, since "Xbox shipments increased 27 percent over the same period a year ago. Microsoft reports 15.5 million units sold worldwide through the end of June: 1.5 million in Asia Pacific, 3.9 million in Europe, and 10.1 million in North America. The company also quoted industry research group NPD's claim that Xbox has a 33 percent market share in the US, with 50 percent growth in software sales over Q4 last year." Does this bode well for the apparent 2005 launch of Xbox 2?
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Xbox Sees Earnings Lag, Stronger Sales More

Xbox Sees Earnings Lag, Stronger Sales

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  • Isn't Office for the Mac in that division as well?

    It'd be interesting to know how the Xbox numbers compare to the Office:Mac numbers if so--I suspect one is carrying the other.
    • you're thinking of the MacBU. and yes, the mac bu is profitable. i believe they produce office, msn messenger, (used to do ie), and now virtualpc. not sure what else they do really. office is the big money maker.
  • manage to spend almost 2x what the total revenues were?
    If I did this I would be MBNA's bitch for the rest of my life. Ah to have the life of a corporation....
    • by fighting a price war against a cheaper to made devices?

      or by using zillions on marketing, buying game companies or whatever. gaining market share by using money in the hopes of being able to pocket in some income from it later.
    • manage to spend almost 2x what the total revenues were? If I did this I would be MBNA's bitch for the rest of my life. Ah to have the life of a corporation....

      Not if you made billions of dollars beforehand.

  • Losses almost as big as revenues = sound business strategy. I'm sure their shareholders are loving that. I mean, they obviously need to do something with all their cash, but flushing it down the toilet usually isn't the best strategy. Of course, if they leverage these losses to eventually become profitable in the console market, that's another story. But that's a big "if" right now.
    • No offense, but any time you start a business there is always a big 'if'

      • "No offense, but any time you start a business there is always a big 'if'"

        You're right that there's always a big "if". My point was that, given the state of the industry and the competition they are facing, this "if" is bigger than most.
      • Not all ifs are equal. Most businesses face ifs that are like, say, betting in poker. There's a risk, but you might profit.

        With the XBox, it's a little different. It's more like...say...if you hang out at a freshly-post-meltdown nuclear reactor site, it's not exactly safe, but what if the radiation mutates your DNA and gives you the ability to shoot mind bullets!?!?
    • Most large corporations accept huge losses to break into a new market segment. Shareholders don't mind as long as the stock goes up, and revenue growth makes the stock go up, not necessarily profits. Investors prefer a company losing millions of dollars to grow their business than just see it stagnating on huge cash reserves (MS has been criticized for not using its reserves on strategic investments)
      Microsoft knows it can't grow in its traditional space, so one logical step is to try its hand at getting i

  • My take on how Xbox2 will do (Score:4, Insightful)

    by Lovedumplingx ( 245300 ) on Friday July 23, 2004 @12:26PM (#9780512)
    I think it really all depends on what specs the Xbox2 has. If the Xbox2 won't play first gen games then I think this buying trend (which appears to be people have waited a while to buy) will not be good for the Xbox2 release because all the games bought in December of 2004 and January 2005 (like Jade Empire and Halo 2) will then be useless. And even though Penny-Arcade and the like will own every console known to man normal people like myself (who just purchased an Xbox a few months ago) will wait a few years to purchase a new system. I think this will lead to poor sales for the Xbox2 unless the Xbox1 games will work with the Xbox2 and then maybe I could pay ~$150 (after selling the Xbox for $50) for a new console and I wouldn't have to buy any games right away.
    • Apparently according to this, it will be backwards compatible (At least according to Microsoft)

      http://www.gamesindustry.biz/content_page.php?se ct ion_name=dev&aid=3669
      • Maybe I missed something important in that article, but it looks to me like it says it is not likely to include backwards compatability.

