oh goddog, i forgot to use the 65.3 million software (the more recent assumption), but the process and calculation should still be the same.

thank you, your work is much apreciated, i think it would be more than worth of being featured in the news section once a quarter for the breakdown of each companies finacing of games. honestly they would probably be the most neutral articals in tone ever posted

Few mistakes you made :

1)You used NPD attach rates for software and accessories and applied it to consoles sold worldwide.
It's likely the attach rate is different in Others. ( NPD numbers are US only)

2) You suggest Microsoft was making 45$ per console end of 2007 and is now making 75$ per console. Very unlikely considering Microsoft did a 150$ price cut in Others in March and Others represented more than 50% of the hardware sales this last quarter...
If anything the last quarter results tend to indicate that the 360, in Others at least, might be sold at a loss...

And in the end any profit made on consoles sold in the US is washed out by the loss made on those sold in Europe resulting in hardware barely breaking even worldwide...

Great work, Bumidan.... I'm trying to read through it all to see what questions/comments I have.

Ail, thanks for the feedback.

1. Yes, I used NPD attach rates.  However, if I don't have an attach rate, I will not be able to figure out what numbers to use for software and accessories.  Do you have an attach rate in mind?

Basically, what would happen is that if the attach rate is lowered to take into account your suggestion of lower attach rates overall, then some other line item revenue will be higher - maybe XBox Live or PC games.

2. Yes, the $45 and $75 is an AVERAGE gross margin on an AVERAGE selling price of US$300 per console.  I don't have any data on the breakdown of arcade, pro and elite models.  If they approx. sell the same (which they don't), then the average price is about $365 retail.  I give some margin to the retailers obviously.  Hence, the $300 average selling price.

Note again that gross margin for the consoles is not the same as the "net profit" numbers that I use for my Sony analysis.

If you can give me some numbers on the Euro price cut that would help.  Though note that the Euro is a stronger currency, so even though they had a "price cut" in retail or in Euro - the US$ translation may not have been very significant.

It's like a price cut in Canada, X360 consoles were cut $50 to $75.  But the currency went from 1.4 to 1.0 - so therefore effectively, there was no price cut for MSFT in US$ terms, just in C$ terms.

Any other info and feedback would be appreciated.

Thanks.

Bumidan,

I've read through this twice now and I think you've done an exceptional job breaking down what you can and using microsoft's statements about increases and decreases to arrive at what are probably quite accurate numbers. This assumes that they behave somewhat rationally and attribute revenues and expenses in their proper (and proportional) places. I don't believe there is much more that can be done other than hang on to this model and refer back to your model each quarter. As long as they continue to provide X increased 50% and Y decreased 10%, and so on, you can get closer and closer to having very accurate numbers. I, for one, very much appreciate your efforts.

One thing I take from this and you said it in your own post... I don't see a clear path for EDD to make a big profit going forward. Expenses have to go down, revenues have to come, overall profit margins need to increase, or some combination of the three.

I would enjoy some trend analysis. What would it take to start making a significant amount of money? What will next quarter look like if current trends continue? And so on. You have already spent an enormous amount of time on it, though. How effing cool would it be to predict EDD's profit for next quarter and be within 5-10%? You've got some market data to play with from NPD and VGC...

@kn
Actually I did an comparison between actual and predicted for Q4 for MSFT.

Note: I suck at predictions, but please read it and tell me what you think of the actual model. It was quite close, given the circumstances.

I do have a Sony one as well, I'll bump it for you.

@ kn

actually their margins, if you go by the analysis, are pretty good.

It is volume/revenue - they need to increase - to offset the other costs such as R&D and marketing.

If those don't go up proportionally to revenue, then increases in revenue will give them good profitability.

As it does not seem like any one product or division is losing crazy money, unlike the original xbox or the ps3.

Bumi, I am still reading through this, but so far so good. If I don't post an update to this with any mistakes I see, then you should assume I think it's a good job and went to sleep

Thank you so much for not writing "For all intensive purposes"

Also, a slight problem is using current NPD attach ratios to apply to 2006/2007 as well. That won't be the case, and it may be possible to find historical numbers to use. I'm too tired to look for it now, but if noone has by tomorrow and I remember I'll try to find some.

Other than that, though, good analysis. Keep up the good work