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[DenchDeckard]

Series performs worse than XBO, which performed worse than 360.

PS5 improves PS4, which improved PS3.

Since the 360+PS3 gen the trend is that PS keeps improving while XB keeps decreasing.

The tracking is PS5>PS4>PS3>360>XBO>Series.

I assume shifting their focus to release day one all their games to PC and GP, plus having cloud gaming even in mobile is helping them to slowly reduce their console userbase.

Nailed it, console is just less important to MS now. They make more revenue and probably profits from their new approach than they ever did in the sole console space.

I guess they can only be happy with it as nothing came out from the court case on a different opinion than that.

 

[Heisenberg007]

Microsoft reports shipped numbers. Vgchartz reports sold to consumers. Consoles sold to consumers are probably under 21mil.

But even shipped numbers were wrong by VGChartz.

 

[wolffy66]

Same. It’s the first time in my 46 years that I can ever recall a console maker purposely releasing a lower spec budget version of their next gen home system.

The fact that they’ve offered a budget model at almost half the price of their premium model and it has only nominally moved the sales needle compared to the previous generation has to sting for Microsoft.

What I’d like to see is split data between X and S sales, and I’d like to see a split data set between PS5 Disk and PS5 Digital Only sales. The only true like-for-like comparison we have this generation is XSX to PS5 Disk, but, unfortunately, both sales figures are obfuscated.

The console is nothing more than the pathway to software sales and subscriptions. After development and production costs consoles barely make money in comparison and sometimes not at all.

They would happily sell you gamepass without any console whatsoever.

 

[Luminoth-4545]

Hold on.. am I in the twilight zone or something?

1. We have all guesstimated that the XB1 did over 50M lifetime. Or better put, was outsold by the PS4 by 2 to 1. That would mean if the PS4 did 120M, then our projections were that the XB1 did 60M. So why is this 58M surprising anyone when its been the common consensus that the PS4 won by 2 to 1.
   
   
2. Am I the only one that notices that 58M in 7 years, averages out to around 8M consoles sold per year? And that's impressive?
   
   
3. Or that at its current 21M sales, it tracking at around the same 8M sales per year from the previous generation.

I don't know..I am trying to see how any of this is good. I mean, for me, coming from the OG Xbox to the 360... now that was good. They gained market share. Went from selling 24M consoles to selling 85M+ in the 360. But going from the 360 to the XB1, they lost market share... and now they are tracking similarly... how is this a good thing? Is this like giving someone an also participated trophy? A celebration in mediocrity? Or like that gif where that guy that comes third celebrates harder than first and second.

What am I missing here? So basically, if the XSX consoles do like 50-60M... it would be considered a success?

It's not that good, 8 million per year would be decent sales in the 80's and 90's but not now when PS5 sold 19.10 million last FY and Nintendo was disappointed that they missed their forecast and "only" sold 17.97 million. Also 60 million lifetime would be a good result in the 90's but their rivals are going to sell well over 100 million and maybe even get close to 150 million. Xbox is one of only three console manufacturers so it has to be compared to the competition and it is way off, it wouldn't be that bad if they were close but they are a distant third and that is a little embarrassing.

 

[Mr.Phoenix]

Nailed it, console is just less important to MS now. They make more revenue and probably profits from their new approach than they ever did in the sole console space.

I guess they can only be happy with it as nothing came out from the court case on a different opinion than that.

I really don't agree with this sentiment that consoles are less important to MS. I mean, even MS said it themselves how important consoles are, regardless of what they are doing with gamepass or Subs.

I feel they are basically just hedging their bets or trying to diversify because they have repeatedly failed to make inroads into the console market share. This is good, but also unfortunately would just stand to further erode their growth in the console space. And make no mistake, services like gamepass were built on the back of their console owners first and foremost. And MS knows that too.

And I think it really still remains to be seen just how much revenue or profits the Xbox division is actually making for Xbox. And I think info like that is purposefully obfuscated by MS for the exact purpose of making it hard to discern. It should be as simple as looking at all the net spend of the Xbox division or their affiliated assets (which should include acquisitions) and then look at what is coming back each year. But they don't do that, eg... that $67B Activision acquisition wouldn't fall under Xbox. If it did, how many years would it take them to make that back? Isn't that how profitability should be measured?

