So what's Microsoft really losing on the Xbox 360?

We don't really know for sure — we haven't had a chance to sift through all of J. Allard's emails to Bill yet — but iSuppli estimates that a Premium Xbox 360 sets Microsoft back $470 (-$71), not including the packaging, power supply, cables, and accessories estimated at $55 (-$126) or the somewhat more inestimable costs of research & development, marketing, cost of business, etc. (-$???) The moral of the story? Be a sweetheart and buy loads of games for your 360 or you'll make Microsoft cry and there won't be an Xbox 720, mkay?

[Via Joystiq]

[Pete @ Dec 19th 2005 12:55AM]

Microsoft will make for the losses with gains in other ventures. Establish market share and raise prices as game titles develop.

[Nick @ Dec 19th 2005 12:55AM]

I am a Microsoft fanboy and would gladly bend over and take it up the ass from them anyday. It's just so nice to see they care about me by taking a loss. I must go buy one and then buy lots of games for it. Games made by Microsoft. ;)

[Neester @ Dec 19th 2005 12:55AM]

Aww well.
I wonder if sony are in the same boat with the PSP.
It's a ball of technology and is only $400 AU...
Dirt cheap for what it can do... all the R&D that went into it too.

[JT @ Dec 19th 2005 12:55AM]

I don't care if they take a loss or not. I'll never buy a gaming machine from Microsoft, let alone games. Until I can afford a Mac, Microsoft will continue to rule my PC and that's more than I'd like as it is. Sony will always be my platform of choice.

[nate @ Dec 19th 2005 12:55AM]

not a fanboy im gonna get a ps3 to but i bought 5 games with my 360 :) bout to get doa4 and kameo too so microsoft send me a card

[Marty B @ Dec 19th 2005 12:55AM]

good news they already are and have been for years!

[Cooper @ Dec 19th 2005 12:55AM]

Sony is in a worse position. They're not as flush with cash as Microsoft and they have a lot more on the line. Their components are easily the most expensive of all next generation consoles, so depending on what cost they pass to the end consumer, they stand to lose a lot of money in the first couple of years of the PS3's release.

Oddly, Microsoft and Sony are polar opposites when it comes to gross profits. Sony's gaming division is the only profitable division, supporting the entire company, and Microsoft is profitable in all divisions but gaming, and the rest of the company is supporting the gaming division. Hmmm...

The PS3 could literally hurt Sony if unsuccessful.

[Roaming Abercrombie @ Dec 19th 2005 12:55AM]

... Playstation Three

It doesnt matter that Microsoft is taking a loss...they are making DESPERATE attempts @ market domination...they will fail, due to the fact that their hardware does not support blu-ray and also their software will not be comparable to the PS3's lineup... mebbe Halo 3 but... it wont compensate for all the other good titles PS3 will have.

*If square enix does want to be a douche and support microsoft then Xbox might be able to win this generation... even then its highly doubted*

also think of the crappy hardware they have... with the errors ... HA Micorsoft sucks...

loss my ass

[Brian @ Dec 19th 2005 12:55AM]

haha i bought a (microsoft) game with no system, they are making money off of me! lol dont know wethere to be happy or sad about that.

[fogd00d @ Dec 19th 2005 12:55AM]

#1 "Pete" -- uh, good theory, Pete. "...raise prices as game titles develop." The London School of Economics called and they want your degree back. In the face of competition (Sony) what exactly would raising prices do to Microsoft's market share? There you go. The hat goes ON the head.

#4 "JT" -- "never" and "always" and "until I can afford" sound like fanboy talk. I never said I'd never buy a Mac. I said I'd buy a Mac when Apple had a real operating system. Now I've got a Mac and a few PCs. This irrational polarity and brand loyalty is amusing, but I suppose when one's pre-teen identity hinges on having the same platform as their friends, you don't risk thinking for yourself. If the PS3 has compelling games, I'll end up with one. Most of the loudest voices in the "console wars" aren't even qualified to compare the two technically, so all thats left is how pretty the box is and what games play on it.

