Support NeoGAF

[Vorg]

Here's a breakdown to how little the Xbox contributes to their overall revenue:

The entertainment division is more or less half of most of their other markets. And that includes many things other than the Xbox (such as the Zune).

Huh? Either I'm looking at that wrong (likely!) or the entertainment division seems to be making them a few billion a year?

 

[Fredescu]

Huh? Either I'm looking at that wrong (likely!) or the entertainment division seems to be making them a few billion a year?

I'm not sure which way you're reading it, but the top figures are before expenses, and the bottom figures are after expenses. The bottom figures are more accurately what they're "making", and those are six month figures. $686 operating income (income before taking taxes and interest into account) for the latter half of '09. That's less than "a few billion a year". Yes, they're bringing in a lot more than that in revenue, but that revenue is costing them a shit tonne, especially in comparison to their other divisions.

 

[Vorg]

I'm not sure which way you're reading it, but the top figures are before expenses, and the bottom figures are after expenses. The bottom figures are more accurately what they're "making", and those are six month figures. $686 operating income (income before taking taxes and interest into account) for the latter half of '09. That's less than "a few billion a year". Yes, they're bringing in a lot more than that in revenue, but that revenue is costing them a shit tonne, especially in comparison to their other divisions.

Oooooh, okay. Now I get it.

 

[harSon]

Why would Microsoft pour hundreds of millions of dollars into developing and releasing Xbox Kinect if they had plans to exit the industry? The venture in itself is proof of their commitment to the Xbox brand.

 

[hatchx]

Why would Microsoft pour hundreds of millions of dollars into developing and releasing Xbox Kinect if they had plans to exit the industry? The venture in itself is proof of their commitment to the Xbox brand.

What happens if Kinect tanks?

 

[Nuclear Muffin]

Also another thing to consider with Opportunity Cost is whether or not those resources (in this case their game studios and network/software/firmware programmers) would be compatible with other markets.

Can MS Game Studios and their Xbox Live/360 firmware divisions be transplanted into other divisions? If not, then getting rid of them and closing the xbox division is just cutting off a source of revenue.

 

[unomas]

It makes no sense for Microsoft to exit the console industry at this time, but I'm sure Nintendo and especially Sony would be ecstatic if they did. Sorry fellas, not gonna happen, they're just starting to get the ball rolling in the right direction as a company with the Xbox brand.

 

[JaxJag]

There just seems to be a lot of wishful thinking in this thread.

 

[Beer Monkey]

They haven't even killed the Zune (which is factored into the expenses in that division). MS would bail out of music players, phones, everything else in that division before dropping Xbox.

 

[elrechazado]

What happens if Kinect tanks?

Has nothing to do with his point. You don't invest heavily in an industry you plan to leave. Obviously if that investment ends up not paying off, you may change your plans, but you don' tmake that investment if you don't plan for it to pay off.

 

[EagleEyes]

There just seems to be a lot of wishful thinking in this thread.

Exactly. One poster mentions Microsoft and its inverstors and gaf runs with it. Too funny.

 

[Puddles]

It makes no sense for Microsoft to exit the console industry at this time, but I'm sure Nintendo and especially Sony would be ecstatic if they did. Sorry fellas, not gonna happen, they're just starting to get the ball rolling in the right direction as a company with the Xbox brand.

Getting murdered in the exclusives realm is getting the ball rolling in the right direction?

The Xbox is the only one of the three major systems I own right now, but they're pissing me off to no end. Sony announces exclusive after exclusive, and it seems like Microsoft is content to play off the fact that they have the best versions of every multiplatform game (especially the multiplayer multiplatform games).

I don't buy that many games, and the ones I'd actually buy always come out on the 360, so it's not a deal-breaker for me, but goddamn, they're not even trying anymore compared to Sony.

 

[EagleEyes]

Getting murdered in the exclusives realm is getting the ball rolling in the right direction?

The Xbox is the only one of the three major systems I own right now, but they're pissing me off to no end. Sony announces exclusive after exclusive, and it seems like Microsoft is content to play off the fact that they have the best versions of every multiplatform game (especially the multiplayer multiplatform games).

I don't buy that many games, and the ones I'd actually buy always come out on the 360, so it's not a deal-breaker for me, but goddamn, they're not even trying anymore compared to Sony.

If you look at retail sure there are less exclusives than Sony. But it is pretty evident by now that Microsoft is placing a very big emphasis on XBLA exclusives. Just in the last few months we have gotten Limbo, Hydro Thunder Hurricane, Castlevania and Monday Night Combat. All exclusives you won't find on the PS3 with more to come like Hydrophobia, Comic Jumper, Pinball FX 2 and Super Meat Boy( not if this one is coming to PSN). Plenty of exclusives if you ask me considering Sony's PSN effort this year has been pathetic to say the least after a good 2009.

 

[Azih]

Microsoft is worried about a future where Windows is no longer needed (everything through browser baby), they aren't going to cut off one of the few businesses where they have actually managed to successfully diversify

 

[Puddles]

Yeah, that is pretty cool. And to me, Halo Reach is worth any number of exclusives on the other systems (especially since my other favorite series, Zelda, has gone to shit). Still, it's very disheartening to see the maker of the console I own basically shutting down its 1st/2nd party development and not even giving a shit about securing 3rd party exclusives.