How do they justify spending more money on acquisitions in 1 year than the Xbox division has made in overall revenue, over the last 4 years???? And that's revenue..not even profits. How is this considered as being profitable as a division?

 

[MarkMe2525]

That's just VGChartz for you. They literally make an educated guess and then correct their data when actual analytics companies post their data. Best to just ignore what they say.

Yeah, I should have learned. I remember the same debates back in the 360, PS3, and Wii days.

 

[Brucey]

It’s short term to the extent that it isn’t loss-leading, that’s all. Again, just differentiating from MS here. I’m not suggesting that they don’t have a long-term plan, but that long term plan *must* involve short-term profit. MS’s long-term plan doesn’t need to.



No, I agree with everything you posted in follow-up to this. MS wants to expand *beyond* that market. I don’t know whether that will work out for them, but what is an unacceptable risk for Sony is a necessary gamble for MS.

Microsoft have been talking about that for a decade now.

Yusuf Mehdi in 2013 on the Xbox one:

"Every generation, as you've probably heard, has grown approximately 30%. So this generation is about 300 million units. Most industry experts think the next generation will get upwards of about 400 million units. That's if it's a game console, over the next decade," added Medhi.

"We think you can go broader than a game console, that's our aim, and you can go from 400 million to potentially upwards of a billion units. That's how we're thinking of the Xbox opportunity as we go forward."

Microsoft: Next-gen could hit 1 billion consoles sold

According to Microsoft senior vice president of Interactive Entertainment Yusuf Mehdi, the company is looking to sell 2…

www.gamesindustry.biz

 

[Chukhopops]

I really don't agree with this sentiment that consoles are less important to MS. I mean, even MS said it themselves how important consoles are, regardless of what they are doing with gamepass or Subs.

I feel they are basically just hedging their bets or trying to diversify because they have repeatedly failed to make inroads into the console market share. This is good, but also unfortunately would just stand to further erode their growth in the console space. And make no mistake, services like gamepass were built on the back of their console owners first and foremost. And MS knows that too.

And I think it really still remains to be seen just how much revenue or profits the Xbox division is actually making for Xbox. And I think info like that is purposefully obfuscated by MS for the exact purpose of making it hard to discern. It should be as simple as looking at all the net spend of the Xbox division or their affiliated assets (which should include acquisitions) and then look at what is coming back each year. But they don't do that, eg... that $67B Activision acquisition wouldn't fall under Xbox. If it did, how many years would it take them to make that back? Isn't that how profitability should be measured?

How do they justify spending more money on acquisitions in 1 year than the Xbox division has made in overall revenue, over the last 4 years???? And that's revenue..not even profits. How is this considered as being profitable as a division?

- The fact that console is the #3 priority for MS growth vectors is written black on white in one of the FTC emails from Spencer to Nadella that I’m sure you’ve seen already. It’s an indisputable fact at this point;

- Revenue from the gaming division is known and reported every quarter. Operating margin isn’t known, all that’s known is it’s « lower than Microsoft’s » (40%), how you interpret that is up to you;

Not going to go again into the « make the money back» argument, been done to death already, it’s basic accounting.

 

[Mr.Phoenix]

- The fact that console is the #3 priority for MS growth vectors is written black on white in one of the FTC emails from Spencer to Nadella that I’m sure you’ve seen already. It’s an indisputable fact at this point;

Where did I say it was #1 or even #2 priority for them? I simply said I don't agree that it less important. Cause even in their docs you can see one where they speak to how important itis and how it is seen or regarded in the industry. To me, they are taking a two/three-pronged approach. That is not the same thing as saying #1, #2 or #3 is more important than the other.

Not going to go again into the « make the money back» argument, been done to death already, it’s basic accounting.

lol... basic accounting... ok, got you.

 

[thicc_girls_are_teh_best]

Nailed it, console is just less important to MS now. They make more revenue and probably profits from their new approach than they ever did in the sole console space.

I guess they can only be happy with it as nothing came out from the court case on a different opinion than that.

Maybe in a sense due to absorbing large 3P publishers and benefiting from inflation, as well as the market just generally getting a bit larger gen-over-gen. But I wouldn't say their profits are "magnitudes" higher than they were at arguably the peak of the 360 era, for example.

Not when you take inflation out of the picture, for example.

The console is nothing more than the pathway to software sales and subscriptions. After development and production costs consoles barely make money in comparison and sometimes not at all.

They would happily sell you gamepass without any console whatsoever.

