Xbox goes profitable, almost like a grown-up business

Well, what do you know. After years of watching Microsoft chase billions of dollars into the bottomless pit that has been its Xbox Entertainment and Devices Division, the company is finally, as predicted, returning with some loot -- $524 million in income over the past six months, compared to $423 million in losses over the same period last year. Microsoft says the achievement was primarily due to 360 successes, even though Zune and PC sales are factored in there somewhere. Sounds like decreasing production costs, decreased marketing and a little thing called Halo 3 all worked together to help rake in the cash, and Microsoft has high hopes for the rest of fiscal '08, since they "expect revenue to increase due to increased sales of Xbox 360 consoles and related games, accessories, and services." Apparently Nintendo isn't the only manufacturer this generation that's figured out how to make some money... how's it looking on your end, Sony?

[Via Joystiq]

[Dave @ Jan 24th 2008 11:46PM]

I wonder if the Microsoft fanboys will bitch that this should've been posted 3 hours ago like they did in the other post.

[jetswin018 @ Jan 24th 2008 11:51PM]

Umm wow your comment is unnecessary. People were mad because of the bias opinion of engadgget, not because of the late posting time. Also, its a shame to see another person who thinks there completelty perfect. Youre definatly a mac user

[thethirdmoose @ Jan 24th 2008 11:53PM]

Jetswin, your grammar and spelling are atrocious.

[Boostjunkie @ Jan 25th 2008 12:15AM]

The real question you should be asking yourself, why does anyone care when a multi-billion dollar company makes some money, unless your a shareholder.

[Sam @ Jan 25th 2008 3:19AM]

I'm a shareholder and a customer. I care :)

[Cleverboy @ Jan 25th 2008 8:06AM]

It' STILL too positive towards Microsoft.

Sony finally admitted that they got production costs down so that they're charging around the same thing that it's costing them to produce them. I think the ball is still in Microsoft's court. So their entire division is profitable (nebulously speaking)... cool, I guess. Celebrate. Let's see you get the console and mp3 player profitable too. I'd like to think the video game industry isn't a contest of who can lose the most money forever and ever and ever.

Given XBox's tremendous sales, only initially costing $500 in cost to PS3's $800 cost, and... not having a Blu-Ray, cell processors or HD-DVD player inside (thank god), you'd think they'd have already celebrated that milestone. Have they? Meanwhile, Apple and Nintendo produce hardware that makes a profit out of the starting gate. So what you will, but that just impresses me... when companies product a product, mark it up from their cost, and sell it. Suddenly, its about how much a company can afford to LOSE to dominate a market... and not simply how GOOD their device is for customers. The Wii is really showing them up in this regard. Microsoft is doing it again with the Zune... which is fine, but again... it disturbs me AS A CUSTOMER, because if a company decides to simply "dump" their product on the market, irrespective of cost... people WILL buy them, and then the price will be sky-high for newer models. It wouldn't be a lowered cost as an indicator of success, it would be artificial and disruptive. Like HD DVD right now.

The sooner Microsoft and Sony finish optimizing their production into the ongoing path for profit, the better.

[BradVT @ Jan 25th 2008 10:48AM]

@ Cleverboy
So you're angry that microsoft and sony put more advanced hardware in their products, and then charged less for them than the production costs. If anything this would mean that you have more value in a xbox 360 or PS3 because it would take longer for the hardware to be outdated unlike the Wii which started out outdated. (I'm not trying to bash the Wii, I'm just using it as an example)Oh, and I don't like to think that companies make a product and then just mark it up so they can make a profit, I like to think that companies charge a fair price for what they are offering, and if they make a profit or not is up to them.

[Chris @ Jan 25th 2008 11:08AM]

Dave, why would they bitch. People have known XBOX finally made a profit like what, last fall?? It was only *officially* announced to investors on their call.

[Andrew @ Jan 26th 2008 6:40AM]

jetswin?

Dave, you are goung to take that crap from Jetswin? I wouldn't, the last person that accused me of being a crapple user got bitch slapped.

Then again I was talking like one... "I had such an open mind that my brains fell out, now I just do what the cool corporations tell me!"

[Justin @ Jan 27th 2008 1:11AM]

I really don't understand what being a fan of a certain company has to do with what editors at Engadget post.

A story gets posted, people read it, and automatically comments fly up all over the article about so-and-so being a fanboy and this company sucking and this game system is terrible.

What would most of you do if every single company just sorta merged into one giant conglomerate of a company and they sold one game console or one operating system? What would you all find to complain about then?

