czecherychestnut said:
His guy called microsoft said that microsoft was still losing money on their entertainment division. http://www.microsoft.com/msft/earnings/FY08/earn_rel_q4_08.mspx#Channel And yes whilst the division includes more than just the Xbox related businesses, looking at the other included products, most would be profitable in their own right, particularly with Windows Mobile products booming in recent months. So whilst its great that Xbox live sales have increased, can you really say its enough to counter the big price cuts? And note Microsoft only mention revenue increases, no mention of profit, although that just might be due to the difficulty in calculating profit over a small time window. And lastly how much profit would they make on live titles. $US2 per title, maybe $US3? So even if they sell 10 million titles a month, thats chump change profit in a division with a revenue of billions.
Please don't get the impression I'm flaming the Xbox, I'm happy that live sales are bubbling along nicely, and the extra profit (assumingly) is certainly handy for microsoft, but lets be realistic here. No increase in Xbox live game sales will suddenly generate any significant amount of revenue/profit for the company, so using this to say otherwise is a little silly. And any profit increase made by increased xbox live sales will be dwarfed by the reduced profit (or increased loss, we don't know) due to the price cut.
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I'm not saying that your argument is without validity, but the balance sheet you provided a link to shows a total fiscal year gain for the entertainments division...not a loss. Additionally the notes therein identify the performance of the XBOX 360 as a key factor.
Additionally, this statement: "No increase in Xbox live games sales..." seems contrary to the market as we know it. Hardware sales are almost ALWAYS sold at a loss as the money is made from sales of software (Nintendo seems to be the exception here). Microsoft's software attach rate is currently estimated as the highest among this generation platforms and XBLA sales add to that. Therefore I'd argue that software sales, including XBLA sales, are exactly what drive profit for the 360 portion of the entertainment division.
As far as hardware costs go, I don't think anyone knows, if the 360 is being sold at a loss. Would seem strange to me that with 3 years worth of improvements/cost reductions, that they would be, but you never know.