This is true of Sony & Nintendo as well. I don't understand why it's mentioned with Microsoft as if it's exclusively a strategy onto them. Sony & Nintendo generate more software sales than Microsoft and Sony generates more subscribers and subscription revenue than Microsoft does with Xbox, too.

I really don't agree with this sentiment that consoles are less important to MS. I mean, even MS said it themselves how important consoles are, regardless of what they are doing with gamepass or Subs.

I feel they are basically just hedging their bets or trying to diversify because they have repeatedly failed to make inroads into the console market share. This is good, but also unfortunately would just stand to further erode their growth in the console space. And make no mistake, services like gamepass were built on the back of their console owners first and foremost. And MS knows that too.

And I think it really still remains to be seen just how much revenue or profits the Xbox division is actually making for Xbox. And I think info like that is purposefully obfuscated by MS for the exact purpose of making it hard to discern. It should be as simple as looking at all the net spend of the Xbox division or their affiliated assets (which should include acquisitions) and then look at what is coming back each year. But they don't do that, eg... that $67B Activision acquisition wouldn't fall under Xbox. If it did, how many years would it take them to make that back? Isn't that how profitability should be measured?

How do they justify spending more money on acquisitions in 1 year than the Xbox division has made in overall revenue, over the last 4 years???? And that's revenue..not even profits. How is this considered as being profitable as a division?

Microsoft know internally that Xbox's profits aren't very high. They know Game Pass's revenue isn't too much given what you'd expect with the subscription costs and reported number of subscribers. So yeah, they obfuscate these things as best they can to not draw attention to them.

And I'm glad more people are noticing just how much of this ABK deal is being financed off of non-Xbox money, which makes the claims that Microsoft's corporate weight shouldn't be considered as a factor into determining foreclosure strategies or even the deal itself happening, completely ridiculous. This ABK deal wouldn't be a thing if MS didn't have Azure, Windows and Office making the vast majority of their money.

The fact those three areas make so much money is reason enough they even wrote that 2019 "thought experiment" email and could 100% justify full foreclosure of ABK content into the future regardless of money left on the table, just like they've already decided to do with Zenimax's future content.

- The fact that console is the #3 priority for MS growth vectors is written black on white in one of the FTC emails from Spencer to Nadella that I’m sure you’ve seen already. It’s an indisputable fact at this point;

So Xbox console owners are second-class citizens after all? Good to know. It was already increasingly obvious from the Game Pass price increase for ONLY Xbox owners, and now the MS Reward limits tightened again ONLY for Xbox owners. Neither of these affect PC or mobile.

It makes things like Phil's X-Cast interview, pretty much worthless and shows what that really was: a 45-minute temper tantrum and moping therapy session.

- Revenue from the gaming division is known and reported every quarter. Operating margin isn’t known, all that’s known is it’s « lower than Microsoft’s » (40%), how you interpret that is up to you;

Not going to go again into the « make the money back» argument, been done to death already, it’s basic accounting.

Xbox are the only platform holders who are afraid to show division profits or unit sales numbers. They are even afraid of disclosing Game Pass revenue (never mind profits) for what is supposed to be a key pillar in their growth strategy.

Also, the idea Xbox is #3 in their priorities is countered by Phil Spencer's own words where he describes things like Game Pass as "only" constituting 15% of their gaming revenue, as a future outlook. So logically speaking, Xbox on the console side would be #2 in that picture, at the very least. The only thing that would be larger is mobile but right now MS don't even have much of a footprint in the mobile space (that's partly what they want ABK for), and as long as things remain as they are, console will always be larger for MS's gaming revenue than PC.

 

[Team Andromeda]

Its not very good for fruggin huuuuuge company like MS they wants much more than being so behind the compeitions

They made billions off the Xbox One.

 

[Chukhopops]

So Xbox console owners are second-class citizens after all? Good to know. It was already increasingly obvious from the Game Pass price increase for ONLY Xbox owners, and now the MS Reward limits tightened again ONLY for Xbox owners. Neither of these affect PC or mobile.

It makes things like Phil's X-Cast interview, pretty much worthless and shows what that really was: a 45-minute temper tantrum and moping therapy session.

I don’t know how you go from “there is more growth opportunity in the PC space” to “console owners are second class citizens”, it’s a big leap.