Can people write anything more interesting about the console market other than merely cast their lame vote as to whether or not they'll buy one or the other?

Vive le PS3 and the 360. Competition is good. Quality is driven up, prices driven down. (taking notes Pete#1?)

Give up the treehousey little boy's club mentality. You are not your gear. You are not the labels you're wearing. But when you're 14 and terrified about not fitting in, you don't tend to think straight like that, you want things in black and white, what's cool and what's not. Sooooo original.

Nobody cares which one you buy or don't buy. Buy both, buy none. Why all the loud crowing? What do you have to gain from promoting the product you probably haven't even bought yet?

[dave @ Dec 19th 2005 12:55AM]

You bought a game and no system hahahaha. Way to support microsoft.

[FisherKingKQJ @ Dec 19th 2005 12:55AM]

I've weighed up this situation again because Cisco has bought Scientific Atlanta. And AT and T are getting their mettle back in one piece like in Terminator. Sony are in cash trouble for bizarre reasons unknown, and will have to subsidise as well, only more. I'm not sure Blu Ray at 40 gb is a big deal compared to
180 gb IBM harddrives which are already ancient history.

[Johnymepeino @ Dec 19th 2005 12:55AM]

Shit! Microsoft is on HD DVD and the rest of the planet wants Blue Ray

[Qubit @ Dec 19th 2005 12:55AM]

--------
Owner:"Cool! Now I can play the Xbox360!"

(flashing green power button)
Xbox360:"I'm sorry Dave, I'm afraid I can't do that."

Owner:"huh? I'm not Dave."
(Black Screen of Death)

And from the wise words of Darth Vador:"NOOOOOOOOOOOOOOOOOO!!!!!"
--------
Wouldn't they lose even more money if they have to replace those with heating problems?

[XLR8 @ Dec 19th 2005 12:55AM]

#10.by fogd00d owned this thread.

[Roaming Abercrombie @ Dec 19th 2005 12:55AM]

fogd00d = nooblet...

PS3 will own... i have to admit that i am a sony fanboy, BUT... lets face the facts... microsoft cant win, their software support and their hardware cant match up to the caliber to that of sony's PS3...

especially with DEFECTIVE hardware...

[icemorebutts @ Dec 19th 2005 12:55AM]

I'm really helping Microsoft. I have bought 3 games at $60 a pop with no system. Wait, thats not good.

[Jack @ Dec 19th 2005 12:55AM]

Well said fogd00d, just let them blab on about it.

[cy7 @ Dec 19th 2005 12:55AM]

i just got one, and my machine has heat problems, and if i put it on my cable box (comcast digital cable box, surface is pretty hot) my xbox just making a lot of noise and turn off. (after it turn off, u still can hear noise) i think my xbox is hunted =[

[Ron @ Dec 19th 2005 12:55AM]

The xBox 360 is the way to go if you want a console. IMHO Sony lost all chances to any of my $$ with the rootkit fiasco. So Sony can shove it and Microsoft can take over the console gaming world!

[paralipsis @ Dec 19th 2005 12:55AM]

How much money does Microsoft actually make per game? I guess there would be a fair bit of difference between 1st and 3rd party releases, but I would be curious to know at what point this loss starts to balance out.

[jaysins @ Dec 19th 2005 12:55AM]

Believe it or not I trust Microsoft more in the hardware department. Don't laugh ;) Yea they definitely got your problems with them but they replaced my xbox so fast I barely missed it, while I've gone through 2 playstations and talk about prick service. Also, there customer support and warrenties are going to hell. As a college student working in retail, they are hurting my income which is important to me:) Not really hurting it but I have had customers turn sony products down because of the reputation for awful consumer support and "god awful warranties" as one customer actually put it. These aren't even tech driven people either. Rootkit not helping. Lack of liscensing going to hurt them. Not that I'm a Microsoft fanboy or any fanboy or anti-anything. I have just had some reoccuring bad experiences with sony while Microsoft, though not perfect, has at least been helpful and cooperative with their fouls. Just some food for thought. Ps, owned all 3 before and going to try and do it again... unless new RPG(dark and light) on PC consumes me and my GPA :)

[Corley989 @ Dec 19th 2005 12:55AM]

#10 You fall prey to the logic of your own rhetoric I'm afraid. Why flame?