Engadget, please just start offering up segregated news feeds by companies so we can end this fanboy bullshit.

[CharlieX @ Jan 24th 2008 11:46PM]

Frankly MS beating Sony to the 3rd Gen Premium Console punch will probably pay off... Despite the large % of console failures (I'm on my 3rd myself).

[Microdot @ Jan 25th 2008 3:23AM]

wait a minute... this isnt possible. less than a year ago, microsoft sucked up 1.9 BILLION dollars in loss due to the hardware issues with the 360. that money doesnt just get magically erased, and they DAMN sure havent sold THAT many 360's and games.

so... either thay have slipped this press release through on a technicality (like shifting the debt to another division), or its just blatantly false.

[Jeremy W @ Jan 25th 2008 3:33AM]

"that money doesnt just get magically erased"

Ummm, yeah. It does. The E&D division was never in debt, it was simply running at a loss. Meaning, more money was pumped in than was pumped out. They don't have to pay back all of the money that was pumped in, because it wasn't loaned to them in the first place. Business accounting 101.

[cbhwr @ Jan 25th 2008 4:31AM]

@Microdot:
That expense is probably being recognized over several years, meaning that the impact right now is minimal and MS can go out looking sharp right now.

As for why someone would be on their 3rd XBox 360 and not simply demanded their money back is beyond me.

/G

[SimbaDogg @ Jan 25th 2008 5:33AM]

@charliex
actually, it may not pay off, not now, and especially not in the long run. it looks like sony may be making a profit on their console after about 15-18 months, while its taken MS even almost double that...especially considering that MS hasn't released info on JUST the 360 gaming divison by itself (zune and other products to help keep that division afloat). Sony has had more of an uphill battle, considering they've had less AAA title games, have not been charging for their online gaming (the majority of that money profit), and the highest console price (inflation adjusted) but might start to make a profit in half the time, thats remarkable if you ask me.

@microdot
you are correct

@ jeremy w
you're an idiot. serious, running @ a loss= debt. sure every company in the world looks at 1st quarter-4th quarter profits, and yearly profits/losses. But i dont know of a single company in the world that would say, for example...lose 5 billion their first 5 years, then make 500 mil in year 6, and be extatic about it. Cuz really, they're still 4.5 billion in the red over 6 years. NOW THATS accouting 101. Jesus h christ w/ some of the people here...

@ cbhwr
actually, microsoft did something very tricky, and very smart actually. Instead of writing off the losses for their warranty extension for all the years to come, they simply wrote all of their total estimated warrany losses in that single year. so in that year, they actually lost a fraction of that. The good thing is, for all the forthcoming years, they can go w/out writing off any warranty expenditures until they hit year X (whether it be 4,5,6 etc).

and why some people would be on their THIRD warranty exchange on a product over a period of 2 years w/out switching to the competition...well, some people just like their little white box. nuff said. though i prefer to go w/the lil black box w/ the less than 1% failure rate, or you could go w/ the wiiiii mini white box which also has the less than 1% failure rate. to each their own.

@ Jeff (Below me)
jesus, you actually know how to do math. Please stay on this board and make comments, so many people here do know their asses from a hole in the ground, or what happens when you add a large negative number w/ a small positive one, still negative people.

[SweetSauce @ Jan 31st 2008 11:58AM]

@Microdot--

>"this isnt possible. less than a year ago, microsoft sucked up 1.9 BILLION >dollars in loss due to the hardware issues with the 360. that money doesnt just >get magically erased, and they DAMN sure havent sold THAT many 360's and games."

Microsoft did not lose all of that money at one time. They expected the total losses to be around that number. I don't believe that every 360 died at the same time. Therefore, the loss is spread out over X-amount of time. This would make it alot easier to make that profit that they are so excited about.

[CharlieX @ Jan 25th 2008 12:17PM]

Let me clarify - there's a lot more video game content for 360 than Ps3. I just bought a Ps3 for Blu Ray and was pretty unimpressed by the 20 games titles crammed into a little corner at Best Buy. It seems 360 has so much more traction than Sony in exclusive titles - and most gamers seem to prefer 360 IMO. Sony fanboys do not count.

@cbhwr There's many of us who've gone through multiple 360's (though warranty repair. I certainly didn't buy more than 1). Frustrating.

