Each Xbox360 = Microsoft -$130?

[Citizen Philip]

As written (http://games.slashdot.org/games/05/11/23/1549209.shtml?tid=211) on Slashdot: (http://www.slashdot.org/)

BusinessWeek has taken a look at the insides of the XBox 360 and with the a little help from market researcher iSuppli determined that Microsoft is continuing its tradition to taking a big loss on the console in hopes of making a profit on games. From the article: "An up-close look at the components and other materials used in the high-end version of the Xbox 360, which contains a hard drive, found that the materials inside the unit cost Microsoft $470 before assembly. The console sells at retail for $399, meaning a loss of $71 per unit -- and that is just the start. Other items packaged with the console -- including the power supply, cables, and controllers -- add another $55 to Microsoft's cost, pushing the loss per unit to $126.
The original BusinessWeek (http://businessweek.com/) article (http://businessweek.com/technology/content/nov2005/tc20051122_410710.htm).

Oh em gee? Naw! They did this with Xbox too!

[*Legion*]

Welcome to console sales 101.

It's going to be an even bigger loss per unit with the PS3, if they intend to price it competitively with the Xbox 360.

And yet, both companies are lining up to push their entries in the market. Wonder why? (Hint: there's a lot of money in it beyond just pushing hardware)

[Donut11]

Gee, I don't know if, given their financial performance this year (http://www.microsoft.com/presspass/insidefacts_ms.mspx#EEMAC), they can afford these losses.

Jeesh.

[Reanimated]

Forbes had a different estimate that shows MS almost breaking even.

In any event, they're ESTIMATES. Only MS knows what the TRUE cost is.

[baz]

Yeah, they are a freaking amazingly well perfoming company, but if the 360 loses as much money as the xbox, they might have to rethink a third iteration.

They probably have it sorted though, if anyone know how to make money, its MS.

[automaton]

I don't think it is a suprise that MS is losing money on 360, we all expect that. The news here is exactly how much they are losing. No suprise as it was projected they lost around that much on the first XBox.

However, you can't say that Sony will lose more than that on every PS3. We have NO IDEA how much Sony is going to sell the thing for. They are still in the process of dropping features which I expect will go on for the next 3 to 6 months. So, to that end, we don't even know what parts will go in the PS3 much less how much they are going to cost.

[Cubfan]

Hmm, everything I had read up to this point speculated that Microsoft was either breaking even, or taking a much smaller loss than that. Time to get ol' Bill on the horn and get this thing straightened out.

[Murmillo]

Any event, is seems like MS is loosing less money per 360 then they were on the xbox. Which means they should make money or at least break even in 2-3 years. Something they could never do with the xbox. Even today a sale of an xbox means a loss of money (to its better to sell one then not sell one at all)

[Heretic Machine]

I saw an analyst who said they profited $50 on every 360 sold. So in conclusion, this article means jack-shit.

[XenonCJ]

Of course they make this money right back if people start buying 2nd controllers, XBox Live, "custom" faceplates, and/or other junk.... And I assure you... LOTS of people will buy that stuff.

[Citizen Philip]

I found the article, thought it was interesting: specifically because I wanted to see who would get their undies in a bunch!

I caught you!

Who cares if they are selling at profit, Microsoft could bankroll a trip to Mars if they wanted. Bank roll a trip out of cash reserves, not selling assets.

[Loganrapp]

I'm not sure if there's a console that was ever sold at a profit on its first run, or second, for that matter. So I don't see how this should even be news.

[Taco]

I don't think it's possible to do these kind of studies, who knows what kind of deals MS gets on these parts. FUD.

[XxSATANxX]

Holy Fuck I'm guessing that you can just make up any shit you want and it's a story over at Bizweak. Me thinks it serves the master to talk about loss

[Zanzibar]

Of course they make this money right back if people start buying 2nd controllers, XBox Live, "custom" faceplates, and/or other junk.... And I assure you... LOTS of people will buy that stuff.

Yay!!! We have a winner!

Hell, each freakin' GAME includes $8-$10 per unit going directly to MS, and I'm sure half of that is profit.

[Borys]

Nothing will stop MS, not even another $4B in the red.

[Citizen Philip]

Here's another article from bizweek:

http://www.next-gen.biz/index.php?option=com_content&task=view&id=1497&Itemid=2

They are making money, too?

[CrysDark]

I'm not sure if there's a console that was ever sold at a profit on its first run, or second, for that matter. So I don't see how this should even be news.

Nintendo has made money on every console they sell. It is rumored they have over One Billion dollars in Cash reserves.

[RMan]

I think for MS especially it's much more about eventually being the standard set-top media center, and beyond that the brain of future “smart homes”, which is ultimately way more important than who has the most successful game console.

[automaton]

Nintendo has made money on every console they sell. It is rumored they have over One Billion dollars in Cash reserves.

Nintendo is a publicly held company. You don't have to rely on rumors to know how much Nintendo has in cash reserves. All you have to do is read their financial statement. This article (http://biz.gamedaily.com/features.asp?article_id=9698&filter=) says they have $5.17 billion tucked away.

[Achilles]

Analysts are awesome, almost as good as slashdot commenting on a Microsoft product. I’m sure anyone here could call around to some manufacturers, get some inaccurate prices for equivalent parts, and put a number like this together. Best part is that a lot of these people, speaking of the PS3 vs 360 cost comparison a few weeks ago, don’t even get the parts right that the system is coming with.

That being said MS probably is losing money currently on the 360 as that is the model that everyone but Nintendo follows these days. They make it up on accessories (memory cards) and games for which they charge fabrication fees to the publishers. They then cost reduce the hardware and after 2 years are making a profit on it until they eventually price it down to $100 in 4 years at which point they’re breaking even and trying to grow their base for the next system that comes out. That didn’t work with the Xbox because the hard drive and other components couldn’t be cost reduced, now they own the rights to make everything and the hard drive is considered a premium so they’ll be able to.

The idea behind hardware for both MS and Sony is to break even on the console itself over its lifetime and make money everywhere else.

[TrackZero]

I don't think it is a suprise that MS is losing money on 360, we all expect that. The news here is exactly how much they are losing. No suprise as it was projected they lost around that much on the first XBox.

However, you can't say that Sony will lose more than that on every PS3. We have NO IDEA how much Sony is going to sell the thing for. They are still in the process of dropping features which I expect will go on for the next 3 to 6 months. So, to that end, we don't even know what parts will go in the PS3 much less how much they are going to cost.

Well, it's really a game of chicken is what we're all talking about.

We know the PS3 is going to be costly to make (and that was before the story this week about their yields on cell processors being vastly lower than it should, upping the price per processor) and Sony has admitted as such.

So they either have to price it low to compete (which will cost them an arm and a leg, as the hardware will be expensive than the 360) or alternatively they price it too high and it doesn't sell. Depending on how much it does end up costing them per unit, there may not even be a "sweet spot" to price it at, and it may just end up costing them everything they have to get market share.

[mister_slim]

I doubt MS is losing that much. That said, iSuppli are rather more reliable than Merrill-Lynch.

[bapenguin]

The difference for MS between this gen and last is MS owns the IP on all components of the XBox, and over time the cost will work its way down quite well with no licensing fees.

[Paltry]

chances are ms has some slick slimy scheme that keeps the cost down lower than any of us think