# xbox to lose M$ 1.1 billion



## satanicpoptart (Jun 25, 2002)

xbox to lose M$ 1.1 billion Dollars over the next fiscal year.

http://zdnet.com.com/2100-1103-938999.html

to bad thats not alot of money for them...


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## azosx (Jun 25, 2002)

Anything in the billions is a lot of money for anyone, even MS.


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## Koelling (Jun 25, 2002)

It wouldn't be a lot if it had some sort of future but what are they going to do now? They have sold most of the boxes they will and the whole project seems like it's heading for a dead end.


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## voice- (Jun 25, 2002)

WRONG!!! Now is when they pump out the additional hardware like extra joysticks an such. When it dries up we will see X-Box 2. They don't want to make money immedeately, they want to drive Sony and Nintendo OUT of the market. When they dominate, that's when you'll see MS making money on X-Box. They will do anything to become a monopolistic company in the console market.



> As seen in Secret of Monkey Island and Escape from Monkey Island:
> *When there's only one candidate there's only one choise*



Userbase is more powerful than any immedeate profit and MS knows that.


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## rinse (Jun 25, 2002)

the real question, is will their shareholders allow them to continually lose money on this project for the foseeable future? (at least until 2004 according to Red Herring)

my guess is no.

btw... check out www.MediaDinosaur.com for a editorial piece i wrote on the hacking of the XBox.


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## azosx (Jun 25, 2002)

> WRONG!!! Now is when they pump out the additional hardware like extra joysticks an such. When it dries up we will see X-Box 2. They don't want to make money immedeately, they want to drive Sony and Nintendo OUT of the market. When they dominate, that's when you'll see MS making money on X-Box. They will do anything to become a monopolistic company in the console market.



What you fail to realize is MS is new to the gaming market and never had such substantial losses on any other product before.  Also, Microsoft never throws good money at bad money.  If they feel they can't win, they'll yank the plug all together, no questions asked.

Microsoft doesn't operate like the razor blade companies, sell the hardware for a loss and reap the profits of software, so it'll be interesting to see how long they can cope with losing so much money with no foreseeable change in the future.


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## Snyper M (Jun 25, 2002)

Microsoft loses money on each system they sell.  THis is a common marketing ploy that both Nintendo and Sony also use to simply push their products out of the door and increase their market share.  Just because Microsoft is losing money at this point and time and to at leats some degree into the future is no reaosn to really worry I'd say.  Sadly...  The real money is in accessories and game liscensing.  both of whihc are driven by marketshare.  I'm not sure what that number is at but I've heard it's not too high.  If microsoft can't increase this to at least Sony's level soon beofre a PS 3 is introduced.  They'll never recoup any losses no matter how many systems they have installed.  Just my thoughts.

Also I just wanted to add that I have a feeling microsoft will have th e easiest time upgrading systems.  Sony could put out a PS 3 that could have taken years to develop and essentially all microsoft has to do it upgrade the comptuer that is the xbox, a process that requires no innovation and can  be accomplished easily in a matter of days most likely


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## phatsharpie (Jun 25, 2002)

http://www.namibian.com.na/2002/june/techtalk/026AFF0365.html

Xbox + UltimateTV... This is direction everyone knew MS was going anyway.


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## ccuilla (Jun 25, 2002)

> _Originally posted by azosx _
> *Anything in the billions is a lot of money for anyone, even MS. *



Well...if you have $38 BILLION (that's with a "B") sitting in the bank. $1B isn't that much.


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## dave17lax (Jun 25, 2002)

well i have an xbox and i think it's the best system out there. playing halo, you can see how good xbox _can_  be (and without substantial mods, ps2 would not be able to do it).
it's funny to possibly see xbox go the way of beta, and other superior products.


 .ahem.


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## ccuilla (Jun 25, 2002)

A couple of posters have already made this basic point...Microsoft is trying to "give away the razors, and sell the blades and shaving cream." Second, if they can establish a monopoly here, they will. Third, don't EVER count MS out. They were "out" of the word processing business (WordPerfect), the spreadsheet business (Lotus 1-2-3) and the internet (Netscape). Now they are not. :-(

Finally, and this is the most interesting point to me...especially on this board.

Everyone (and it really seems like EVERYONE) has been lobbying for (or speculating when) Apple will port OS X to x86 (it can be done, and has been done in the past...technology is not the problem here). They point to commodity (junk) hardware...blah, blah, blah. And yet...and YET...Microsoft appears to moving in exactly the opposite direction...INTO hardware. Note, XBox is not the only foray for them. See this article: http://zdnet.com.com/2100-1104-938110.html.

If I were Dell or Gateway, I'd be very nervous.

Microsoft is looking for new ways to grow its revenue. Its software sales are flattening. So, why not grab a bigger piece of the customer's pocket book. True, margins on hardware are slimmer. That is assuming you don't have a monopoly. Look at Apple...30% margins. Why...because if you want what Apple offers there is only one place to get it (Apple has a monopoly too...though not so much in the classic sense of it.)

Microsoft WILL be a hardware player. No doubt of that. And when they realize they can control the whole picture (much like Apple does)...they will. The process may be slow...but it will happen.


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## Ricky (Jun 25, 2002)

I foresaw this...

Microsoft's online strategy is horrible.  They REQUIRE broadband.  What kinds of fools are they?


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## gibbs (Jun 26, 2002)

I cant believe that people color their perceptions of Xbox platform success based on their personal console preferences, or company preferences.

All console companies subsidize the hardware cost and LOSE money on their console. Nintendo loses money on their consoles, sega lost money on their consoles [okay, bad example ] and YES...SONY LOSES MONEY ON THEIR CONSOLES. Of course, as they drive down manufacturing costs, their margins on console get better and better, but in the end, as has been said SO many times, CONSOLE systems make money on GAMES AND ACCESSORIES.

