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bumidan on 30 July 2008
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Ail said:

Few mistakes you made :

1)You used NPD attach rates for software and accessories and applied it to consoles sold worldwide.
It's likely the attach rate is different in Others. ( NPD numbers are US only)

2) You suggest Microsoft was making 45$ per console end of 2007 and is now making 75$ per console. Very unlikely considering Microsoft did a 150$ price cut in Others in March and Others represented more than 50% of the hardware sales this last quarter...
If anything the last quarter results tend to indicate that the 360, in Others at least, might be sold at a loss...

And in the end any profit made on consoles sold in the US is washed out by the loss made on those sold in Europe resulting in hardware barely breaking even worldwide...

Ail, thanks for the feedback.

1. Yes, I used NPD attach rates.  However, if I don't have an attach rate, I will not be able to figure out what numbers to use for software and accessories.  Do you have an attach rate in mind?

Basically, what would happen is that if the attach rate is lowered to take into account your suggestion of lower attach rates overall, then some other line item revenue will be higher - maybe XBox Live or PC games.

2. Yes, the $45 and $75 is an AVERAGE gross margin on an AVERAGE selling price of US$300 per console.  I don't have any data on the breakdown of arcade, pro and elite models.  If they approx. sell the same (which they don't), then the average price is about $365 retail.  I give some margin to the retailers obviously.  Hence, the $300 average selling price.

Note again that gross margin for the consoles is not the same as the "net profit" numbers that I use for my Sony analysis.

If you can give me some numbers on the Euro price cut that would help.  Though note that the Euro is a stronger currency, so even though they had a "price cut" in retail or in Euro - the US$ translation may not have been very significant.

It's like a price cut in Canada, X360 consoles were cut $50 to $75.  But the currency went from 1.4 to 1.0 - so therefore effectively, there was no price cut for MSFT in US$ terms, just in C$ terms.

Any other info and feedback would be appreciated.

Thanks.