PC GP launched two years after console GP and the offer between the two isn’t at parity yet, which is imo the reason for the difference in the price increase. Or maybe it’s more present in price sensitive markets. The whole second class thing is your interpretation that nobody shares, especially users.

Also, the idea Xbox is #3 in their priorities is countered by Phil Spencer's own words where he describes things like Game Pass as "only" constituting 15% of their gaming revenue, as a future outlook. So logically speaking, Xbox on the console side would be #2 in that picture, at the very least. The only thing that would be larger is mobile but right now MS don't even have much of a footprint in the mobile space (that's partly what they want ABK for), and as long as things remain as they are, console will always be larger for MS's gaming revenue than PC.

How do you connect GP revenue to PC/Xbox split when nobody knows how users are split between the platforms? How do you know the split of PC and console revenue? You don’t and you’re spitballing.

More importantly, why in the world would MS lie about or misrepresent its own priorities in an e-mail from Spencer to Nadella???

 

[Thick Thighs Save Lives]

This update makes PS4 + XBO more sucessful than PS3 + XB360.
PS3 + XB360: 87.40m + 85.40m = 172.80m
PS4 + XBO: 117.20m + 58.00m = 175.20m

To me it says that the console market for high end consoles has actually stagnated for the past 2 generations which is far cry from a W.

On the other hand PC gaming market is still growing strong.

 

[Coney]

That's what the article said but yeah if it wasn't intended then someone is getting fired. Microsoft don't like giving out hardware numbers when they are far behind the competition but maybe with this court case going on then they want to depict themselves as underdogs.

That's a very good point. I could see that being the case.

 

[thicc_girls_are_teh_best]

I don’t know how you go from “there is more growth opportunity in the PC space” to “console owners are second class citizens”, it’s a big leap.

That's not the thing which shows that Xbox console owners are second class citizens in that ecosystem, though. It's Xbox Game Pass getting price increases yet none on PC Game Pass. It's MS Reward points getting a tighter cap on Xbox but not on PC. That's in addition to things like 1P games costing less on PC than on Xbox, having free online MP on PC Day 1, having more graphics, framerate & resolution options on PC than console (again, Day 1), etc.

How do you sit back and not acknowledge that Xbox owners are increasingly an afterthought to Microsoft in the Xbox ecosystem? I don't care what Phil says in a PR-controlled interview; I care about the actual actions the company does.

PC GP launched two years after console GP and the offer between the two isn’t at parity yet, which is imo the reason for the difference in the price increase. Or maybe it’s more present in price sensitive markets. The whole second class thing is your interpretation that nobody shares, especially users.

The only area where they lack parity is on some 3P games and, if anything, PC Game Pass has the advantage over console because MS have released some games on PC as timed exclusives before coming to console, such as Flight Simulator and Age of Empires IV.

If you're suggesting they aren't increasing PC Game Pass because it's a more price-conscious market, aren't you making the argument in a sense for why companies like Sony should not do Day 1 releases on PC? What makes those gamers feel entitled for cheaper access to that content than the console owners? In terms of subscription services what is Game Pass even really competing against on PC?

How do you connect GP revenue to PC/Xbox split when nobody knows how users are split between the platforms? How do you know the split of PC and console revenue? You don’t and you’re spitballing.

No; I'm using as much market data as we can get from 3P sources and collaborating that with market data other platform holders are actually confident enough to publicly share to their investors.

The 15% figure is what Phil sees Game Pass as a whole contributing to their gaming bottom line. That's console & PC combined. If Game Pass generated $2 billion in 2022, and it was closer 10% at that time, then that would line up with ~ $17 billion Xbox drew in for revenue for the last fiscal quarter (yes the $2 billion would be split between two fiscal years but that isn't very important here).

Microsoft doesn't make Xbox gaming hardware systems; they make Xbox game consoles. That already gives console a big advantage in gaming revenue vs. PC and Game Pass. MS also get 30% cuts off of most 3P game sales on Xbox; they get none of that on PC outside of maybe Windows Store but 3P game sales there are pathetic compared to Steam or even EGS.

I forget to account for gaming peripherals; those would probably be a bit under Game Pass or at best tie with it, most likely.

More importantly, why in the world would MS lie about or misrepresent its own priorities in an e-mail from Spencer to Nadella???

Spencer's ass is on the line and he is trying to pitch a future for Microsoft in gaming that aligns with the overall corporate strategy Nadella has been moving the company towards. But the truth is gaming for MS is three pillars: Xbox console, Game Pass, and mobile.

