Margins on the software are nowhere near where you put it because most of those 90 millions software sales will be third party software, Microsoft only take a licencing fee on those.......

Your numbers would imply third party publishers and developers get close to no cash on games sold on the 360.

That is your big mistake, the software sold for 360 is in its huge majority not software developed by Microsoft so you can't compare it to Windows........

I can try to explain it in a simpler way :

Take a game sold 60$

3 main actors get their share of those 60$ :

- retailer

- Publisher ( who then shares with the developer).

- Microsoft through a licencing fee.

the biggest share is the one the publisher gets. Common accepted numbers for the licencing fee are in the 10-15$ range..........

 Microsoft just doesn't make anywhere near 30$ per copy of GTA4 or Madden sold.......

 Any analysis you did based on your software will as a result be heavilly flawed..

 Now divide by two the software revenue and you pretty much have to redo all the analysis.......

@ ail

I appreciate your comments and understand your points. I do want to respond to see if we can get a better consensus.

1. I have 2 different analysis. Please refer which one you are talking about.

2. As I have mentioned before, I do not mind your comments and they are very much appreciated.

However, as per the post, I would like you to point out, not just 1 set of figures, but also supply your own figures for the other line items.

For the projected FY Jun 09 - I have no problems making the Revenue per Software Unit Lower and Gross Margin per unit lower.
However, for the previous FY, I can't suddenly make it lower because:
a. Have to change revenues/margins for XBox Consoles - make it higher
b. Or have to change revenues/margins for PC games - make it higher
c. Or have to change revenues/margins for Live
d. Or have to change revenues/margins for Accessories

Note that Revenue for Zune+ and Mobile - CANNOT BE CHANGED - in the previous FY.

So I need to know, what other numbers are you suggesting that needs to be changed for FY Jun 08 and FY Jun 09?

It is much easier to change the FY Jun 09 assumptions, because everything is up in the air.

But for FY Jun 08 - You can only change so much, as other numbers are "TRUE".

Thanks for the feedback Cleveland, to answer some of your questions:

1. I didn't speculate anything - in the sense that it changes the analysis for the whole division.  I still put the whole R&D expense and took into account the same 40% increase in the projected FY Jun 09.

2. No, I don't have any data on the Zune, so can't comment really.

3. FY End Jun 07 loss is $1.892 Billion.  $1.06 Billion is due to RROD.  So the actual loss, less 1x charge is about $800 million.  In the same FY, they only sold 6.6 million XBox.

If you look at the previous thread, you can see how I broke it down.  If you take into account all the numbers, it's ALMOST IMPOSSIBLE, that they are losing money on hardware in FY End Jun 08.

Because there are no other places where you can attribute enough profit to make up the $426 million that they reported.

Unless you assume that Zune is actually VERY PROFITABLE - which is even more unlikely than the XBox actually making a positive gross margin.

So I am not quite sure what calculations you are making in your above post.

I hope this clarifies my position.  Please take into account the other segments and use different numbers so you can see what your suggestion on 1 line item implies.

THANKS.  Please let me know if you still have any questions.

Thanks for the feedback, jkimball.  To clarify your questions:

Let's break it down in numbers and text:

COR decreased by 683 million or 13%

FY Jun 08 - COR = $4,571

FY Jun 07 - COR = $4,194 + $1.06(RROD) = $5,254

FY Jun 08 is 683 less or 13% - simple mathematics.

If you take out the RROD - then yes, the Cost of Revenue went up - BECAUSE THEY SOLD MORE consoles - from $4,194 to $4,571.  But it does not mean that consoles are sold at a loss.  They mean that the COR went up - the actual number, not the per unit cost of the consoles.

Think about it, if we take into account that other segments did not see much change.  The increase or difference is $377 million.  But MSFT sold 2.1 million more consoles.

You can do whatever calculation you want, but $377 more cost of revenue divided by 2.1 million more consoles is impossible to work out - if you think that consoles are sold at a loss.

But if consoles have a positive gross margin, then the math works out beautifully.

 Does that make sense?  Please let me know.  Thanks again for your feedback.

@ jkimball,
Reading your post again, you may be confusing Cost of Revenue to Gross Margin.

Total Cost of Revenue SHOULD GO UP, if you are selling more stuff.

Because Total Cost of Revenue SHOULD NOT GO DOWN if you sell more stuff.
But Total Gross Margin can go down, if things are sold at a lower margin or loss.

How about this math.  According to this site, Microsoft has sold 46,083,983 units of software for the first six months of 2008.  Assume 80% is third party and they collect a $10 licence fee.  Assume 20% is first party and they make $20.  Let's do the math.  36,867,186.4 x $10 = $368,671,864 from third party software.  $9,216,796.6x $20 = $184,335,932 for first party.  Total profit of $553,007,796.  Hmm, that's over their reported profit.  Still think they can't be losing money on hardware?

@Ail,

Yes, we can change our projected FY Jun 09 assumptions on those things, that is not a problem.

But it is more difficult to change it for FY Jun 08 because of all the other numbers that need to be changed.

Do you have a suggestion with regards to actual numbers?

If 3rd parties pay a license fee - basically by definition, the license fee is 100% gross margin, because there is no direct attributable cost to that fee.

Of course, those numbers that we have are "AVERAGE REVENUE AND GROSS MARGINS" per unit of software.  Average implying for 1st, 2nd, 3rd party software is taken into account.

We can break it down, but I don't have enough data to do it.  Again, if you have any numbers, please let me know so we can tweak it.

@ cleveland124.  I appreciate your feedback.

That calculation does not prove anything unless you can show me how those numbers "fit" with their reported numbers.

For example, if you are saying that the GROSS MARGIN from your data = $553 million (or is it revenue?)

Let me make it simpler for you this way:

FY Jun 08 (taking into account the 6 months you are referring to)

Total Revenue = 8,140 million

Total XBox PLATFORM Revenue = 5,784 million

Total Cost of Revenue = 4,571 million

Total Gross Margin = 3,569 million

Where will you put the $553 million + the other 6 months of profit , compared to the 8.7 million consoles sold? Also, Live, PC Games, Accessories?  Remember, you only have 3,569 of gross margin (+ losses) you can play with.

Let me know?  I can do the calculations for you even, just as long as you give me the numbers.

I have done trial and error, making hardware lose money, software make a lot of money, etc. and so far I haven't been able to do what you are claiming - that is consoles lose money in FY Jun 08 - to make the numbers work.

So if you have some data/numbers, I will be more than happy to do it for you.

But realistically, I think it's highly UNLIKELY that 360 consoles(on average) are losing money in FY Jun 08.

I look forward to your reply.  Thanks.

2006 - http://www.xbitlabs.com/news/multimedia/display/20061120132150.html

"A year ago the total bill of materials (BOM) cost for the Xbox 360 Premium, including hard disk, the DVD drive, enclosures, the Radio Frequency (RF) receiver board, power supply, wireless controller, cables, literature, and packaging, reached $525, well above the retail price of $399, according to iSuppli. Considering the up to date BOM, Microsoft has managed to reduce the pricing of its console by over 38.5%."

So if thats true - Zephur = $325

Falcon =?
Jasper =?

Is that updated?  $325 is for what? a Pro - 20GB?

Does that take into account volume discounts already?