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sharky on 27 September 2007
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kazadoom said:
NJ5 said:
I already told you in the other thread... Breaking even on Halo 3 is a no brainer, no matter how much is spent on marketing. It's a multi-million seller.

http://www.planetxbox360.com/index.php/articledetails/show/2713

"The total cost to Microsoft for Halo 3: a little more than $60 million. Development costs will probably be just above $30 million, given an elite team of 300 full-time artists and programmers working for three years on the game at Bungie, the internal Microsoft studio that created the games, said Michael Pachter, an analyst at Wedbush Morgan Securities. Bonuses to key developers and artists will probably add $25 million to the tab, Pachter said. Though about $15 million to $20 million in television marketing will be spent promoting the game, the majority will be footed by marketing partners such as Pepsi, Burger King and Pontiac that want to ride the Halo 3 hype."

Regarding the 360 as a whole, it's looking like it will achieve profitability much earlier than its PS3 rival. Xbox live subscriptions, much better software sales, near profitability of hardware sales... Yes, the 1 billion lost in warranty extension will delay profitability, but it won't avoid it.

I know you did NJ5, but I did not really get the answer about the Xbox campaign as a whole. I understand that about Halo, I was just wanting to know where Microsoft stands with the Xbox project. Thanks though

 


 As a whole to date? No. Microsoft has lost, estimates from me here, about 6 billion dollars. About 4 b on Xbox 1, and probably like 2 b on 360 so far.

 

But you have to look at things in context. Start with Microsoft's chief opponent, Sony. They've easily lost 2-3 billion on PS3 so far. PS2 was a moneyloser at first, but ended up very profitable. That is how videogames work. Xbox 1 never gained profitability, but 360 will, it's on it's way.

The profit outlook going forward is far better on 360 than PS3, it's chief opponent. Sony lost so much money because the Blu Ray in PS3 was so expensive, and Cell was very expensive project also. Sony is just bleeding money on PS3 and there is no end in sight. People keep wanting them to cut price of PS3 to 399 now. Well guess what, that just means they will bleed even more money.

 

Next you have to look at corporate motives. MS didn't want Sony to gain a foothold with a box on top of every TV. Because then Sony could start using that box to do other things that could cut into MS core operating system business.

 

This is why Nintendo, is  in one sense not really a competitor to MS. Nintendo just wants people to play games on it's box. Sony, want to sell people music and movies and make a online service with playstation eventually. Sony has much grander ambitions with Playstation than just games. That is why they are a threat to Microsoft and that is why Microsoft made the Xbox. Not for games, but to counterattacks Sony's inroads into the living room.

So the Xbox projects are in essence defensive. So, spending 6 billion dollars over 6 years is probably worth it for MS, even if they never turn a profit on Xbox. But of course they do hope to turn a profit. Look at it this way, MS has 30 billion in cash in the bank. A billion dollars a year on a defensive effort is nothing to them. Hell, they often get criticized by shareholders for keeping too much cash, and that they need to spend it to improve the business. Xbox is just one of those efforts.

Xbox has had one profitable quarter, that was 2ndQ (fiscal) 2004 when Halo 2 came out. They will probably make a profit this quarter too, because of Halo 3. They have stated they would like to have a profitable fiscal 08 in the divison where Xbox is. 

 Recently MS did a 1 billion write-off for RROD repairs, That really hurt the 360 profitability to date. However, it's over with now for fiscal accounting purposes.