The truth is it doesn't matter what their growth vectors are in gaming specifically because at the end of the day, the money talks, and the breadwinner for Microsoft in gaming is still very much Xbox consoles and that audience. So while on one hand it makes sense to increase prices on that audience , when Microsoft does it, it looks like they're taking advantage of that customer base and taking them for granted.

It's different from say Sony getting more ARPU because when they did things like relaunch PS+ with the new tiers, they actually added content & value to correspond with the increase. They also don't simultaneously bring their content to another platform (PC) that gets the content for cheaper Day 1, gets online for free Day 1, and gets more performance features Day 1. They don't immediately devalue their offerings on console the way Microsoft does between Xbox and PC (IMO).

 

[Nydius]

The console is nothing more than the pathway to software sales and subscriptions. After development and production costs consoles barely make money in comparison and sometimes not at all.

They would happily sell you gamepass without any console whatsoever.

I completely agree with you but, right now, they know the Xbox console itself (and Windows PCs) are the only ways they can do that. There's no way they're going to get Game Pass on PlayStation or Switch without paying a cut to Sony or Microsoft, respectively, and there's no way in hell they'd be willing to do that. They're experimenting with Game Pass xCloud streaming on select Samsung TVs, but I haven't heard more about that since their initial announcement.

Until there's a paradigm shift in the market where they don't have to pay revenue splits to be on other platforms, their fortunes are tied to their console and PC userbase. Which brings me back to my original point: The fact that they've created a budget console to facilitate this move to digital sales and subscriptions but it hasn't improved their sales over last generation has to be a thorn in their side.

 

[Vognerful]

That kinda thinking is what keeps getting MS fucked up. They, like you, just don't seem to get the console business. The total number of potential console gamers remain more or less the same... its been that way for a while. Even dating as far back as the PS1 and PS2.

The reason for that is that outside of a core base of gamers, which probably only accounts for ike 30-50% of sales (and evn these are in flux too, their turnover rate is just bi/tri generational), the rest of the market is constantly in flux. People that are coming of age to game or can afford it, and people that are getting older or no longer have the time.

And there is no such thing as being in the gaming business and chasing a market outside gaming. Maybe what you mean is market outside consoles. But all you are doing is shifting your user base from actual physical boxes to subscriptions. But even those need a box to game on, be that their console.. or their PC. Don't drink the cool aid. thanks to recent events, it's been revealed that even Xbox doesn't believe in what you are saying. Even though that's the message they had been peddling.

I don't know where that came from, being that as far back as 2021 the general consensus was that the XB1 had sold over 50M, and we knew how much the PS4 had sold. No way any sane thinking person pegs it at 3 to 1.

close to 3:1 =/= 3:1

if xbox one sold 50 mill and ps4 sold around 120, then it was around 2.4. Indeed it is far from 3:1, and so from 2:1.

 

[DryvBy]

They made billions off the Xbox One.

Weird. I thought a few years ago they claimed the Xbox hadn't made a profit yet.

 

[Team Andromeda]

Weird. I thought a few years ago they claimed the Xbox hadn't made a profit yet.

Then please explain why the Xbox division has been making a profit for every quarter of the Xbox One was on sale until the Series consoles came out?

 

[NeverYouMind]

I could be wrong, but I think the Series S is likely the best designed console ever. It never overheats, there is practically no moving parts, and it's energy efficient. I am genuinely curious if there is a hardware issue that could render it unusable in a century, but I have read nothing to that effect so far. Even the Wii has the limitation of internal NAND having a limited set of read and write operations before hardware failure. Anybody have any info on the flaws of Series S hardware architecture?

 

[Dr_Ifto]

How many gamepass subs are they going to lose when they don't make games for the xb1 any longer. Only 21m xbs is a low number.

If a subscriber has to buy a new console, how do you get them to stick to xbs instead of ps5 on the generation change

 

[thismeinteil]

Then please explain why the Xbox division has been making a profit for every quarter of the Xbox One was on sale until the Series consoles came out?

MS doesn't report Xbox profits or losses, so have no idea where you are getting your info.

 

[TBiddy]

How many gamepass subs are they going to lose when they don't make games for the xb1 any longer. Only 21m xbs is a low number.