It's fine now, but when the next batch of consoles rolls around, I don't see any reason to pick the Xbox brand over the Playstation brand considering that Sony is the only one of the three who seems to give a shit.

 

[charlequin]

Has nothing to do with his point. You don't invest heavily in an industry you plan to leave. Obviously if that investment ends up not paying off, you may change your plans, but you don' tmake that investment if you don't plan for it to pay off.

Literally 100% of the discussion about this from posters who aren't saying either "hurr hurr M$ suxxxx" or "hurr hurr Xbox haters gonna hate!!!" is premised not on whether Microsoft intends to stay in the console business (they do) or whether they intend Kinect to be a success (they do), but on what their reaction to failure would be.

Getting murdered in the exclusives realm is getting the ball rolling in the right direction?

The number of still-upcoming retail exclusives from third-parties for either system is minuscule to the point of almost complete irrelevance at this point.

 

[RSTEIN]

Has nothing to do with his point. You don't invest heavily in an industry you plan to leave. Obviously if that investment ends up not paying off, you may change your plans, but you don' tmake that investment if you don't plan for it to pay off.

Off topic, but now everytime I read obviously my mind fills in there's a rapist in Lincoln Park thanks to that stupid video/song :lol

 

[Vinci]

Literally 100% of the discussion about this from posters who aren't saying either "hurr hurr M$ suxxxx" or "hurr hurr Xbox haters gonna hate!!!" is premised not on whether Microsoft intends to stay in the console business (they do) or whether they intend Kinect to be a success (they do), but on what their reaction to failure would be.

I'm predicting that people read this and miss your point entirely. Which is damned depressing.

 

[Mariah Carey]

While it seems strange that this Microsoft talk is hapening in this particular thread (I remember getting eyerolls when I tried bringing it up here a few years ago), it's not like it isn't a relevant or worthwhile discussion to have. It's no secret Microsoft entered the games space because of Sony, and now that the thread Sony posed has been neutralized it's reasonable to question whether they ought to stay in a business as tough and unpredictable as console videogames.

Why would Microsoft pour hundreds of millions of dollars into developing and releasing Xbox Kinect if they had plans to exit the industry? The venture in itself is proof of their commitment to the Xbox brand.

All the Kinect and "this generation will last 5 more years!" stuff coming from Microsoft lately actually strikes me as the guys in charge of the XBox trying to convince and reassure Microsoft investors that it's worth keeping around.

 

[Lonely1]

Has nothing to do with his point. You don't invest heavily in an industry you plan to leave. Obviously if that investment ends up not paying off, you may change your plans, but you don' tmake that investment if you don't plan for it to pay off.

I can't predict MS. They did spent millions in the Kin...

 

[kame-sennin]

While it seems strange that this Microsoft talk is hapening in this particular thread (I remember getting eyerolls when I tried bringing it up here a few years ago), it's not like it isn't a relevant or worthwhile discussion to have. It's no secret Microsoft entered the games space because of Sony, and now that the thread Sony posed has been neutralized it's reasonable to question whether they ought to stay in a business as tough and unpredictable as console videogames.

A few years ago, I would have been with you on this. But I think from an investor perspective (i.e. the people who would be calling for a shutdown of the entertainment division), the Windows division is in hostile territory and new growth has to be created somewhere. As successful as Windows is, new threats are constantly popping up from multiple directions. Even if the major shareholders wanted to kill the Xbox, MS would then be faced with creating a new division which would be riskier than trying to make the already established entertainment brands work. I just don't see MS cutting off any - even moderately successful - potential growth business right now.

All the Kinect and "this generation will last 5 more years!" stuff coming from Microsoft lately actually strikes me as the guys in charge of the XBox trying to convince and reassure Microsoft investors that it's worth keeping around.

Yea, PR doesn't mean anything, but investments don't lie. You can always determine the focus of an organization based on where they're spending their money. Based on how much they've spent on kinect, it's clear that they want to double down on the Xbox brand.

 

[charlequin]

I just don't see MS cutting off any - even moderately successful - potential growth business right now.

Right, which is why as long as Xbox is even moderately profitable it'll remain safe -- the sunk costs are sunk and killing it now won't bring them back.

 

[segarr]

Xbox isn't going anywhere, It's making dough and gives MS a "cool" factor. Investors must love it. How can this discussion even be going on is beyond me. Do people want Sony to have a monopoly on the HD market?

 

[antonz]

Xbox isn't going anywhere, It's making dough and gives MS a "cool" factor. Investors must love it. How can this discussion even be going on is beyond me. Do people want Sony to have a monopoly on the HD market?

I think making money is a relative term. If the Xbox division makes a 10 million dollar profit for the year but lost 5 billion the previous 8 years thats not going to make stockbrokers happy.

This discussion has nothing to do with enjoying games or not but everything to do with business. Microsoft execs are praying to god that they can milk another 5 years out of the 360 with Kinect otherwise they will very likely face very angry stockholders.

