Update on 360 shipments (5M WW) and losses (no price cut soon?)

Info on their latest quarter here:
http://www.microsoft.com/msft/default.mspx
It is probably best to check out the PowerPoint, which has some tidbits about the H&E division (the division the Xbox is in), and the 360 specifically.

They've shipped 5M WW, which hits their low-end forecast from while back (which was upped from their previous forecast, so this would hit the high-end of their 1st forecast). I guess since they've hit their past targets, then they'll probably hit the 10-12M target they have for the end of the year.

Apparently, the H&E division has lost $414M in the last 3 months, and $1.26B in the last FY. I once thought a price cut was in the works pretty soon, but I'm not sure how MS could handle doing that if they are losing that much money without it. I know MS as a whole will make billions of dollars every year no matter how much of a loss the 360 creates, but I would think that they'd want the business to be profitable at some point (hopefully before losing $10B or so). It would suck for MS (to a degree) if the 360 didn't take off like they wanted to, and another $2-$3B gets thrown away (assuming they bring another console out soon like they did with the Xbox->360). That is a big if though.

There might be still be a price cut early next year once MS can switch over to the 65nm process. Along with normal cost reductions, that should help keep losses at a minimum (relatively speaking). Then Halo 3 and the other games coming out in 2007 will help make the H&E division look a little better.

 

FWIW, I believe Sony is expecting to lose $1B in their gaming division during the first FY the PS3 is out (think about what it would have been if they priced it at $300-$400 ). And that is combined with the PS2 and PSP businesses, which are both very profitable AFAIK.

Sony will be giving shipment updates (for PSP and PS2) and financial info next week. I'll probably make another thread or post the info here for comparison I guess. We might get updated info on what Sony expects to lose with the PS3 as well maybe some extra targets for all 3 of their systems.

Actually, there will probably be another summer PS meeting next week, which may or may not be noteworthy. I might end up posting those details in that thread depending on the situation.

 

Uh...I'm pretty sure that the royalties MS gets are added into that number DaDa. I've never seen anything to suggest otherwise. It certainly would be beneficial to add that in if it ended up putting the H&E division out of the red.

 

Here are some slightly up-to-date numbers on the profits between the 3 during the last 10 years or so:

Code:

Year    Sony               Nintendo           Microsoft
1997    974,000,000
1998  1,130,000,000    629,000,000
1999    730,000,000    645,000,000
2000   -409,000,000    421,000,000
2001    623,000,000    726,000,000
2002    939,000,000    800,000,000      -750,000,000
2003    650,000,000    560,000,000    -1,191,000,000
2004    404,000,000    316,000,000    -1,215,000,000
2005    75,000,00      777,000,000    -485,000,000
2006                   894,000,000    -1,262,000,000
Totals  5,116,000,000  5,768,000,000  -4,903,000,000 

Most of that was compiled by sonycowboy at the NeoGAF forums. I posted these before (except without some of the latest numbers), but I thought I'd post it again since it has been a while.

This isn't an original idea, but if the 360 doesn't work out, it would be interesting if maybe MS can work out something with Sony and/or Nintendo. IIRC, they originally just wanted to provide the OS and the dev tools for consoles but were rejected. Now that the other two know just how serious MS is, I wonder if maybe they'd be more open to working together. This might be more of an issue for Sony if Microsoft can cut generations down to 3-4 years, which is not nearly enough time for Sony to recoup losses made on HW during the 1st year or so.

So here's to a PS4/RevII/PSP2/GBNext with a Windows-like OS and MS-developed software tools (maybe the network too). That way, everyone profits. Sony gains back any marketshare MS took away, MS profits on their SW (the thing they do best) without worrying about HW (big losses), and Nintendo...well, Nintendo will just keep being Nintendo. I guess for MS game companies, they can either sell them off or make them available on the PC and/or consoles like some of their PC developers (EX: Ensemble).

That's not going to happen, but it would be an interesting scenario. Much like any dreams of all 3 working together (Sony hardware and marketing, MS software, and Nintendo games).

