The Xbox 360 is the leader of the home console market at the
moment. Its year head-start has given it the largest user base along with the
greatest number of quality titles. Despite all that, however, the Xbox 360 is a
financial loser for Microsoft, which lost $315 million
USD from its Entertainment end Devices Division in the third fiscal
quarter.
Microsoft is in the gaming business for the long-haul. The company’s
deep pockets allow it to sit in the trenches, weathering the storm until the
tides turn – and according to Robbie Back, president of Microsoft's
Entertainment and Devices Division, those days may be coming in 2008.
“It's a business that will be profitable next year—we'll
make money next year and that will be the first time, which is pretty
exciting,” said Bach in an eWeek interview. “And then the next two or three years are the
place where you need to make tracks, and the next two or three years are where
you have to make money.”
Bach details that the Xbox hardware itself is something that
may never end up being profitable, though accessories such as controllers and
other peripherals usually do bring in some money. A major source of revenue is
from its own games divisions and royalties from other publishers. The last
piece to the Xbox profit model is the Live service, which is now six million
subscribers strong.
“The pieces are in place to drive the proverbial billion
dollars. Specific date—oh, that's going to depend on what happens in pricing,
which partly we control, partly we don't,” Bach explained when asked about
turning a profit. “You know what happens in component costs—mostly we have
pretty good influence over that, but there are places where we don't. Pricing
on memory goes up and down seemingly like a yo-yo, so [we have to manage]
through that.”
“Right now we're doing a pretty good job. We're humming
pretty well in the business,” added Bach. “Our costs are a little higher than
we'd like, [but] we're pushing those down; there are good initiatives underway
to drive that.”