[SimbaDogg @ Jan 25th 2008 12:57PM]

@CharlieX
Yeah, 360 sure as hell better have more exclusive titles, i mean...they did have a year head start. But i think every gaming magazine and online source has said that in 08, PS3 has...i can't believe i'm going to say this, but "more better" exclusive titles. I've never played them myself, but Final Fantasy and Metal Gear Solid alone are huge. Then there's Gran Turismo 5...which would honestly make me buy a PS3 by itself, consider i bought PS1 and PS2 pretty much just for GT1-4

[Molly C @ Jan 26th 2008 3:56AM]

@Microdot

Microsoft took a 1.06 billion charge on 360 RROD fixes (meaning that they set aside a virtual 1.06 billion dollars for RROD fixes and can't include that 1.06 billion as part of their assets). That charge was made against their 4th quarter 2007 earnings (which was the quarter that ended June 30 2007, as Microsoft starts/ends its fiscal year on June 30 of each calendar year). So that charge has already been dealt with and accounted for and has no effect on Microsoft's 2008 earnings (of which the Entertainment Division has made 500 million profit in the 1st two quarters).

Also, indications are that Microsoft was ultra-conservative with the 1.06 billion charge and that the real cost of RROD fixes may end up being significantly lower than that. If so, then at the end of the period of time that the charge covers, Microsoft gets to bring whatever is left of that 1.06 billion back into their normal assets, which would be pure gravy.

[SirPasta117 @ Jan 24th 2008 11:46PM]

wow, thats mature

[sepirioth @ Jan 24th 2008 11:48PM]

WOOOHOO!! Sorry but I LOVE MS. Nice to know all that money spent finally made them a profit!

[Yor1001 @ Jan 24th 2008 11:48PM]

Good to see they are actually making a profit in their gamming department, but now that the ps3 production cost is around 400 bucks, I wonder whats their overall revenue on the system, Sony have been the marketing the ps3 like there is no tommorow, so I guess thats where all the rest of their profits are going.

[jetswin018 @ Jan 24th 2008 11:49PM]

Wow way to keep up the negativity against microsoft. W

[JD @ Jan 25th 2008 2:23AM]

Yeah, no shit. "almost like a grown-up business"? This is why I constantly almost remove engadget from my google page- I don't like the anti-microsoft thing, and I am driven mad by Ryan's insanely pro-apple posts. See any post by Ryan Block for proof. Consoles are historically a money losing business, I think it's remarkable that such high end hardware as a 360 can turn a profit. Unlike the wii, which is just a die shrink of several years old hardware. Not that it's bad, but it's significantly cheaper to build, without a doubt. Sony's hopeless this generation for profit though, sorry.

[JD @ Jan 25th 2008 2:27AM]

Yeah, no shit. "almost like a grown-up business"? This is why I constantly almost remove engadget from my google page- I don't like the anti-microsoft thing, and I am driven mad by Ryan's insanely pro-apple posts. See any post by Ryan Block for proof. Consoles are historically a money losing business, I think it's remarkable that such high end hardware as a 360 can turn a profit. Unlike the wii, which is just a die shrink of several years old hardware. Not that it's bad, but it's significantly cheaper to build, without a doubt. Sony's hopeless this generation for profit though, sorry.

[JD @ Jan 25th 2008 2:28AM]

Stupid comment system. My bad.

[z3r0D @ Jan 25th 2008 2:56AM]

JD - Go to gizmodo or some other blog.

We don't want your whining.

[Gavin @ Jan 25th 2008 5:40AM]

@ JD

it's sarcasm.

obviously ms is a "grown-up business." nobody's raining on anybody's parade, so chill

[James @ Jan 25th 2008 1:32PM]

@Z3r0D
Gizmodo is even more Mac Pro than Engadget.
Not that I care >.>

[waiownsyou @ Jan 24th 2008 11:51PM]

Good thing all my achievements got erased.

[clak @ Jan 24th 2008 11:55PM]

Yeah, they made 400 million and lost 1.8 billion on the Red Rings of Death and God knows how much more selling the consoles at below production costs. I wouldn't saying they're seeing a profit just yet.

[Andrew @ Jan 24th 2008 11:58PM]

Do you know what "profit" means? That means, even after losses and accounts payable, they have money at the end of the day. That means those billions are factored in. That means they made a profit. Nice try, though.

[Gary Russo @ Jan 25th 2008 12:13AM]

The Xbox business cost MSFT $6 billion. Nice to know that they made $524 million.

They need to earn $5.5 billion more before they can break even.
I'll assume it'll take 3 more years to recoup all costs.

