Note: All the following is rough calculations since MS doesn't break down this data. I am just trying to ascertain how much the 360 might really be bringing in and show that it is likely profiting on the console itself.
Based on the complete data in the earnings report, removing new expenses from WinMo and Zune/PC Hardware revenue losses; one could argue that Xbox is likely making around $600 Million a quarter. See data at end of post for qualification of this statement!
Breaking this down further, you could argue that about 50% of Live renewals occur during Q2 and the rest are evenly split between Q1, Q2, and Q3 at about 10% each with the last 20% being quarterly or montly renewals. With an estimated 10 Million subscriber base for Gold.
So Live renewals probably equate to about $50 Million for yearly renewals + $15 Million other renewals for about $65 Million.
Game sales on the 360 per VGChartz for WW equate to about 17 Million units. If all were 3rd party, that would be about $100 Million in revenue. Assuming about 20% 1st/2nd party, you get up around $225 Million.
Total Profit off royalties, games, and Live Gold is about $290 Million.
Now take accessories, which MS has touted previously to have an attachrate around 6.5:1, and you could likely place about 7 Million accessories sold and assume profit of about $20 per accessory, so another $140 Million.
Last but not least is other Live Marketplace purchases. This is extremely hard to estimate, if not impossible with data available. So just going to throw out a randomly high number of $100 Million since MS quoted in their earnings report that Live sales nearly offset all revenue decreases from the Xbox360 price drop. As they shipped (sold to retailers) 1.2 Million systems, this would be about $120 Million decrease in revenue. $100 Million would nearly offset that.
Total now at $530 Million is potential profit for the quarter not counting console HW itself.
That means that the Console HW is likely profiting around $70 Million for the quarter on 1.2 Million systems shipped or about $58 per system sold on average.
*I will not add the Elite into the next mix as it is estimated to be less than 3% of sales now. This will SKU my data a bit, but not enough that I am worried about it right now since this is all rough estimates anyways.
Differences between Arcade and Premium SKUs are HDD (COG = $55 + $20 nVidia backcompat royalty), higher quality AV cable + Network cable($3), Silver Faceplate + Headset ($3). So difference in SKU cost is about $81.
Retail pays roughly $188 for arcade and $282 for Premium. Shipping on each costs about $4 per system, so total revenue for MS is probably about $184 and $278 respectively. Subtract Premium costs and you get $184 for arcade and $197 for Premium sku.
If you figure a 40% (480k systems) marketshare for Arcade and 60% (720k systems) for Premium SKUs, you can then estimate that roughly $9.5 Million of the profit is due to the extra revenue from Premium vs Arcade. Leaving about $60.5 Million in profit for all 1.2 Million systems shipped, or about $50 per system sold in profit.
This would put Xbox360 current production costs at about $134 per system.
To put into perspective, the PS2 was selling at $150 3.5 years after launch in the US. One would assume that they were profiting on the HW at that price and one could also assume that MS could obtain similar levels of cost reduction in similar time. Both the 360 and the PS2 started at a price point of $300.
At this point in time, MS could in theory drop the price of the Xbox360 to $150 and not take a loss. Retail price would likely be $141 and shipping still at about $4 per unit. So $137 per system sold would be MS' cut and result in a $3 profit.
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Qualification for $600 Million profit (I have posted this in a couple other threads which got me thinking and caused this post to be written)
Researching further into MS Earning statements and listening to the conference call, one would have discovered that the Xbox360 and related products are actually doing quite well and that the loss in E&D and primarily be attributed to Headcount increases in the Windows Mobile Device Platform group.
In addition, Microsoft calls out decreased costs of revenue (hence progress toward profit or increase in profit on the platform) associated with Xbox360.
http://www.microsoft.com/msft/earnings/FY09/earn_rel_q4_09.mspx
"Research and development expenses increased $252 million or 16%, primarily reflecting increased headcount-related expenses associated with the Windows Mobile device platform, driven by recent acquisitions. Cost of revenue decreased $326 million or 7%, primarily due to decreased Xbox 360 platform costs."
If Microsoft hadn't ramped up WinMo development efforts, E&D would have seen a profit of roughly $122 Million. Given that they also call out Zune and PC hardware having massive decrease in revenue, those likely cost the E&D division additional profit potential. When they do call out Xbox revenue decrease, they point out the price drop and also mention that Xbox Live revenue increases offset most of the 360 price drop revenue decreases for the quarter. They do not make any related assertion for Zune of PC Hardware out of E&D
"Revenue from our non-gaming business decreased $292 million or 12%, primarily reflecting decreased Zune and PC hardware product revenue."
While Microsoft did layoff approximately 5,000 employees in the past 6 months, very few came out of E&D, thus while revenue has decreased, operating expenses have not dropped nearly as much. In the case of WinMo, they increased drastically.
All in all, what this means is that Xbox is doing fabulous. One could argue based on the data provided, that without Zune, WinMo, and PC Hardware wrapped into E&D with Xbox, that you could have seen profits from Xbox360 upwards of a $600 Million profit for just Q4 FY'09.
