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Forums - Sales Discussion - Global Hardware Feb 7-13 - Super Mario 3D World Pushes Switch Sales Above 400,000

SKMBlake said:
Elputoxd said:

Like I said, the figures you are looking for about Xbox are not shared about any other service or product in the company either. You are trying to paint this as "Microsoft hides information about Xbox so something must be wrong", but in reality they share about Xbox what they share about Office, Azure and other products. Your problem - which makes a lot of sense, by the way, I think you are right - is with how Microsoft shares their information in general, not information about Xbox in particular.

Xbox Content and Services is a part of the Gaming division (games, DLCs, digital sales, subscriptions and everything that is not hardware sales). The Gaming division at Microsoft is divided in two: Xbox Hardware and Xbox Content and Services . 

The link you shared is only the Press Release summary Microsoft always does every quarter. There they highlight some of the figures for the media and journalists. The full financial report with more details on performance (and figures on Xbox Hardware, which is the other Xbox division) is on the Financial Statements Excel document and the documents for investors - especially the PP presentations, the Investors Call transcript and the 10Q Word document - , where you will see more data on Xbox that is not shown in the link you shared, because that's not the full report, it's a summary for the press.

Showing their Earnings Press Release summary and saying they are being opaque is very misleading, you can't find data on Windows or Bing revenue there either because it's a summary for journalists and the media, but that data is in their 10Q document. These are all the numbers they shared about Xbox:

- Xbox Hardware revenue: 1.5 billion (up 86%, up 85% CC).

- Xbox Content and Services revenue: 3.5 billion (up 40%, 38% CC).

- Total Gaming revenue: 5 billion (up 51%, up 50% CC, first time they have ever hit 5 billion according to Nadella in the transcript of the Investors Call).

- 2 billion third party revenue (all-time record according to Nadella in the transcript of the Investors Call, this goes within Xbox Content and Services, meaning 1.5 billion came from subscriptions and first party games and DLC - so basically 90-95% of this must be Game Pass and Gold because people play Xbox first party games with Game Pass nowadays, they don't buy the first party games individually; also, revenue from the EA Play subscription service goes into third party revenue and not here).

- For Q321, they expect Gaming revenue to increase 40% and Xbox Content and Services to increase 25%. So they are expecting around 3.29 billion in total Gaming revenue. Considering Microsoft's fiscal year starts on July 1, the total Xbox/Gaming revenue for FY21 should be 3.2 (1Q21) + 5 (2Q21) + 3.29 (3Q21) + around 4 billion (Q421), so around 15.5 billion dollars, although it depends on how much it grows in Q3 and Q421. Microsoft is usually conservative in their outlooks so they can surpass expectations later - common practice among big companies, Nintendo does the same - , so going from 3.33 billion in Q420 to 4 billion in Q421 should be very doable.

- Game Pass has 18 million subscribers and Xbox Live has 100 million monthly active users.

- A bunch of non-numerical data about the Zenimax acquisition, future plans for Game Pass and other stuff.

More Personal Computing (the part of Microsoft the two Xbox divisions are in):

- Revenue: 15.12 billion (they say "up 14% driven by Gaming" and that's true because they expect between 12.3 and 12.7 billion in revenue in Q3, you can read the Q3 Outlook document if you are interested, Gaming grows a lot in revenue during the Holidays and especially when new consoles launch).

- Profit: 5.22 billion (up 25%).

- Costs decreased 10% to 9.9 billion.

More Personal Computing breakdown:

- Windows represented 40% of the division (6.15 billion). The biggest segment.

- Xbox represented 33% of the division (5 billion). The second biggest segment.

- Bing (this includes advertising revenue), Hololens and Surface represented the other 27%.

Like I said, Microsoft only shares the profit of every one of their three divisions (More Personal Computing, Productivity and Business Processes and Intelligent Cloud). They NEVER share the profit of each of their products and services within those divisons. Not only does Microsoft not share the profit of Xbox, they don't share the profit of Surface, Azure, Hololens, Windows, Bing and any other one of their products or services. Your problem is less of Microsoft not being open about how much money Xbox makes and more of Microsof not being open about the amount of money any of their products or services make.

If your proof for saying that Xbox is not profitable is that Microsoft doesn't share the profit of the Xbox segment, then literally all of their products and services are non-profitable too. And Xbox is not reported as Xbox Content and Services, like you said, that is what they chose to highlight in their Earnings Press Release summary for the press. They shared a lot more data than that - as I have shown - as well as their expectations for the future of the Gaming segment. You can say Microsoft is opaque in the way they share their financial data when it comes to their products and services in general - and I would agree - , but you cannot say they are opaque about Xbox in particular because that is not true. They are as opaque with it as with Azure, Windows and so on.

I know all of this (once again, this is my job, I revue reports like this). MS disclosed its losses of the Xbox division for years, until 2014, when they suddenly decided to stop. And the revenue back then was pretty high too, but they were still losing money.

Now they spend more money than ever on the Xbox division, and not disclosing their profits/losses. The reason seems pretty clear.

You literally made that up. They have never shared the losses or profit of anything, and not of Xbox either. You probably mean an analysis made by a third party analyst that was featured on Forbes in 2014 and that turned out to be very wrong as in fact Forbes eventually reached the conclusion that the Xbox divison was profitable in 2014 (they even had to correct the article because they realized they got it wrong): https://www.forbes.com/sites/insertcoin/2014/08/11/why-its-perfectly-fine-if-microsoft-has-lost-400m-on-xbox-one/

In fact, this is what Forbes wrote in regards to that "report" (which, by the way, was removed by the author and is no longer accesible): 

The $400M figure itself was not the point of this article, but many are pointing out the math leading to all these headlines is misguided. These numbers reflect gross margin, not profit and loss, and are increases, not totals. While we can use that data to approximate $7.1B in revenues compared to $5B in costs, without further information from Microsoft, it's hard to pinpoint an exact profit or loss on the Xbox One. Though if they have lost money on the system so far, it's for the reasons I go into below, and would not be cause for alarm.

They debunked that report and said that their information was that the revenue was 7.1 billion and costs were 5 billion. 

Edit: just checked Microsoft's 2014 financials and they had Consumer Devices and Hardware at a 411 million profit.



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Elputoxd said:

You literally made that up. They have never shared the losses or profit of anything

Edit: just checked Microsoft's 2014 financials and they had Consumer Devices and Hardware at a 411 million profit.



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SKMBlake said:
Elputoxd said:

You literally made that up. They have never shared the losses or profit of anything

Edit: just checked Microsoft's 2014 financials and they had Consumer Devices and Hardware at a 411 million profit.

That is all their consumer hardware, including Nokia phones (at the time), PCs, laptops and Xbox consoles. I was pointing out that segment was profitable and most of it was probably Xbox hardware. But that is simply hardware, nothing else. They never shared the profit of the Xbox division. Hardware sales is a relatively small part of Xbox now and it was at that time too.

And even then, you said their financials until 2014 showed Xbox was not profitable and the only segment related to Xbox shows a 411 million profit and Forbes estimated Xbox profit at 2.1 billion that same year, which seems in line...

Last edited by Elputoxd - on 04 March 2021