The Xbox division has almost never made money for Microsoft, except for during the Xbox 360’s latter years. And even then, overall, the Xbox division has always stood in the red. But the sheer enormity of that amount can almost never be understood.
For example, Microsoft just revealed that during its first eight months on the market, the Xbox One lost $400 million. Just to point out, losses of like that for Sega for three years (ironically, with Sega Saturn, their third mainstream console, just as Xbox One is Microsoft’s third) basically put them out out of business. Of course, Microsoft is no Sega, but Xbox has always been a sticking point with investors, and these massive losses are unlikely to help.
“Computing and Gaming Hardware revenue increased $3.2 billion or 49%, primarily due to higher revenue from the Xbox Platform and Surface. Xbox Platform revenue increased $1.7 billion or 34%, due mainly to sales of Xbox One, which was released in November 2013, offset in part by a decrease in sales of Xbox 360. We sold 11.7 million Xbox consoles during fiscal year 2014 compared with 9.8 million Xbox consoles during fiscal year 2013. Surface revenue increased $1.3 billion or 157%, due mainly to a higher number of devices and accessories sold,” Microsoft’s report said.
“Computing and Gaming Hardware gross margin decreased slightly, due to a $3.2 billion or 59% increase in cost of revenue, offset in part by higher revenue. Xbox Platform cost of revenue increased $2.1 billion or 72%, due mainly to higher volumes of consoles sold and higher costs associated with Xbox One. Surface cost of revenue increased $970 million or 51%, due mainly to a higher number of devices and accessories sold, offset in part by a charge for Surface RT inventory adjustments of approximately $900 million in fiscal year 2013.”
Basically, an increase in revenue by $1.7 billion, and then an increase in costs by $2.1 billion, leading to a $400 negative differential.
And it’s not like the console is setting the world on fire either. Microsoft and Xbox really need to do something, and fast.