        Given the disparaging remarks made by senior members of the Xbox team about the importance of backwards compatibility in consoles, it seems highly unlikely, then, that the next-generation system will include this feature - even regardless of the comments made to our source, which effectively rule out backwards compatibility entirely.

        and

        At present, the technology to emu

    • unless the Xbox1 games will work with the Xbox2 and then maybe I could pay ~$150 (after selling the Xbox for $50) for a new console and I wouldn't have to buy any games right away.

      No offense, but: what's the point of buying the new console then? if you aren't going to buy any new games for it straight away? So you can say you have an Xbox2? I don't get it.

      I agree with your main point though that it's too soon, the Xbox has only just caught on in the mainstream, and most people only have one console (or n

  • The trick isn't so much what Microsoft does... (Score:5, Interesting)

    by Moryath ( 553296 ) on Friday July 23, 2004 @12:42PM (#9780676)
    it's what Sony does, or doesn't, do to counter.

    Nintendo has already said they're trying to sidestep the next generation of consoles; the focus is going to be on "Revolution" (whatever the heck it is). So they're out, and will probably be content with 20% market share. Look at Nintendo as trying to transition to the Apple business model, with the Gameboy Advance their bread and butter.

    Xbox being 33% in the USA market is a good thing; they've got strong sales and they're getting better as the PS2's hardware just can't keep up with new games. Compare PS2 Spider-Man 2 to the Xbox version, the PS2 version looks like ass.

    The trick for Microsoft now is to leverage themselves so that they're the next-buy instead of the PS3. They're 33% in the console market right now because the majority of Xbox owners also own a PS2. When crossover titles come out, this hurts them - people pick one console or the other as their primary, and only get the "must have" titles on the second.

    It will help immensely for early adoption sales, however, for Microsoft to have the Xbox2 compatible with Xbox games; The Playstation did the same, and people saw it as an "upgrade" rather than a whole new platform. This enabled them to keep a lot of customers, as opposed to Nintendo's N64 being abandoned by many players for the Playstation - you can bet they'd have had better luck if the N64 had been backwards compatible with the SNES.

    Of course, Microsoft could REALLY kick ass if someone (them or a third party; preferably them, and in the box) came out with an emulation layer that let the Xbox2 play Playstation/Playstation2 titles as well... they're moving to a RISC processor, so it shouldn't be all THAT hard, especially since they're emulating something that ran at an order of magnitude less clock speed.
    • revolution is the project name for the next nintendo console.

      like doplhin was the codce name for the gamecube

      ultra64 for the nintendo64

      nitro for the nintendo ds.

      its a console just like the next one from sony and microsoft.

      so please back up the "they are out" comment.

      you might be interested to know that camecube is #2 in the world AND in the us.
      • #1 - in the US, Playstation2's #1, Xbox is #2, Gamecube is #3. If you can find a recent article you can quote differently, please provide the link.

        #2 - Nintendo's PR and designers have made statements that the console currently named "Revolution" will be a "different" sort of Console.

        To wit: THIS [gamespy.com].

        • It's a different kind of console just like the DS is a different kind of handheld. I don't think it'll be as different as they make it out to be, maybe two or thee new concepts but the rest still the same. Nintendo has a talent to make anything sound like more than it really is. Though that might be fans hyping it up, too.

        • Re:Two things: (Score:2, Insightful)

          by Weirdofreak ( 769987 )
          It's still a console, and it's still going to be competing against Xbox 2 and PS3. In the same way that the DS, while a different sort of handheld, is still a handheld, and will compete against the PSP.

          To quote the most commonly used line in the X-Men comics, "People fear and hate what they do not understand." Sending out novel hardware will not help Nintendo attain the mainstream crowd.
          Maybe, maybe not. There are people who will resist the change, certainly, but others, the ones who Nintendo is referrin
    • "The trick for Microsoft now is to leverage themselves so that they're the next-buy instead of the PS3. They're 33% in the console market right now because the majority of Xbox owners also own a PS2. When crossover titles come out, this hurts them - people pick one console or the other as their primary, and only get the "must have" titles on the second."

