Starting July 1, 2008 (Fiscal Year Ending Jun 30, 2009), I see X360 at a crossroads, with many challenges for MSFT.

Console Sales

For the FY ending June 30, 2008, MSFT has shipped a total of 20.3 million X360 consoles.

However, for the period ending Mar 31, 2008, Sony has shipped 14.74 million PS3 consoles.  With some approximation, they should ship another 2.0+million consoles for the 3 months ending June 30, 2008 (We will know the actual amount very soon from Sony financials).

To compare – as of June 30, 2008:

X360 = 20.3 million

PS3 = 16.74 million

So, even with a year’s headstart, PS3 and X360 are in a virtual tie already.

Going forward, based on reasonable predictions:

X360 = 10.0 to 11.5 million consoles shipped period ending Jun 30. 2009 (8.7 million from previous year)

PS3 = 11.0 to 14.0 million consoles shipped period ending Jun 30, 2009 (based on Sony shipping more PS3s already)

Therefore, in another year, Sony will already be tied or likely ahead in terms of total consoles shipped.

Even with price cuts, it is not likely that X360 will outsell PS3s, UNLESS it is a massive price cut.  This scenario is extremely unlikely.

Profitability

It is concerning that even for the latest quarter, EDD division again lost money.  While you can argue that the losses may be attributed to all the other segments of EDD, it is also quite likely that as a whole, the Xbox Platform is still losing money.

(Please see my analysis on previous threads on this).

The reason the Xbox Platform is still losing money is likely due to increased marketing expenses, as well as increased headcount expenses.  As well, it seems very likely that as a whole (NET), the X360 console is maybe breaking even only or still losing money (though not that much).

Games and Xbox Live

Tying it to profitability – even though Xbox has record attach rates for games and Xbox Live has supposedly millions in “paying” subscribers, this has not translated into profitability at all.

Again, one can conclude that MSFT doesn’t earn that much in revenues and profits from console games.

Challenges

In the longer term, I am not sure if I am confident in the Xbox Platform to achieve significant dominance, or even just consistent profitability.

The competition in the industry is quite strong, and so far their existing strategy, while relatively successful, is still not where MSFT wants it to be.

It is one thing to claim 2^nd or 3^rd place, while achieving “some” profitability.  It is another to be the 1^st or 2^nd place in the industry while achieving significant profits.

If I was an investor in just the Xbox Platform, it is difficult to see how the Xbox Platform will be successful (profits and business wise), to justify any significant investments going forward.

Please discuss. Thanks.

I'll post a more detailed response later, but kudos to you for being the first poster today with some basis for his prediction!

Very nice and well thought out.

Price cut is the only answer! They have held on the same price points or very similar price points for far too long. It SHOULD be at about $199-$250 for the premium by now after 3 years if it started out at $399. Natural depreciation. You cant sell a 3 year old phone or PC at the same price points!

It's amazing how many ridiculous posts we're seeing since the FF13 announcement.

I know right? 

>_>

<_<

>_<

Ironic.

ROTFLMBO. One sentence owns this thread. Haha.

Someone makes a thread with facts in it and it's "ridiculous".

If that's your terms for ridiculousness, what about fiction based threads?

Some people just can't handle the truth.

well while I agree with the arguments.... I have to say that they don't have the choice.... if MSFT wants to stay alive for the next generation of technology they can't just be on PC.... Bill said it years ago the future is in the mobile communication and the living room....

now you obviously put Wii in the mix when you talk about 1st and 2nd and profitability etc..... the thing is Nintendo is in a totally different ball game... they actually do a gaming platform... and will probably never change from that or at least not in the near future..... but MS and Sony are not only looking at that but at the entire media library you have in the living room with MS seriously looking at moving the PC from the office to the family friendly place in the house....

for an MSFT investor not pushing XB... is completely suicidal for the entire company..... at least on the non professional market for now... they can't survive with vista office and couple other software... (i'm condensing here but you get the picture, we are entering a new era in the IT/IS world, who ever miss the train will be left behind)

LOL.  The XBox is a drop in the bucket for them.  As much hangs in the balance based on the XBox brand as does the Zune brand.  Having said that, until we can see more specific breakdowns of their profit reports we cannot assume things.