If a subscriber has to buy a new console, how do you get them to stick to xbs instead of ps5 on the generation change

They can stream the games, if they want. But I agree. They will feel it.

 

[Team Andromeda]

MS doesn't report Xbox profits or losses, so have no idea where you are getting your info.

Didn't the Xbox division make $16.2 billion in 2022 or is that just made up?

 

[PeteBull]

21M is pretty good with the supply constraint and the lack of great first party content. If they are finally able to deliver a steady streak of great games, I can see them reach 80M by the end of the generation

Just compare it to joke of a console switch is, powerwise, to realise what a diseaster both xbox one and series x/s was and still is , official data for switch is https://www.nintendolife.com/news/2...illion-ps2-nintendo-ds-target-still-a-way-off

 

[Brucey]

Then please explain why the Xbox division has been making a profit for every quarter of the Xbox One was on sale until the Series consoles came out?

Citation for this claim please. Revenue != Profit (operating income), and MS doesn't report profit/loss for the Xbox division.

We do have Microsoft VP Lori Wright testifying in May 2021 that the Xbox consoles themselves have never made a profit:

""Microsoft has always sold Xbox consoles at a loss, an executive confirmed during the Epic Games v. Apple trial on Wednesday, as previously reported by Business Insider. An Epic lawyer asked Microsoft's vice president of Xbox business development, Lori Wright, about what profit margins the company has on its sales of console units.

"We don't -- we sell the consoles at a loss," she replied, before confirming that Microsoft has never earned a profit on console sales."

Xbox consoles have never turned a profit for Microsoft

An executive confirms that in the Epic v. Apple trial.

www.cnet.com

 

[Brucey]

Didn't the Xbox division make $16.2 billion in 2022 or is that just made up?

Let's say I sell a widget for $250. I sell a million of these. I have a revenue of $250 million. Sounds good right? However, the cost to build those widgets was $300. My cost is $300 million.

Revenue-costs=profit

$250 million - $300 million = -$50 million.

So I had a revenue of $250 million but actually ended up with a $50 million loss.

With Microsoft financials we see the revenue for the group the Xbox business is combined into, but only see the profits(income) for the overall business (where the majority of it's big profits come from, Windows, Office, cloud etc).

 

[mckmas8808]

Citation for this claim please. Revenue != Profit (operating income), and MS doesn't report profit/loss for the Xbox division.

We do have Microsoft VP Lori Wright testifying in May 2021 that the Xbox consoles themselves have never made a profit:

""Microsoft has always sold Xbox consoles at a loss, an executive confirmed during the Epic Games v. Apple trial on Wednesday, as previously reported by Business Insider. An Epic lawyer asked Microsoft's vice president of Xbox business development, Lori Wright, about what profit margins the company has on its sales of console units.

"We don't -- we sell the consoles at a loss," she replied, before confirming that Microsoft has never earned a profit on console sales."

Xbox consoles have never turned a profit for Microsoft

An executive confirms that in the Epic v. Apple trial.

www.cnet.com

That's insane! MS has never found a way to make a profit per Xbox console sold? Ever?! How is that possible?

 

[Team Andromeda]

Let's say I sell a widget for $250. I sell a million of these. I have a revenue of $250 million. Sounds good right? However, the cost to build those widgets was $300. My cost is $300 million.

Revenue-costs=profit

$250 million - $300 million = -$50 million.

So I had a revenue of $250 million but actually ended up with a $50 million loss.

With Microsoft financials we see the revenue for the group the Xbox business is combined into, but only see the profits(income) for the overall business (where the majority of it's big profits come from, Windows, Office, cloud etc).

What you don't see is losses, not like in the 360 and Xbox days or even the PS3 which despite massive sales lost SONY billions

 

[Team Andromeda]

Citation for this claim please. Revenue != Profit (operating income), and MS doesn't report profit/loss for the Xbox division.

We do have Microsoft VP Lori Wright testifying in May 2021 that the Xbox consoles themselves have never made a profit:

""Microsoft has always sold Xbox consoles at a loss, an executive confirmed during the Epic Games v. Apple trial on Wednesday, as previously reported by Business Insider. An Epic lawyer asked Microsoft's vice president of Xbox business development, Lori Wright, about what profit margins the company has on its sales of console units.

"We don't -- we sell the consoles at a loss," she replied, before confirming that Microsoft has never earned a profit on console sales."