      Hmm... you've stated it yourself, cross-over titles look better on the Xbox. Wouldn't I get the crossover title on the Xbox then and just get the exclus
    • Look at Nintendo as trying to transition to the Apple business model, with the Gameboy Advance their bread and butter.

      As long as they don't use Apple as a role model too much. Nintendo has a higher market price than Apple.

    • Re:The trick isn't so much what Microsoft does... (Score:1, Insightful)

      by Anonymous Coward
      "Of course, Microsoft could REALLY kick ass if someone (them or a third party; preferably them, and in the box) came out with an emulation layer that let the Xbox2 play Playstation/Playstation2 titles as well... they're moving to a RISC processor, so it shouldn't be all THAT hard, especially since they're emulating something that ran at an order of magnitude less clock speed."

      I don't think pissing off Sony would be a good move - they could be a lot more aggressive about playstation 3 exclusive titles and d
      • However, Sega are out of the console business - dreamcast compatibility would be doable (though they'd probably improve the copy protection from the original...), add that to xbox 1 compatibility and you have a library that comes close to rivalling the PS2.
        I don't think so. You're forgeting the PS2 backwards compatibility with PSone.
        But even without PSone games, I think that the PS2 has more games than Xbox + dreamcast. See here [gamerankings.com].

        "Another interesting speculation is that xbox 2 and revolution could be th
      • I don't think pissing off Sony would be a good move - they could be a lot more aggressive about playstation 3 exclusive titles and do some serious damage to the xbox 2.

        Or, you know, sue Microsoft out of the console market by stating that emulation of PSOne and PS2 titles is a violation of the DMCA, since it breaks the region encryption, etc. of the disks

        Microsoft isn't stupid. Evil, but not stupid. They get a lot of good things from the DMCA, and if they were caught in violation of the DMCA by making

    • emulation layer ... play Playstation/Playstation2 titles as well... they're moving to a RISC processor, so it shouldn't be all THAT hard

      Obviously stated by someone who has no clue what either RISC means, or how emulation works.

      Here's a hint: pretty much every processor made in the last 10-15 years has had a RISC core. Yes, that includes Intel and AMD's offerings that just provide a translation stage between the CISC instruction sets and the RISC core.

      can bet they'd have had better luck if the N64 had

      • PlayStation was the first generation for Sony, and a completely new disc format. There was nothing to be compatible with.

        The Atari 7800 was backwards compatible, but didn't beat the NES to launch, and wasn't advertised properly. See any history of Atari if you want more details on the matter.

        The PS2 was backwards compatible... and hey, it WORKED! All things being equal, a backwards compatible console from the same company will do better than a non-compatible console, because you'll speed early adoption

      • I think that there is nothing to be gained by Microsoft emulating the PS1/PS2 on the XBox 2.

        But as far as feasibility goes, Microsoft does own Connectix, which developed the Virtual Play Station for the Macintosh. So I think that if they wanted to, they should be able to put something together pretty easily (at least for the PS1), given that they already know how to do it.

    • Of course, Microsoft could REALLY kick ass if someone (them or a third party; preferably them, and in the box) came out with an emulation layer that let the Xbox2 play Playstation/Playstation2 titles as well... they're moving to a RISC processor, so it shouldn't be all THAT hard, especially since they're emulating something that ran at an order of magnitude less clock speed.

      Regardless of the difficulty of emulating a playstation on the new hardware, they would still run smack into the illegality of doing
      • Connectix WON their court fight. They were completely legal to sell their emulator.

        The only reason that VGS died was that Sony paid them boatloads of cash to stop selling it.

        Bleem would have won, too, but they ran out of the financial resources needed to challenge Sony. Microsoft wouldn't have that liability, it'd be big company vs big company.

        I think Microsoft's not going to go with Sony compatibility, but that's nothing to do with their lawyers - they know they could win the court fight, or at least dr
        • I have to agree - compatability with a competitor's software in a business where most or all of the money is made selling the software is a pretty bad idea.

