Microoft Burns $50 million dollar hole in their wallet

[mike_intellivision]

Let's look at what we do know.

1. GTA IV on the Xbox 360 outsold the PS3 version by about 25%. That is actually less than the advantage Microsoft has over Sony on installed console base (37%). All of the sales advantage was in the Americas -- the PS3 version outsold the Xbox 360 version in Japan and in Others.

2. There are 17M "active members on Xbox Live" according to Microsoft (as of January 2009). If this means Gold paid members, it is doubtful that many subscribed just to get DLC for GTA IV.

3. A lot of people traded their games in before DLC was available. There are used copies at 60 Gamestops within a 100 miles of my location (which is remarkable since the Store Locator only lists 50 locations). For reference, there are 57 stores with used PS3 versions.

4. Most sources have said the payment to Rockstar was a loan of some type. If that is the case, assuming a 70% return on sales to Rockstar, it would need close to 3.6M sales of both DLC (total) to payback the money. And if that money was to front development cost and it did not exceed it, then Rockstar would begin to profit after that number of sales.

5. It is highly doubtful that the it cost $50M to do two DLC installments. The money probably helped Rockstar finance on-going activities -- so it was good for it. And it will make a true profit on the DLC at a (much) lower number of purchases.

6. Even if Microsoft does not realize any hard (monetary) profits, it got a lot of PR buzz out of the purchase -- which does not hurt.

Mike from Morgantown