Xbox consoles have never turned a profit for Microsoft

An executive confirms that in the Epic v. Apple trial.

www.cnet.com

That's selling a console at a loss. Not what the division brings in with games sales, developer royalties and 3rd parties retailers.

Don't try and be clever on that score...

 

[Heisenberg007]

Didn't the Xbox division make $16.2 billion in 2022 or is that just made up?

Revenue, not operating profit.

Regarding the performance of the Xbox division, Phil recently said that it is missing internal targets and the business is not strong. Xbox also missed its revenue target by over $780 million.

 

[twilo99]

They would happily sell you gamepass without any console whatsoever.

PC gamers are a solid target it seems

 

[Brucey]

That's selling a console at a loss. Not what the division brings in with games sales, developer royalties and 3rd parties retailers.

Don't try and be clever on that score...

Right and there's also costs to fund all it's game studios, licensing costs it pays to developers/publishers to have 3rd party games in gamepass, to fund capital costs of xcloud/datacenter space etc.

Anyway, your claim:

"Then please explain why the Xbox division has been making a profit for every quarter of the Xbox One was on sale until the Series consoles came out?"

Waiting on the evidence.

 

[Brucey]

What you don't see is losses, not like in the 360 and Xbox days or even the PS3 which despite massive sales lost SONY billions

We can see those losses in Sony financial statements, because Sony breaks out the gaming business in it's reports. We don't have that transparency for the Xbox business. Just snippets from Microsoft employees during lawsuits etc.

 

[M1chl]

Shit ton of Xbox Ones, to be honest.

 

[Team Andromeda]

We can see those losses in Sony financial statements, because Sony breaks out the gaming business in it's reports. We don't have that transparency for the Xbox business. Just snippets from Microsoft employees during lawsuits etc.

Losses would be shown, no matter how hard you try and hide it.

 

[Brucey]

That's insane! MS has never found a way to make a profit per Xbox console sold? Ever?! How is that possible?

My theory is that hardware design is not their core competency, so they cannot get the costs down like Sony can. At it's core Microsoft is a software and services company. That's where it's massive profits are generated. The PS business can leverage hundreds of engineers that have been creating consumer technology for decades. Constantly Iterating and optimising. Building tech is their core competency. (Nintendo seem to achieve big profits by deploying trailing edge tech that doesn't cost much).

Other factors could include things like management incompetence or failure to maintain focus (i.e. the hardcore gaming crew like j Allard, ed fries etc wants max gaming visuals/hardware but the marketing folk have run focus groups and think a waggle camera aka mandatory Kinect would be just awesome etc).

What's surprising is Phil recently saying they were still losing $100-$200 on the series consoles. That's nearly three years from launch. What were they losing at launch?

 

[Team Andromeda]

Revenue, not operating profit.

Regarding the performance of the Xbox division, Phil recently said that it is missing internal targets and the business is not strong. Xbox also missed its revenue target by over $780 million.

Nothing in there of a loss. But please, keep it coming...

 

[Brucey]

Losses would be shown, no matter how hard you try and hide it.

Losses for the Xbox division would be known internally to management, of course. But they don't need to report it publically (and they don't).

 

[mckmas8808]

My theory is that hardware design is not their core competency, so they cannot get the costs down like Sony can. At it's core Microsoft is a software and services company. That's where it's massive profits are generated. The PS business can leverage hundreds of engineers that have been creating consumer technology for decades. Constantly Iterating and optimising. Building tech is their core competency. (Nintendo seem to achieve big profits by deploying trailing edge tech that doesn't cost much).

Other factors could include things like management incompetence or failure to maintain focus (i.e. the hardcore gaming crew like j Allard, ed fries etc wants max gaming visuals/hardware but the marketing folk have run focus groups and think a waggle camera aka mandatory Kinect would be just awesome etc).

What's surprising is Phil recently saying they were still losing $100-$200 on the series consoles. That's nearly three years from launch. What were they losing at launch?

After reading the Sega leaked docs on our GAF thread, it's amazing to me how both Sega and MS are running into the same issues. The big difference obviously is that Xbox has MS' big war chest of money. Whereas Sega just had their videogaming business.

 

[Brucey]

Revenue, not operating profit.

Regarding the performance of the Xbox division, Phil recently said that it is missing internal targets and the business is not strong. Xbox also missed its revenue target by over $780 million.