 

By not working out, I'm basically saying that if the 360 isn't as profitable as MS wants it to be. The Xbox sold 20-25M units in 3-4 years, and had the one of the biggest sellers ever with the Halo franchise, but it still ended up costing MS like $4-$5B minimum.

So for example, let's say the 360 gets to around 30-40M with some nice hits, but still, for some reason or another, loses a lot of money for MS (say $2-$3B). I don't know what MS plans for the Xbox division, but if the wanted profits from the 360 and weren't getting it, then that wouldn't 'work out' for the 360.

Now I'm not trying to make it sound like this is a very likely scenario...it's not. Maybe something like the limitations of DVD or the lack of Japanese developer support hurts them from really expanding their marketshare. Maybe the Wii takes off like crazy and everyone ditches the PS3 and 360 for the Wii (in this case, the PS3 wouldn't work out either). Basically that might keep the 360 from being very profitable. They've already lost $1.26B (although probably more) on the 360, and may lose another billion or 2 at this rate. If they don't make this up, MS might need to go back to the drawing board.

Also, they'll probably hit 10-12M consoles by the end of the year, but they'll still have to sell them. I don't think that will be much of a problem since they have some nice games coming out, but if the actual install base is more like 5M by then, there could be problems (not that we'll know for sure though). FWIW, I think there are ~2M here in the US, 100-150K in Japan, and about 1M in Europe. Those are all rough estimates though, and may not be completely accurate (can't even remember for sure where the Europe figures come from TBH).

Well, MS seems to be pulling more of a Sega instead of Sony when it comes to losses (and we know where Sega is at). If MS can be like Sony and start pulling off profits in 2007, then there probably won't be a problem. But if they won't be able to make profits until 2008 or so, then they might be going the way of Sega...although MS makes like $12B or so a year, so I guess that won't really matter.

Yeah, I wouldn't really be surprised that happening. In fact, I think all 3 have a good shot at taking the lead to be honest.

My whole point in that post wasn't so much there being a big concern for MS right now with the 360. I was just discussing the potential things that could occur if the 360 were to not work out. It is kind of like saying "If GTAIV sells well only on the 360, then GTAV may be exclusive to the 360" or "If the Mistwalker games sell well in Japan, maybe MS can sell 10-15M units there and get a lot of Japanese developer support (Final Fantasy, Devil May Cry, Dragon Quest, etc.)." There's not much evidence for either occuring as far as I can tell, but the events that could occur afterwards would be interesting.

 

I figured they could sell really well straight through the holidays w/o a price cut, but recent sales figures started putting some doubt in my mind. I imagine they'll go on without one, like you said, and will implement a pricecut early next year. Maybe after March in order to keep sales strong during the summer (announcement at E3?). Plus, as I mentioned earlier, that would be around the timeframe where they could switch over to 65nm.

Yeah, I guess that's true. I thought maybe it might work out since MS seemed to really want Sony to use their SW with the PS2 (I think even giving them one last chance before green lighting the Xbox), but it might not have worked out anyway. It seems like it would be better to make a couple easy billion instead of losing $5-$10B, but it is a little more complex than that I guess.

Yeah, I do too, although I think it could be better (although it is too early for that to even matter to be honest). I think things would certainly have been interesting if they could have gotten some sort of success in Japan instead of doing worse there than the original.

 

Turns out that these may be slightly off if this is to be believed:
http://www.next-gen.biz/index.php?option=com_content&task=view&id=3478&Itemid=2

This last quarter, MS shipped only 200K to Europe, compared to the 500K and 600K it shipped their in the two previous quarters; the US received 1.5M units in the last quarter, compared to 900K in got in both previous quarters.

I said that there might be about 1M 360 users in Europe, but it might even be (far) less than that, and it seems like there is little demand as well (only 200K sent to the entire continent in the last 3 months?). The 360 might be able to make it without Japan, but they can't get by on just the NA sales alone.

Still early in the game though, and things can certainly improve for them later in the year.