Just because MS is "losing money" on the Xbox, it doesnt really have anything to do with its success or failure. That is a seperate issue.

The losing money headlines are only interesting for 2 reasons

A) Microsoft can lose a lot of money and get away with it
B) A lot of people are hoping the Xbox is failing,  the sheer amount of fud and negative press from its enemies is astounding, and it is working to some extent.


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## phatsharpie (Jun 26, 2002)

> _Originally posted by gibbs _
> *All console companies subsidize the hardware cost and LOSE money on their console. Nintendo loses money on their consoles, sega lost money on their consoles [okay, bad example ] and YES...SONY LOSES MONEY ON THEIR CONSOLES. Of course, as they drive down manufacturing costs, their margins on console get better and better, but in the end, as has been said SO many times, CONSOLE systems make money on GAMES AND ACCESSORIES. *



Losing money on game consoles to make money on game licensing is a new phenomenon.

http://www.actsofgord.com/Proclamations/chapter02.html

Even if Nintendo and Sony are losing money on their consoles, their loss margin is much smaller than MS, so they can recoup with relatively little amount of games and accessories being sold.


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## Ricky (Jun 26, 2002)

Okay...

1.)  Someone _please_ define *fud* for me.
2.)  Yes, I agree that all of the video game manufacturers are losing money, but is Microsoft gaining it back on games?  I do not believe so, because most of the money goes back to the development studio of the game.  Last time I checked, Microsoft was not making any games for their own console.  This poses a threat to the financial future of the Xbox.  Someone please correct me if I am wrong on this.
3.)  Microsoft's online strategy is utter *fud.* D)  They expect everyone who wants Xbox internet access to get broadband, which is simply not going to happen.  A lot of people don't even have the ability to get broadband, so why bother?  A recent survey shows that broadband is only in 7% of the total American Internet population.

Fud, I say!    Hehe.


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## Javintosh (Jun 26, 2002)

fud is a term that is usually associated with M$. as they use it to try to scare people into not buying competitor's products (Novell being the latest high-publicity victim - MS actualy had to send retractions to people -  )

it stands for fear, uncertainty and doubt.

I think that no-one is surprised that MS is loosing money in the console. People are surprised at how *much* money is loosing there.

It is no secret that MS expected to do much better than it is doing now. It is also no secret that MS predicted a loss of 800K over 8 years (a little fuzzy on that second number, but it was on the 8-10 year range).

Well, here we are in year number two, and MS is not selling as many as they thought they would (which actually curtails the loss) and they have lost a total of 2billion on the first two years...

the question to me is simple: who the fudgecicle is doing their math for them? how do you sell less money-loosing units and loose over 700K in the first year (when this kind of loss was expected only after roughly 8 years and then loose another 1.1B on the next year.

in two years, they've lost almost tripple of what they projected they would loose over almost a decade!!!

they must keep the books the same way they write code!!!


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## Javintosh (Jun 26, 2002)

oh yeah - I've never been able to see one of this puppies in action.

I've taken 3 trips to the mall (which is more than my yearly average) to check out the xbox consoles at the games stores.

Every single time I've made this trip, the xbox console was crashed and would not respond to any sort of input...

I think some of those heralded technologies from hailstorm (you know, the ones that totally eliminate your privacy and hand it over to M$) must be in the xbox...

as I approach the store, the xbox detects who I am and gets an internal error: "Warning, warning, user does not bend over for bill. fatal system error"


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## rinse (Jun 26, 2002)

> _Originally posted by Snyper M _
> *Microsoft loses money on each system they sell.  THis is a common marketing ploy that both Nintendo and Sony also use to simply push their products out of the door and increase their market share.  *



That statement is a myth. Show me the data from a reliable source.


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## lonny (Jun 26, 2002)

Many software developers are not going to make games for the XBox just because it's not profitable for them.
This is the beginning of the end for a console.


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## nichrome (Jun 26, 2002)

It is a commonly known fact that console manufacturers lose money on each console sold. But consider this:

1. Nintendo's loss per unit is in the 20 buck range, even after the price drop.
2. So is Sony's. They were in the green for a moment before they dropped the PS2 price.
3. Microsoft was losing almost 100 dollars even before the fairly recent Xbox price drop.

MS is making a metric sh*tload in losses per unit sold. And they sure as heck aren't making up for that in software.


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## rinse (Jun 26, 2002)

show me the data on losses... until there are some cold hard numbers.... the loss on consoles is a myth.


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## Koelling (Jun 27, 2002)

> Microsoft WILL be a hardware player. No doubt of that. And when they realize they can control the whole picture (much like Apple does)...they will. The process may be slow...but it will happen.


 I see it already happening with this DRM "Secure OS" which is coming out after longhorn. The palladium chip makes the machine Microsoft without them having to manufacture any of it. 

Take a look at this (perhaps a little too speculative) article:
http://theregus.com/content/4/25378.html
It's about how with the Palladium chip requiring that a program be certified in order to run, nobody will be able to compile their own software so opensource and Linux will die.

Microsoft's biggest enemy, Open source will vanish if this catches on (assuming it does catch on which in all likelyhood it wont). Then for 30 cents a pop to manufacture the palladium chip every Dell, Gateway, Sony motherbord will belong to Microsoft and only the software they want you to run will. They can sell the licence to place this chip on the board for the profit they hope to recieve in creating their own box but they won't have to worry about people not trusting microsoft hardware (like they did for XBOX, told you I could tie it in )


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## Valrus (Jun 27, 2002)

$1 billion?

Gates will pay for that out of his pocket.
His _front_ pocket.

I know, I know. I'm kidding.

-the valrus


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