          Their best bet is to have compatability with XBox1 ... a few XBox1 games that get 'a little extra' when played on XBox2 would probably help encourage sales of the new console - but the extras need to be way less than you can get from 'native' XBox2 games or else developers won't be very motivated to make XBox2-only titles.

          David

  • Question for the IANALs out there (Score:3, Interesting)

    by Kevin Burtch ( 13372 ) on Friday July 23, 2004 @12:55PM (#9780868)

    Back during one of MS's $1B loss (on Xbox) statements, someone posted the relevant portion of the law against abusing a monopoly... could someone who knows where to find this info either post a link to a site with the laws available, or post a reply with the relevant info, please?

    The basic jist of it (from memory, it was a year or 2 ago), was "using one's position and finances within one market to attempt to dominate another, unrelated market" or something like that. I'm almost positive it specifically mentioned losses for an extended period of time (proving the company won't be able to profit in the new market until its competition is dominated).
    • I don't think you need to be a monopoly in the Console market to be profitable - neither Sony, Nintendo, (or Sega or Atari for that matter) ever had what I'd consider a 'monopoly marketshare' and yet all have been (or still are) profitable.

      XBox will be profitable eventually, though it may not be until the next-gen box has been out awhile.

      I sorta hope it's backwards compatible, too - even if they have new versions of many key games available at launch, I wouldn't want to buy a new console AND a bunch of ne

      • I don't think you need to be a monopoly in the Console market to be profitable - neither Sony, Nintendo, (or Sega or Atari for that matter) ever had what I'd consider a 'monopoly marketshare' and yet all have been (or still are) profitable.

        No, not at all (I agree with you).
        To add to that, the competition is healthy and very good for the consumers.

        My point (in my previous posting) is, they're using their position as a monopoly in *another* market to fund their (failing) attempt to dominate this market...
        • Ahh. I thought that had more to do with using the nature of Monopoly A to create a Monopoly B, not merely the funds from it, but I could be mistaken.

          If my thinking were accurate, then the XBox wouldn't qualify unless you had to buy a retail copy of Windows to run any console except the XBox, or something like that.

          Xentax
  • I am a PC gamer but sorta follow the consoles a bit to see if they ever going to supply the kinda games I like (not so far but the gba is a lot of fun).

    Anyway, how often has a company done better with their second console? The only recent "new" player is sony and they had a hit straight off.

    So people don't like the x-box and are not buying it. So you are in a store, you are ignoring the x=box stand and looking for playstation/pc/gba games/hardware. Why should you then look at the x-box2 stand? Sequels are

    • The Xbox has not failed; if it had it would be dead by now (3 years after launch?) and a second generation would not be planned. Microsoft successfully turned a 2-player market into a 3-player market. This whole article is stating that "people don't like the x-box and are not buying it" and "of course, nobody has an x-box" are simply not true.
      • "Microsoft successfully turned a 2-player market into a 3-player market."
        Pre MS console makers: Nintendo, Sony, Sega
        Post MS console makers: Nintendo, Sony, MS

        2 to 3, huh?

      • "The Xbox has not failed".
        No? So what does the /. news affirm? That the Xbox is a success?

        The last week, the Xbox has sold 272 units in Japan. That is even below PSOne, with 276. If that is not a failure, then i don't know what it is. Someone may say that the Japan market is not important, but majors softhouses are there.
      • If MS was a game company like nintendo or sega they would be dead. Just like all the others who tried it. MS own figures show that the x-box has only cost money. The only reason there is an x-box-2 coming up is because to MS even the gigantic losses of the x-box are small change. Their dream of owning the console market is to big a dream to give up and they got to much money anyway.

        As for my statement that people don't like the x-box. Your right it is a 3 player market and MS finished last. Since GBA games

    • I wouldn't count them out yet. When has Microsoft ever did anything right the first time, or even the second? Windows 1.0 and 2.0 were terrible and barely usable, Word for Windows 1.0 and 1.1 were not very good, IE was up to version 3.0 before it really started overtaking Netscape, and it even took MS DOS until version 5.0 to really be any good.

