Fuck revenue.

How much profit did MSFT's E&D division pull in during that time period?

I could say many things but let me say just this:

If it was a common knowledge that u could see in MS financial reports how big % share of the EDD revenue consists of gaming revenue, don't you think we would have heard that earlier? MS gaming/Xbox revenue has always been the big mystery, because it's been hidden in EDD. This is the first time I hear someone claim that they know how big is the revenue from MS gaming. And why is it the first time? Because it's a misunderstanding of the '$50 million is 1%' number. You have never been able to derive the gaming revenue in thse reports before, and you think we all of a sudden can, and this guy (OP) found it out?

No no.

 

I do agree that any attempt to assign any profits or losses in EDD to solely the 360 are wrong.  There is too much in this division to know what is making money or not.

But this analysis has one big flaw.  The percentage increase/decrease are rounded to whole numbers.  At such small numbers (1%, 2%, etc) this can lead to a big difference in real numbers.

Gaming related revenue decreased $51 Million, or 1%. If $50million is one percent then 100 percent is 5Billion. This gives us gaming revenue.

Gaming revenue decreased somewhere between .51% to 1.49%, so betwwen $3.442B to $10B.

Cost of revenue decreased 2% or $60million which gives ua a total cost of revenue for the EDD of $3 billion.

Cost of revenue decreased between 1.51 % to 2.49%.  Which gives a total cost of revenue of $2.4B to $3.973B

the reason microsoft doesn't release xbox sales figures in depth is they are doing quite a bit of other things with their EDD that aren't working all that well and they are trying to hide it.  Based on these numbers, which makes a lot of sense, you can get an aproximation of what kind of revenue the gaming portion makes.  Obviously, we don't have a complete breakdown of what exactly all the costs are, for all we know the R &D and the costs of revenue could be largely due to the gaming aspect, I doubt it, but it could be. 

Your math seems to have more holes in it than the o.p. though.  For example, I work at best buy and I know the exact cost of what best buy pays for each model of xbox.  the arcade is 188, pro is 286, and elite is 379.  That is what best buy pays for those systems, so when you are times 10 mil by 150, what math are you trying to prove?  You also don't take into acount pc gaming at all, which yes, microsoft publishes pc games.  You can still go to any store that sells pc games and buy flight simulator, age of empires, halo, gears of war, etc. 

@Lord N

The profit was a loss of $31m this quarter. Over the last 9 months it was $299m. Whats your point?

The point of the OP is that gaming/360 related revenue seems to make a larger percentage than gaming/360 related costs. But you dont like this idea.



@Slimebeast

Yes its a big mystery thats why you take what you can get. Total EDD = $6.5bn as published no questions asked right?

So here is what EDD provides:

Entertainment and Devices Division (“EDD”) offerings include the Xbox 360 platform (which includes the Microsoft Xbox 360 video game console system, Xbox 360 video games, Xbox Live, and Xbox 360 accessories), the Zune digital music and entertainment platform, PC software games, online games and services, Mediaroom (our Internet protocol television software), the Surface computing platform, mobile and embedded device platforms, and other devices. EDD leads the development efforts for our line of consumer software and hardware products including application software for Apple’s Macintosh computers and Microsoft PC hardware products, and is responsible for all retail sales and marketing for Microsoft Office and the Windows operating systems.

To summarise:
- Xbox 360 (all aspects)
- Zune (yea sure this is a cash cow)
- PC games
- Mediaroom (dont even know what this is)
- Surface (yea sure this is a cash cow)
- Windows Mobile
- Mac and PC apps (I didnt know about this which proves that development costs go into non-gaming)
- Sales and Marketing of Office and Windows (I didnt know this but proves that more costs are related to non-gaming)

Is it really that hard to believe that Zune, Mediaroom, Surface, Windows Mobile, Mac and PC apps made $1.5bn in revenue and Xbox 360, PC gaming made $5bn in revenue?


@WiiStation360

Good point. But the costs dont deviate that much. The revenue does although we know it cant go above $6.5bn. If it goes as low as $3.4bn then its saying Zune, Windows Mobile etc. made $3bn. I know which sounds more reasonable to me.

And it looks like we have a winner!!!!!!

Out of 5 billion in revenue generated by the 360 and PC alone, they only managed a profit of $299 million. So we're supposed to believe, based on very scant evidence, that the other things in the division lost/spent in excess of 4.7 billion dollars????

That's total bull, and you know it.

@Lord N

No just no.

Obviously the 360 / PC had costs as well. The non-gaming related costs are relatively higher. If you want me to venture an educated guess then I would say $4bn was from 360/PC costs and $2.2bn is from other products and other activity. This is based on the fact that the costs are roughly split up 48% cost of revenue, 21% R&D, 31% corporate level activity. Hence, since 360 / PC made around $5bn, it looks much more profitable than other parts.

I wouldnt dream of asking you to believe me but I do financial analysis for a living (for what its worth anyway).

The bottom line is over the last 9 months:

- EDD made $6.5bn in revenue. If you ask me and take a look at the market, its really not hard to believe that $5bn was made by gaming related platforms. Remember that any less means more revenue by Zune, Windows Mobile, Surface, application software for Mac and PC which all are clearly going down significantly. Just read current business news.

- EDD had $6.2bn in costs. We know that 360 costs are going down, its in their report. We know it is roughly split up 48% cost of revenue, 21% R&D, 31% corporate level activity. Even if 360 and PC took ALL of cost of revenue and R&D, this still doesnt reach $5bn. We also know that EDD is responsible for the costs of developing Mac/PC apps and costs for sales and marketing of Office and Windows. So there is strong evidence that gaming and 360 is profitable.

Im really not sure what Lord N and Slimebeast want me to say.

How about:

360 / PC made $3.5bn in revenue. This is out of $6.5bn. That means Zune + others made $3bn.

360 / PC cost $6bn. This is out of $6.2bn. That means it only costs $0.2bn to make Zune + others.

So 360 / PC suxors. They lost MS a total of $2.5bn.

Does that sound more reasonable then?


I would like to hear what you two think to make up that $6.5bn revenue and $6.2bn costs.


@Slimebeast, how could you believe Zune + others made $3bn in revenue?

Maybe it's just my noobish eyes, but no where in that post did you mention anything about hardware costs.... Which I believe is what the other thread was hinting at.

And a few million in profit will not offset more than a few billion in total lost, also mentioned in the other thread.

I think the reasonable points which can be made are:

Xbox 360 operations are 99% sure to be profitable.

This division bears the cost of advertising and retail deployment of Windows/Mac software but the revenue for sales of these go somewhere else. (Another cost in that hidden chunk)

The amounts people quote and attribute to Xbox 360/Xbox 1 losses are likely to be wrong.

Btw, do they have an obligation to round small figures like 1% or 2% to the nearest half % point so as to not deceive investors? Say 1.4% has to be rounded up to 1.5% rather than down to 1% and 1.23% has to be rounded down to 1%