[StandardAI @ Dec 19th 2005 12:55AM]

"not including the packaging, power supply, cables, and accessories estimated at $55 (-$126)"

sounds pretty far-fetched to me.

[jaysins @ Dec 19th 2005 12:55AM]

#22 Haven't you heard of the old saying... fight flaming with flaming or fire... or whatever. It's something like that :)

[jack @ Dec 19th 2005 12:55AM]

omg..i cant wait but too bad Bestbuy near me is not opening until Dec 10th..which is way too long..Future shop stores in canada are only giving to pre ordered customers so i am missing it for now..ebay is too expensive..i gotta wait a few months..mybe 1..i hope.

[JahjaMan @ Dec 19th 2005 12:55AM]

if you actually go back a few months and read Time magazine, there's an article with bill gates and stuff, and that article talks about Microsoft's Master plan to make money.
u see, it says that microsoft has lost millions, if not billions, on the original xbox, and it is set to lose even MORE money on the current generation 360. what it aims to do is create a third and fourth generation console which would then VERY slowly close the losses gap, and they would eventually start making money.
just imainge buying a pc with the specs a 360 has. it would set u back more than a couple grand. thats why games are so expensive! =D

[Justin @ Dec 19th 2005 12:55AM]

in reference to the last poster, in order to buy a PC with the specs of an xbox 360 you can imagine a little harder and slap in one more processor and get the Quad Powermac G5. I don't think bill is looking to go backwards and bring windows to motorolla processors other than their Virtual PC commitment.

Another person underestimated the power of BlueRay by comparing a 40 gig hd-dvd disc to a 180 gig hard drive by ibm. The big deal about the 40 gig disc is that most consoles can't accept a 180 gig ibm harddrive with Madden 07 on it. BlueRay could very well give SquareEnix the creative license they need to make these seamless worlds with their games and give Kojima the power to make an even more spectacular Metal Gear Solid. Can you imagine GTA Sin City expanding out to the nevada desert and beyond? GTA Tokyo? GTA Paris (Frank starts looting?). Either way, the BlueRay will only help the performance of the PS3 and allow Sony the ability to offer complete seasons of television shows to be viewed on ONE Disc via it's PS3. Nobody is going to purchase a purely high def dvd player, why not get the all in one solution?

Moving on, Xbox is clearly going to operate at a loss on the backend because Microsoft is going to make it's money back via Xbox live. In the future it will be able to access downloadable movies, tv shows and even mp3s to download. Microsoft will be able to push it's "Plays For Sure" DRM while charging for downloads. It all makes sense. PS3 will operate at even more of a loss due to the expense of not only providing BlueRay for video games, but getting the discs pressed, marketing the game, developing and testing the game, providing the technology which, an hd-dvd player alone can be 300 bucks, so they're throwing in an online ready, top of the line game console in for another 100 bucks, oh yeah BLUETOOTH. Trust me, Sony is headed for a bigger loss, but i'll tell you, they're going to make their money back in the asian markets and their success there will carry over into a stronger campaign for the american markets and Sony will generate the exact type of buzz, the 360 is getting now.

Don't cry for Microsoft and Sony, they'll make their money back. Also, stop calling the xbox's hardware crappy. it won't use blueray because i believe microsoft is in talks with another hd-dvd standard. Only time will tell what will be coming.

[nonobeez @ Dec 19th 2005 12:55AM]

Microsoft is soooo stupid. They are going to lose so much money. With the pricing on this new gaming maching together with giving away IE 6.0, they will be bankcrupt in no time

peoples, make sure you buy all your MS software and pay full price, to help save them from going under!!!

