Xbox One to Break-Even or Make Profit on Each Sale from Launch
September 6, 2013 9:14 AM
comment(s) - last by
Microsoft's Yusuf Mehdi
The Xbox 360 will also get another three years of support
A Microsoft executive said that each sale of the upcoming Xbox One console will break-even or be sold at profit from
its launch date
According to Microsoft's Yusuf Mehdi, the company plans to make money on selling games for the console and the Xbox Live subscription (which, he noted, has grown to 48 million members now).
"The strategy will continue which is that we're looking to be break even or low margin at worst on [Xbox One]," said Mehdi. "And then make money selling additional games, the Xbox Live service and other capabilities on top. And as we can cost-reduce our box as we've done with 360, we'll do that to continue to price reduce and get even more competitive with our offering."
Mehdi, who spoke at the Citi Global Technology Conference this week, also said that Microsoft plans to support the Xbox 360 for another three years. The company plans to release over another 100 games for the console.
"You've seen us over the years constantly be focused on profitability and improving year over year," said Mehdi. "There are different points in the cycle when you invest in new hardware. If you look at 360, that platform lasted for seven to eight years and it's going to go for another three years. It's incredibly profitable now in the tail.
"Some of these things take some time in the launch year in which you invest, and then they they play out over time. We're going to continue to invest in Xbox 360, and the two devices can work in concert. So it's not like the day we ship Xbox One your 360 won't work. We'll continue to support it."
Microsoft recently announced that the Xbox One will officially launch November 22
in 13 markets
, including Australia, Austria, Brazil, Canada, France, Germany, Ireland, Italy, Mexico, New Zealand, Spain, UK, and USA. It will make its way to other markets in 2014.
Games Industry International
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RE: PS4 definitely taking a hit (from Sony's perspective)
9/6/2013 11:26:49 AM
You're just saying things here. You don't know their cost structure. Besides this is just marketing speak. We don't even know if it's true.
For example, he's saying that the Xbox is incredibly profitable now, but reality denies that. According to their last financial statement, the Entertainment and Small devices Division lost $250 million. That division includes the old Entertainment Division which had been steadily losing a couple of hundred million a quarter, on average, since the first Xbox came out, and includes income from movies, Tv shows, music and Xbox Live. Then they merged that with the highly profitable Small devices Division, which had been making over $200 million a quarter in profits for years (keyboards, mice, trackpads, cables, etc.).
But the combined division has made losses almost every quarter since the merger, which should tell us something about how the Xbox and content areas are really doing—really badly.
So when he comes on and says that it's doing incredibly well in profitability, we need to be skeptics about it. And if we are about that, then we also need to be skeptics about the Xbox One being profitable out the gate as well.
Remember that Microsoft is portraying this more as an entertainment center than a gaming device right now, and despite after all the years of doing that they are still in the single digits in every one of those content areas.
RE: PS4 definitely taking a hit (from Sony's perspective)
9/6/2013 12:38:57 PM
Assuming that MS's small device division is making the same profits as it did many years ago despite the vast competition of low price accessories nowadays is silly.
They've added short term money losers like Surface and Windows Phone. They've been paying for XBox One R&D.
It's complete nonsense to ascribe E&S losses to XBox 360.
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