[Mark @ Jan 25th 2008 12:46AM]

@ Gary

... did you not grasp the term "profit"? That means they have already made back the 6 billion (assuming the figure you provided is correct) and have made an additional 500 million.

[Jeff @ Jan 25th 2008 1:08AM]

Andrew and Mark:

I don't think you quite understand how these quarterly reports work. No, the $6 billion is not "factored in" to them. These are reports going forward, not backward. Go read them if you like - they're available for free at Yahoo Finance, or if you have a brokerage account somewhere.

They're also, as the title suggests, quarterly reports, meaning they're only looking at a single quarter. They are not cumulative.

It's amazing to me, though I guess not surprising, that both of your posts are "highest ranked" when they're really nothing but incorrect information.

Microsoft does need to make approximately $5.5 billion before the entertainment division (which also includes the Zune) turns a profit. It's simple math. None of the cumulative numbers are "factored in" to any of these quarterly reports.

[Chuz @ Jan 25th 2008 8:18AM]

@ Jeff

What you are saying is true about profts and loss, but only if Microsoft's Ents. Division was a different company. Microsoft as a homogenous entity absorbed the losses generated by both the Xbox and later the Ents. Divisions - Microsoft as a whole posted profts year on year ever since the original Xbox was released.

Therefore, even though that particular division operated on a loss, the company as a whole operated on a profit - in effect the circa $6 billion sunk into the various brands (Xbox, 360 and guessing Zune, etc) has already been paid for by other divisions (over-simplifying, I know, as lots of other things will happen to ease the burden and maximise cash-flow, etc, etc), so now that the division is also making a profit, it's just pouring even more money onto the cash pile.

[TJ Johnson @ Jan 25th 2008 12:06PM]

Jeff would be right if the Ent. Division was separate or not. If I interpretted your post correctly, you haven't made an opposing claim with this comment thus deeming the first part of it, pointless.

[IndiaTech @ Jan 24th 2008 11:57PM]

Hey Microsoft. Sony here. How is it going with HD-DVD?

[Andrew @ Jan 25th 2008 12:00AM]

Awwwww snap.

Yo dawg, Microsoftizzle hurr. You didn't [i]get the memo[/i]? I put all my eggs into the digital downloads basket. Just to keep you updated, that's going pretttttayyyy prettayyyyy prettayyyyyyyy pretty good.

[Andrew @ Jan 25th 2008 12:01AM]

Awwwww snap.

Yo dawg, Microsoftizzle hurr. You didn't [i]get the memo[/i]? I put all my eggs into the digital downloads basket. Just to keep you updated, that's going pretttttayyyy prettayyyyy prettayyyyyyyy pretty good.

[Derek B @ Jan 25th 2008 12:02AM]

El Oh El

[Andrew @ Jan 25th 2008 12:01AM]

I double posted. That really ruins the joke. :(

[jetswin018 @ Jan 25th 2008 12:03AM]

Hey Sony, Microsoft here. Hows it going with making a profit?

[Jack Storm @ Jan 25th 2008 12:17AM]

Hey IndiaTech, Jack here, wtf does hd-dvd have to do with my 360?

p.s.
I

[BobTurbo @ Jan 25th 2008 12:48AM]

Hello, this is McDonalds; would you like fries with that?

[DeoWulf @ Jan 25th 2008 3:29PM]

Lol BobTurbo.

And, yeah, Sony shouldn't be talking until they turn a profit.

[DeoWulf @ Jan 25th 2008 3:33PM]

Which reminds me...

"Hello Microsoft, Nintendo here. Welcome to the profit club. You're a little late, was there traffic? There's Wii Sports in the other room. How about some hours devours? Sony hasn't showed up yet, but he's bringing some nice movies."

[computer.dude.28 @ Jan 25th 2008 12:05AM]

"how's it looking on your end, Sony?"
had to laugh :D

[ethana2 @ Jan 25th 2008 3:27AM]

With the only machine that can blend? Pretty good.

The Wii will become worth something very soon once a distro is formulated for it.
The 360 is a lost cause-- except for making money I guess. Some people say that's what matters... I disagree. Praise the Lord and pass the soldering iron!

[Das @ Jan 25th 2008 12:10AM]

I wonder what kind of money (or losses) Microsoft is getting from the zune, since I bought a Zune 80 and I'm extremely pleased with it. The only downside is I'm afraid it's turning me into the Microsoft equivalent of those Apple douchebags who say they use Apple products because they're "just better"