You're out of most people's league with these numbers.

@ManusJustus
You mean its too advanced?
I suppose a lot of forum posters are quite young.

If any forum posters have a finance and/or accounting background, I would like to discuss with you.

Thanks.

I Give Up. Mods, please lock this thread.
Will just repost if anybody wants it again for discussion.

Thanks.

Again, I appreciate the time it must take to put together these threads. It is much more difficult to pull the xbox numbers out of EDD because MS stuffs so many products into it. Based on your experience, are you able to determine how much MS has lost on the xbox + xbox 360?

Thanks dbot. I appreciate it. To answer your questions:

1. As per the post, I cannot determine how much X360 has "lost" specifically.
You also have to define what "lost" means as well.

On the gross margin side, based on the above assumptions, the X360 console seem to have about $40 to $75 gross margin if the average selling price of a console is $300.

So it makes money that way

Ooops. Sorry... to finish...

However, it is hard to determine where to allocate all the other expenses - R&D, headcount and Sales & marketing

So no, you cannot really know how much X360 lost.

Also, in FY end Jun 2006, all those other divisions that are now lumped in the EDD division were separate divisions - so again that creates more complexity.

I think the actual XBox Console, even in the Gross Margin department - NEVER MADE MONEY. That is, the original xbox was sold at a loss (gross margin), even before taking into account all other expenses.

The 360 is more being sold at a positive gross margin as implied in the above analysis - unless there is something hugely out of whack in the numbers I've done.

(Which is why feedback from the community is critical - to see if I missed something substantial)

FY end Jun 2007
Revenue = 6,083
Cost of Revenue = 4,194 (not including 1,060 RROD charge - which is a one time charge)

FY end Jun 2008
Revenue = 8,140
Cost of Revenue = 4,571

You can see that the COR is probably mainly due to Zune and X360 - as they are "physical products" with actual product costs.

Despite shipping about 2 million more consoles (don't know how many Zunes, but not that many as Zune is totally unpopular), their cost of revenue didn't actually go up that much.

So X360 Platform is likely making money now - on the gross margin side.
However, I think R&D (maybe Live expenses??) and Sales & Marketing expenses are going up so much more, that their profitability is negatively impacted.

Would X360 platform be successful if those expenses are reduced?
That is the big question.

Because if not, then X360 platform will hardly ever be VERY profitable - UNLESS Revenue increases dramatically.

Eg. Revenue = double = 16 Billion
Then profit = double = about $1 Billion

hey bumidan, as with the sony breakdown, i enjoy, and apreciate a good break down. one of the more valuable things i read on here.

id say the MS fans have either have fled, or just are not as touchy as sony fans

also do you think if they could get a larger userbase say around 40m the software sales/licences could start offsetting development costs, thats always been my feeling but ive never been able to do the math to prove it

@ goddog, thanks.

Yes, once you get a bigger install base, then generally the increase in total gross margin should be more than enough to offset the increase in the expenses.

So currently if X360 is at 20.3 milllion and Software is at 49.5 million
then
if X360 is at 40.6 million then SW should be 100 million

So for example, if Software has a $12 gross margin (in my example), then:

Currently
@ 49.5 million = $594 million gross margin
but if doubled:
@ 100 million = $1200 million gross margin

That additional $600 million should be more than enough to offset many costs even buying exclusive games, etc.
Because "theoretically", marketing, headcount, R&D should NOT double as well.

Oh goddog, in the above example, if at 40 million consoles with same attach rates, etc.

then MSFT EDD division, if everything is the same, CAN MAKE $1 Billion in Profits.

Is this the "math" you wanted to see?

Hope that helps.