 

[segarr]

Smart, long-term investors kept stock or bought stock in it though when it was losing money in hopes of a rebound and that's exactly what happened. They couldn't be happier with this division right now.

On Kinect, I don't buy the "5 year plan" thing. MS will drop it faster than the Kin social phone if it under-performs but the Xbox brand will live on. It's proven.

 

[Curufinwe]

Right, which is why as long as Xbox is even moderately profitable it'll remain safe

You're assuming that investors will be always be happy with MS making sub-optimal profits by pouring resources into a division that's far less than lucrative than their other businesses.

 

[dolemite]

I think making money is a relative term. If the Xbox division makes a 10 million dollar profit for the year but lost 5 billion the previous 8 years thats not going to make stockbrokers happy.

This discussion has nothing to do with enjoying games or not but everything to do with business. Microsoft execs are praying to god that they can milk another 5 years out of the 360 with Kinect otherwise they will very likely face very angry stockholders.

If MSFT is praying with the relatively stable income from the Xbox division, I'm wondering what Sony execs are up to? Human sacrifice?

 

[WillyFive]

Microsoft should do very well in September. It's an onslaught of marketing where I live.

 

[segarr]

You're assuming that investors will be always be happy with MS making sub-optimal profits by pouring resources into a division that's far less than lucrative than their other businesses.

Windows, Office, Server, and then what? Xbox really. Their "sub-optimal" profits on that are a hell of a lot better than every thing else under Ballmer's MS.

 

[charlequin]

You're assuming that investors will be always be happy with MS making sub-optimal profits by pouring resources into a division that's far less than lucrative than their other businesses.

In the short term, they will because there aren't necessarily other great options to reinvest that money now. By the same token that the huge losses up 'til now aren't a good reason to stay in the business, they're also not a pressing reason to get out -- that's all the past now -- so killing the division requires a better use for those resources to be readily apparent. That's not going to happen mid-generation and I don't think it's tremendously likely to happen at the next generation changeover if the 360 has remained steadily profitable for several years and there's a good business plan for how to launch the successor without being a money pit.

Basically, if the Xbox business can become reliably self-sustaining, it's better off left alone as a project that consistently generates a net profit and ties into other broader company initiatives (Live, etc.) or spun off altogether. But the operative word, as always, is that "if."

 

[kame-sennin]

You're assuming that investors will be always be happy with MS making sub-optimal profits by pouring resources into a division that's far less than lucrative than their other businesses.

I think you're missing the point. Microsoft lives and dies on the Windows brand. If something happens to Windows, the whole company will collapse. Right now, the priority is to spread the risk and find new avenues for growth. They can't risk having all their eggs in the Windows basket because the desktop OS market might not be around forever. That means that they can't give up on the entertainment division, or any other division that is gaining traction, because they desperately need to build new businesses.

 

[jedimike]

That's the thing, neither of those are true. ESPECIALLY the latter.

Except those who observe the electronics market and see who buys what and for what reason. What you do with your Xbox 360 is completely irrelevant. Using it as a netflix, video streaming, and gaming box matters no more than my older sister who uses her Wii as one. Looking at the people who buy a 360 and what they use it for it's clearly obvious that Microsoft has not in any way imaginable captured the mass market to use it has a media hub. If there's anything that's a convergence device it's smart phones and iDevices.

Microsoft went into the gaming market because they wanted to eventually capture the mainstream market with a device that not only plays video games, but music and movies as well. Yet in recent years it's become more and more increasingly obvious that they bet on the wrong horse. Apple devices are already marching near what Microsoft originally envisioned with Andrioid smart phones not too far behind, while the Xbox's current situation isn't that much more successful to where the Playstation 2 was as a convergence device 8 years ago. And with the iPad they are in dire danger because not only is it that much more of a thread to their "progress" in the convergence market, but also to their primary market (operating system/severs *combined because they go hand in hand*) as well.

I know you've put a lot of effort into this thread but I don't think you understand MS's strategy. The ipad has nothing to do with the Xbox.

3 screens and a cloud...

The Xbox is MS's main product to occupy the living room screen. The goal of MS is to have consumers using MS products (xbox, media center, zune) on their TV screens. The competitors for this screen are Roku, TiVo, AppleTV, cable box, etc. - NOT iPad or android. The xbox is certainly doing a good job of accomplishing this goal for MS. The investors see progress and want more which is why you have products like Kinect to pursuade customers to buy more MS products for their TV.

The screen you are talking about is the mobile screen. This is where MS competes with android, ipad, etc. MS would never kill Xbox to compete in this market. It makes no sense... especially when they have close to $40B sitting in the bank.

 

[charlequin]

3 screens and a cloud...

Stop saying that. It's just corporate nonsense and it makes you sound like you're from Microsoft PR.

The ideal you're describing makes very little sense sense and has no relationship to actual conditions on the ground. It's a slogan to talk up the divisions Microsoft has to investors and convince them that they're all important, not some grand strategy or serious reflection on the way that Microsoft's divisions are actually operating. The actual concerns facing Microsoft have very little to do with this idea and the fact that they have tons of cash lying around definitely doesn't.