[Anton @ Dec 19th 2005 12:55AM]

Microsoft is soooooooooo GAY!
I am soooo happy xbox has glitches...It just shows, that microsoft is a bunch of lazy, corporaty, monopolizin, good for nothin biatches.
I can't wait for ps3 to come out. Then we'll see who's the boss.

[Trent @ Dec 19th 2005 12:55AM]

I doubt they're losing money over-all. Simple mathematics, really. Average 10 games sold to 3 Xbox systems sold (rough estimate); licensing fees are going to outweigh the combined loss for 3 systems purchased.

Flipside-upside-down comparison:

Dell pcs are cheaper with an o.s. than without. The combined -saved- fee price over-rides the manufacturing/parts total.

Games are constantly given as gifts, etc.

[ledorky @ Dec 19th 2005 12:55AM]

I guess I'm bending over backwards for MS & EA (not that I'd want to :)).
5 games (soon to be 6 when PGR3 arrives from Best Buy) and counting.

[Daniel @ Dec 19th 2005 12:55AM]

I think microsoft have enough money, Mr Gates does not need to worry, and he knows he will make a lot of money in games, I will buy many games for my Xbox 360 and so will millions of others around the world (he will make a packet).

[sk @ Dec 19th 2005 12:55AM]

Blue-Ray drives are just drives with a SATA interface. That's why Microsoft is using a SATA DVD drive now so they can update it anytime to a Blue-Ray drive. If PS3 is successful with the Blue-Ray format I bet you that it won't take long and Xbox360 has it too. The same with other components such as DVI output and other advantages that PS3 has right now. I think MS is definitely in the advantage to be much more successful with Xbox360 than PS3 will ever be.

[eric @ Dec 19th 2005 12:55AM]

The achilles heel of Blu-Ray is digital distribution. Much like MP3 vs CD

Imagine instead of buying a disc to play a movie, you simply have it sent to you over the internet or TV cable lines. Then depending on the license you can either view X times, keep, maybe transfer or burn the movie yourself.

When you think about it, that's what a partnership between TIVO and Netflix could achieve. Then it's just a matter of selling or leasing new HD hardware (essentialy hard drives in every home or I dunno Cisco Scientic Atlantic set atop boxes?).

Why replace DVD disc with another disc when you can bypass disc all together?

In a sense, Microsoft is using this method already, by distributing Live games, demos and trailers. What's to say they couldn't distribute a major game that way?

[rodents @ Dec 19th 2005 12:55AM]

uh, dudes.. isn't bill gates a stinkin filthy rich dude? i don't think it matters much that he's going down the drain for some of the stuff, he's gaining on so much other crap

[T10 @ Dec 19th 2005 12:55AM]

Agghhhh, the fanboys make me want to punch my monitor.

[Fady Ibrahim @ Dec 19th 2005 12:55AM]

Sadly, those figures are 100% incorrect. Microsoft isn't selling the 360 Premium bundle for $399, it's being sold for $381.31. Retailers are selling it for the suggested price of $399. So add to those figures another $20 or so that Microsoft themselves are losing. You really didn't think that retailers bought and sold the product at the same price did they? What's the value proposition in that for them? Attachments? Nah

[lpret @ Dec 19th 2005 12:55AM]

#10

Good points across the board. I completely agree with your economics lesson, but I think you have to acknowledge those who buy the Xbox because everyone else does. It's viral marketing in it's clearest form.

Additionally, I think we have to look beyond specs and even games and look at how the unit is set up. The largest part of console gaming is headed towards playing with others. Xbox picked up (or perhaps started) this and the PS2 was woefully behind -- as evidenced by only 2 controller ports and a lack of cooperative games. While I loved my PS2, I bought an Xbox so my mates and I could play together and make a good evening out of it.

There are always intangibles that will allow new users to enjoy the system. Perhaps it's Xbox Live for the 360 that will somehow attract older gamers or more females. Regardless, it's not prudent to discount marketing or general trends in the market -- those may be the determinants of the end game.

