Sounds sounds like good business to me. I wonder effectiveness though. 360 is already cheap.

There goes mr. Agenda.

Tell me dude, if what you say is true... how come the division went from losing a billion per quarter to profiting half a billion per quarter?

Did Zune sales skyrocket? Are they shipping a couple billions worth of surfaces per quarter now? 

Are you aware that Windows Mobile is costing them money every year? Surface, sphere and other projects don't bring any dough at all? The Zune is a disaster? Office for Mac is now accounted under the Office division, so the division is also eating development of their tools and free utilities for mac. According to you, the 360 loses money as well... you really believe keyboards and mice cover all those costs and on top earn them half a billion per quarter?

Additionally, they did not say that money from retail sales of Office and Windows are accounted under the E&D devices. They said the division "handles" or "is responsible for".

Nevermind the fact on their earning statements they comment on each division and they often cite the 360 as a driver for the division. They risk going to jail if they lie there. Are you saying Microsoft's Chief Financial Officer is lying to the shareholders? Put your mouth where your words are and tell the SEC about it. 

Did you not learn anything after your exchange with redspear about Apple? your corporate affections distort your perception of reality.

Don't mistake Microsoft's statements about the "360 representing most of the income" of their E&D division as being profit from 360 hardware sales. 360 software is the money maker.

360 Arcades are not sold at a profit -- but the HDD add-ons sure are. It'll cost MS maybe $1 to bump the 60GB HDD to 80GB on the Pro model... but including a 20GB HDD on the Arcade will probably cost $15 or more. They aren't going to increase their losses on the Arcade, just to reduce their HDD add-on profits, and their (semi-profitable) Pro sales to boot.

Arcade is getting a memory upgrade only, almost certainly, unless MS is... well really stupid during these dire economic times.  MS isn't stupid.

Pretty simply income is not profit. The xbox 1 made a lot of INCOME too and lost a lot of money. Microsoft may sell less dollars in 50 dollar keyboards and mice, but every single one of those sales is highly profitable. The same is true about retail copies of office (do you think they really spend 300 dollars per copy on R&D for each new version of office? Have you ever USED office? 20 bucks per copy, tops, that's why its the profit center it is). The same is true about the sync, while the sync may be a small part of the pie, it is almost certainly a profitable one since it is a rather simple device that is reasonably expensive as an add on (and included as a base item in many cars).

I will agree with you that most straight up income probably does come from the 360 division now. If you're looking at just hardware sales, if the 360 sells 2-3 million in a quarter at an average income of 180-260 for microsoft (since retailers don't get much for new console sales) thats around 500-750 million per year in gross revenue which is a big chunk of the 5 billion. Of course there is no way in the world an arcade can be built, shipped from china then shipped by truck to stores for 180 dollars, so that revenue almost certainly comes with 1 billion in expenses. Lots of income, no profit.

Software is almost certainly more profitable on a per unit basis, but mainly if the game being sold is a microsoft owned or published franchise like Halo or Age of Empires. If MS owns most of the rights or at the very least is the publisher they are looking at a big 20 dollar chunk of the 60 dollar sale which is how Halo 3 made them so much money. Most games on the 360 though are neither published or developed by MS, and so they are not getting anywhere near that per game. They also have a LOT of staff overhead in their xbox division which is why they fired so many people from it in the recent restructuring. That X dollars per game sale is not anywhere near free and clear profit. It is almost certainly not enough to deal with all the overhead and then also overwrite the 500 million dollar difference between hardware sales revenue and hardware sales expenses.

There is also some money in live, something like 250 million a year (assuming the 10 million paying subs is accurate) but they had that same system of subs and users with the same kind of xbox live network under the old system where they broke out revenue from the xbox division and were constantly losing money.

In case EVERYTHING about the Xbox model is about the same as last time. The console still costs more to make then it sells for, the games are mainly 3rd party with no MS publishing, live is the same price with a similar number of subs and the 360 sales are even similar to the sales of the original xbox year over year other then a slight uptick in Japan sales.

The only thing that has changed is they now roll the xbox in with all kinds of other things that do, on average, make money to make the xbox look like less of an albatros to investors. Especially with warranty costs, which are a new problem for the 360 (they never had to shell out over a billion to fix faulty xboxs in the first gen) they are almost certainly still, yes, losing money on the xbox.