      I don't own an Xbox, I have a PS2 and Game Cube, but I have seen how Microsoft operates in the past. They take the best ideas of their competitors and incorporat
    • The only real killer game for the x-box is halo, halo2 is also x-box1 I believe so what exactly have they lined up for the x-box2?

      Umm...Halo 3?

    • Mod parent down (Score:2, Insightful)

      by MMaestro ( 585010 )
      Anyway, how often has a company done better with their second console? The only recent "new" player is sony and they had a hit straight off.

      What the hell are you talking about? The PS2 was a total crash thanks to god awful launch games (PS1 games don't count) and the shortage of units at launch day. The only reason why it survived was because it played DVDs (now a moot advantage) and because it played PS1 games (once again, moot).

      The only real killer game for the x-box is halo,

      Go back to playing KOTOR,

      • I love KOTOR (and, in fact, played it through again last week) and my Xbox but, man, I've never played KOTOR without hassles on Xbox. Bioware left enough bugs and glitches in there to choke a horse. I actually managed to run up against another bug on my sixth time through that I could have avoided if I spent a lot of time on gaming forums (I don't anymore). Very annoying but, of course, not really Microsoft's fault. :)
      • and it was very smooth indeed, maybe you just can't afford proper PC hardware. Also the console kotor was a bug ridden mess whose bugs were fixed on PC launch and further bugs fixed with patches. Add some extra content, the capabilty of replay to edit the game to your own delight and I am 100% convinced you are an x-box fanboy.

        PS2 a total crash? Riiiiiight. Where exactly do you get your sales figures from? Bill Gates wetdreams? Not being able to ship units fast enough is a good thing, it shows demand. You

    • most people don't know or care that Xbox is from Microsoft. and it's doing quite well. btw i'm a Nintendo fan so i'm biased the other way. the sad truth is MS probably can "win" by having the Xbox2 out early enough with enough pretty but not too special games at launch. I hope i'm wrong, i'd like a Nintendo comeback and for people to recognise Nintendo and Sega for the great games hardware/software design companies they are. As for Sony.. it's such a vast company you can't sum it up easily, but i'll be surp
      • If a console comes out early it doesn't mean it will be succesful. Just think about Genesis (vs. SNES).

        "i'd like a Nintendo comeback and for people to recognise Nintendo and Sega for the great games hardware/software design companies they are"
        why come back? Nintendo is still alive and kicking. It may not have the greatest 3rd party support or its SNES aura, but its franchises are stronger than ever.
    • I don't think that the Xbox has failed just yet. AFAIK, popular games (Halo 2, sports games, etc.) are still being released for the system three or so years after its release, although that might just be MS being able to expend huge amounts of money on ensuring development and multiple-platform launches. I do agree that the Xbox doesn't have a compelling list of games, but I've always chalked that up to the PS2 being released first.

      Personally, I try to buy games for the Xbox. I'm not a PS2/GC/Xbox-only [penny-arcade.com]
      • How exactly? Anyway dreamcast was first of the current generation. So it had the best catalog and won?

        x-box was supposed to take over the console market. Instead it has the lowest sales of the current generation and is a total failure in japan wich is the current home of gaming. MS has so far only lost money on the project. Exactly how this all add up to anything else but failure?

        I really don't get x-box fans. Dreamcast fans have no trouble admitting the financial failure of their console. Neither do all

        • I don't consider myself an Xbox fan, but I do have a very simplistic definition of failure. When I imagine "failure", I think of a console that has been out for X amount of time and has no good games currently being released (or planned for release). Xbox currently has games that I would consider "good" being released for it. Thus, by my definition, Xbox has not failed just yet, although I wouldn't consider it the smashing success that MS envisioned. I freely admit that this is a subjective viewpoint an

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