[James @ Dec 19th 2005 12:55AM]

If thats the loss with half the stuff and assembly missing, is there anyone out there that is willing to guess what the total cost/loss is for a 360?

[Randy @ Dec 19th 2005 12:55AM]

#8 --> square enix is still backing Sony, all they're giving XBOX360 is FFXI, the online one that ps2 kids already have, so don't fear, SE wouldnt forsake its loyal sony fans. They're philosophy seems to be if, if its nay Japanese, its nay good

[Guru G @ Dec 19th 2005 12:55AM]

This is quite ridiculous. There is no way MS is loosing much on the hardware. Lets consider the specs and compare to ps3:

CPU
---
360: Custom PowerPC 360 cuz dual hdmi ports etc
lets say $100 for misc manufacturing and other costs for sony. 60 for ms

Wifi:
360 -- NOT FUKING Available without charging 100 extra
ps3 -- costs sony around 20-30 lets say


controller:
wired: 15
wireless: 25

so with these rought things lets add up

ps3: 90(cpu) + 90(gpu) + 90(blu-ray) + 100(misc) + 25(wifi) + 25(controller) = 420

360: 65(cpu) + 90(gpu) + 15(dvd) + 60(misc) + 15(controller)= 245

now the basic 360 is sold for 299, there ms profit already around 54 for each core system..

consider the 499 bundle. add 40 for hdd, 15 for remote, 10 more for wireless controller. so now the cost is 310 which is sells for 399 so already profit of 89 for each system...

now rake up things:
it makes a profit of around 60-70 dollars on each wifi card sold which sony has on-board. around 60 bux on the hdd sold separately.
its not loosing money, its swimming in money,,,,,,,,,

[Chris @ Dec 19th 2005 12:55AM]

I just wanted to say that I find it humourous how #41 arbitrarily made up production costs for the ps3 and 360 in order to show they are making a profit.

Continue fanboys.

[Zon @ Dec 19th 2005 12:55AM]

So all you Microsoft haters know what to do now...
Buy a whole loada Xbox 360s without games!

[AP2 @ Dec 19th 2005 12:55AM]

Guru, you do know that the 360 has a built in Ethernet port, right? You don't have to use wireless. I'm not even certain you have to use their branded wireless option, are you?

Also someone asked earlier about how much Microsoft makes per each title sold. I read somewhere its in the neighborhood of $8 per title, not including their own released titles, which obviously make more.

[Taylor smith @ Dec 19th 2005 12:55AM]

I waited in line for my xbox 360 for 12 hours. I just wanted to tell everybody that is tryign to deside on getting one or not to get one now this will complete your xmas. i purchased 3 more for gifts but that fell threw so now im selling them please help me out take a look http://cgi.ebay.com/BRAND-NEW-MICROSOFT-XBOX-360-PREMIUM-GAME-CONSOLE_W0QQitemZ8236839850QQcategoryZ62054QQssPageNameZWDVWQQrdZ1QQcmdZViewItem

[Joseph @ Dec 19th 2005 12:55AM]

# 42, you are not very bright are you?.

If the cost is US$245 & the selling price is US$299 for the basic system, how do you figure that Microsoft are making US$54 profit?.

Retailers are happy to take this product on & sell it with no markup to pay for rent & wages for people like you?.

I guess in your perfect world, there are no development costs either. M/S just had an idea, wrote it down on the back of an envelope & then asked a contract manufacturer to build it?.

Think before you start typing.

[Tyler @ Dec 19th 2005 12:55AM]

i REALLY wish everyone wouldnt count the nintendo revolution out.

The controller is so damn sexy

[sheek @ Dec 19th 2005 12:55AM]

I can't fathom why people hate Microsoft so much. evil Japanese company > evil American company?

[Tyler @ Dec 19th 2005 12:55AM]

i REALLY wish everyone wouldnt count the nintendo revolution out.

The controller is so damn sexy