M$ adding options to thier SKU's is just more stuff to go wronge with thier unreliable hardware.

You say a lot of things with absolutely nothing to back it up.  There is a saying about assumptions.

What Bitmap is trying to say, is since the division was losing money in the past(and was attributed to the 360) and is now making money(and is attributed to something else), what is causing the profitability for the division if not the 360.  M$ has been selling computer accessories for quite a while, have they just now seen a spike?

This response doesn't warrant a response, IMO.  All it basically says is: "I don't understand, I need to read it again, or have MS fill in the blanks for me, which of course they aren't gonna do".

If you're looking for an "official" statement, with regards to X360 hardware profit specifically, from MS, you're not gonna see it, JaggedSac.  

In your not making assumptions, you just simply have nothing to add to the discussion -- unless you can pull out an official statement, regarding X360 hardware profitability specifically, yourself.  Until then, since this thread, this forum, and this entire site really, is about theorizing, and thinking ahead in the games industry, using what we have... perhaps you could put something interesting forth, rather than knocking reasonable conclusions without, at the least, some thoughtful logic to back your opinion up.

Tell us, your opinion, of how its the X360 hardware that is making profit for the E&D division, and how that is going to affect the SKUs topic in this thread.  Refute him.

I did have contradictory logic. What, if not the 360, caused this division to be profitable? Was it the Zune? Nope, quite the opposite. Was it keyboards and mice? Not unless a sudden huge spike in sales for them occurred, because they have been selling accessories for quite a while now. Was it Surface? Nope, that is nothing but a money sink at this point. Is it Mac Office? Maybe. Was it all the R&D that this division houses? Nope.

Basically all Impulse said was that since it was a money sink, it is always a money sink.

He says Live used to lose money and it is the same model as it used to be, so, ipso facto, it must currently be losing money. Regardless of the fact that, in addition to subscriptions(which is far, far, far larger number than it has ever been), they now offer far, far, far, far, far more content than when the original XBox was around(music, movies, Arcade, XNA, etc.). So that point is obviously false.

Also, the cost for infrastructure does not increase parallel to the number of users.  So, starting out, the cost of the service is more likely to out pace the revenue generated.  The more users, the more likely profitability is achieved, especially with a subscription model.

And LOL at Sync being the one causing the profits.

Also, here is a quote from M$ financial report:

http://www.microsoft.com/msft/earnings/FY09/earn_rel_q2_09.mspx

"Entertainment and Devices revenue grew 3% driven by strong holiday demand for Xbox 360 consoles with a record 6 million units sold in the quarter." 

One of the only bright spots in their entire report was the 360.  But, you guys are right, it is a drain on M$.  Since the 360 sold more in this quarter than it ever has, the other products in the division had to have kicked it up an extra special notch to overcome the losses accrued for each 360 sold.

Let me pose a potential situation for you:

360 Arcade sells at (small % loss)/unit

360 peripherals sell at (moderate % gain)/unit

360 Pro sells at (small % gain)/unit

360 Software sells at (large % gain)/unit

End result == (small quarterly gains)

If the losses incurred by masses of Arcade unit sales go up significantly, due to a new HDD, bundled software, a price drop, etc... what happens to the end result, do you suppose?  What do you suppose happens when stockholders see this division flailing in the next financial quarter, after finally dragging itself out of a many-years-deep hole?  The gains from software and peripherals offset the losses from the Arcade in the current situation.  Why would MS want to make the Arcade more painful to their pocketbook again?

Totally hypothetical of course.  We all know 360 Arcades are manufactured by chimps in some backwater country, for just a few pennies, because MS posted a profit for the first time in eons, for their E&D division.  It couldn't be the software that's making them money, despite the titanic attach rate of the 360, and the vastly increased software sales, over the holiday season.  Also, the software only makes them a couple pennies as well -- its not about gains and losses, because, as I said, the Arcades are actually sold at a profit as well... right?  They must be?

So, you are saying M$ is profitable now?  That is exactly what I am saying.

You are just bringing in the point of this thread, which I could care less about.  I was just stating that Impulsivity's claims of the 360 still losing money are most likely false.  And if it is true, it is not because of the reasons he listed.