Xbox Hemorrhaging Money

A Yahoo news post reports that Microsoft's financial woes over the Xbox have doubled.  Increasingly determined to maintain their stranglehold on second place in the console war (if I may further abuse a tired and cliche gaming metaphor) Microsoft appears to be heading in the wrong fiscal direction.  The price for beating Nintendo, a regularly profitable corporation, has jumped from a $180 million loss to $348 million last quarter.

Read more for the details, and maybe a little ill informed commentary as to why this news is exactly what Microsoft wants to hear.

Thanks to Eric for the link!

Yahoo reports:

Microsoft's Home and Entertainment segment, which includes the Xbox, games for personal computers and the company's TV products, posted an operating loss of $348 million in the quarter on revenue of $1.28 billion. A year earlier it had revenue of $833 million and a loss of $180 million.

The company loses money on each Xbox it sells, with some analysts pegging the shortfall at more than $100 per $199 console, meaning that strong sales for the platform actually increase its losses

So what does this otherwise dire sounding news say?  Well, probably nothing Microsoft didn't already know.  As the article suggests, high sales for Microsoft actually equals a large fiscal loss over the quarter, so, surprisingly, this doubled loss may actually be good news.  The corporation which has given every indication of being in the console business for the long haul, has demonstrated their willingness to post a loss in order to increase long term market share and installed base.  Thus, a few hundred million dollars now means more Xboxes in more homes, and more revenue later off software. 

For now, comparing Microsoft and Nintendo, as just about everyone manages to do, is an exercise in futility.  Nintendo is clearly dedicated to producing a efficient and profitable machine, while Microsoft is willing to take a gamble for the bigger piece of the pie later on.  When it's all said and done, the likelihood is that Gates' Gamble will pay off - as it always seems to do - while Nintendo continues their investor pleasing ways of maitaining a steady line in the black.  And then above them all, from its palatial space palace, Sony laughs.

- Elysium


A lot of fanboys seem very keen on attacking Microsoft on their alledged losses over the Xbox only to forget that investments by smart companies tend to pay off later. Excellent commentary Elysium, this is exactly what I always try to make clear to the ill-informed and ignorant.

All bias aside, XBOX is an excellent piece of hardware. What is keeping me from hemorrhaging money in an XBOX investment is the limited selection of software. My stack of Gamecube games grows a bit every month, (as I wait with baited breath for Zelda and Ikaruga), and I look over the Xbox and think, "If only the X was $100 less I would buy this for Panzer Dragoon Orta and the promise of Halo 2."

As is, I would buy a PS2 over an XBOX, mainly for Devil May Cry 2, Contra, Ratchett and Clank, Suikoden 3, etc. Maybe if it were legal to turn the box into a Linux machine.....