I'm guessing that $780 million revenue miss was related to not selling/lesser demand from what they expected/forecast in terms of series consoles, however as they actually cost MS to sell each one, would also reduce losses as well.

 

[Heisenberg007]

Nothing in there of a loss. But please, keep it coming...

Nothing about profit either. But it does have "the business is not strong" and "missing internal targets."

 

[Team Andromeda]

Losses for the Xbox division would be known internally to management, of course. But they don't need to report it publically (and they don't).

Microsoft couldn't hide a loss of the Xbox Division. It would have be reported as a loss.
The Division has never reported a loss since the 360 days, now you can put all that down to the PC.

I would myself say that MS has also made a few billion off the back of the Xbox One, especially during Lockdown and it's been a far more profitable console than the 360 for all its faults

 

[Team Andromeda]

Nothing about profit either. But it does have "the business is not strong" and "missing internal targets."

If you don't report a loss, it tends to mean you've made a profit or at least not losing money

Missing internal targes still doesn't mean you made a loss. Capcom missed its sales targets for the likes of RE7, it still reported a profit *rollseyes*

 

[Heisenberg007]

Microsoft couldn't hide a loss of the Xbox Division. It would have be reported as a loss.
The Division has never reported a loss since the 360 days, now you can put all that down to the PC.

I would myself say that MS has also made a few billion off the back of the Xbox One, especially during Lockdown and it's been a far more profitable console than the 360 for all its faults

That's not true because in their financials they don't have an "Xbox division." A while ago, Microsoft decided to lump their financials into just 3 divisions.

There is no such thing as "Xbox profit and loss" in their financials. They just report financials of Personal Computing, which also includes phones, Windows, Surface, etc.

So even if Xbox is losing money, the Personal Computing segment could report profits if Surface and Windows are doing really well.

 

[Romulus]

Keep in mind, the Quest platform sold a very similar number in that timeframe at 20 million. This was almost all Quest 2.

But only VR is niche, not Xbox.

 

[Thirty7ven]

Microsoft couldn't hide a loss of the Xbox Division. It would have be reported as a loss.
The Division has never reported a loss since the 360 days, now you can put all that down to the PC.

I would myself say that MS has also made a few billion off the back of the Xbox One, especially during Lockdown and it's been a far more profitable console than the 360 for all its faults

You are just making shit up and hoping it sticks. Increasing revenue doesn’t mean decreasing losses or increasing profit. We don’t know if GP or Xbox are profitable and by how much because they don’t disclose it. They give no details aside from revenue. And we already know MS does funky bits of accounting because for example, first party development costs aren’t factored into their gamepass investment. That’s one cool tidbit right there.

But whatever, explain how Xbox has been profitable every year, specially these last three years where their gamepass investment ramped up, dollar trials were up and running, Xbox Series losing money hard on each unit, software sales down on the platform, and Xcloud which is another loss leader from them and they had to apparently divert a lot of Xbox Series chips over there.

 

[ChorizoPicozo]

Nothing in there of a loss. But please, keep it coming...

The Denial is real.

 

[Brucey]

That's not true because in their financials they don't have an "Xbox division." A while ago, Microsoft decided to lump their financials into just 3 divisions.

There is no such thing as "Xbox profit and loss" in their financials. They just report financials of Personal Computing, which also includes phones, Windows, Surface, etc.

So even if Xbox is losing money, the Personal Computing segment could report profits if Surface and Windows are doing really well.

There it is. Profits from Windows are bundled together with gaming. Xbox gaming is currently bundled with a huge profit center for financial reporting purposes.

Not sure if we had more visibility back when it was the Entertainment and Devices Division? Hard to tell because of the shenanigans going on with Windows Phone/Nokia.

Operating Segments

www.microsoft.com

 

[Tsaki]

Microsoft couldn't hide a loss of the Xbox Division. It would have be reported as a loss.

That's not true at all. They can report whatever they want. Even if they are asked by investors to specifically report their profits/losses, they can choose to ignore them. What are they gonna do? Sell their Microsoft stock? Unless they come out and specifically name how profitable the division is, people should have doubts. They are already playing loose with MAU.
This doesn't even account the acquisitions. Does the $7 billion on Bethesda count as a spending/loss in the Xbox division? How about the $70 billion on ABK? Of course not, because then the division will never be seen as profitable, after such a huge spent on it. Playstation, for example, had reported losses from the acquisition of Bungie in their own division.