Is Microsoft’s Xbox 360's Success Really All That Successful?

[DC RID3R]

As most of you may already know (if you don't, where have you been?), Microsoft had some wins and losses with their entertainment division throughout 2006. But while they netted an income from the entertainment division of $2.63 billion at the end of December 2006, according to Internet News, what was the exact costs and catches for the Xbox 360? Well, CB Games takes a thorough look to see what they can find.
One of the things we’ve all wondered about is how well Microsoft is making due with the costly next-gen hardware, considering that the original Xbox was abandoned for being costly, if memory serves me correctly. But Microsoft is apparently faring rather evenly with last year’s entertainment division losses (which included the Xbox 360), as the operating downside of $414 million was the total expenditure at the end of 2006.
Microsoft’s overall entertainment division was 75 cents up from the previous year, and at the end of the quarter the company posted nearly $3 billion in revenues from the entertainment division, adding a striking $1.27 billion in additional revenues for the company. That seems rather significant, actually. But significance doesn’t matter if the dollar signs don’t add up. Yeah, the Xbox 360 is definitely doing better than the original Xbox during its second year running – in which most analysts had pegged the original Xbox at only 3.85 million units to be sold by the end of 2002, according to Cnet. Although, it did do slightly better than the analysts projections, with around 5 million units sold by the end of 2002.
And there’s no doubt that the Xbox 360 is doing better as a second generation to Microsoft’s console brand. At the end of just one year running, the Xbox 360 is already established with nearly 10 million units in homes worldwide. But at the same time, it costs Microsoft $323 – according to iSuppli – to manufacture just one Xbox 360 unit. So with the $399 price tag, it’s not like the company is hurting too badly when it comes to evening out the profit score with hardware sales. This wasn’t always so, as the Xbox 360 was actually much more expensive to manufacture, as reported by Joystiq, with costs reaching up to $715 per unit. And as hardcore gamers are well aware, the consumer is paying for the cost re-adjustments with what seems like an endless supply of upgraded, modified and altered Xbox 360 units (i.e., Xbox 360 Elite). Yet despite all the alternative forms of Xbox 360 gaming, whether it's the Core or Premium package, the Xbox 360 is definitely making huge waves in shifting units across North American and European territories.
Still, we all know that profits are really garnered from software and not [necessarily] hardware. So what does the software share look like for the Xbox 360? Well, if you’ve followed even the scantiest details regarding triple-A titles released for the Xbox 360, you’ll have noted that Capcom’s Lost Planet and Epic’s Gears of War, both pegged at $60 (i.e., Gears of War collector’s edition was $70) both broke the 1 million mark in less than 3 months time. Even more-so, Gears of War sold 3 million copies faster than any other Xbox 360 game could even break the 2 million mark. Simply put – and just to name a few – Gears of War, Dead Rising and Lost Planet have already made back their $10 million in development costs and have gone on to cumulatively garner well over $300 million in worldwide sales. Now this doesn't include other best sellers, such as Tom Clancy's GRAW, Call of Duty 2 and 3, Chromehounds, Perfect Dark Zero or any of the Xbox Live accouterments. But on a general scope, the Xbox Live has already reached 6 million subscribers, with many Gold subscribers joining on after the launch of Gears of War, making it the first Xbox Live title for the Xbox 360 to beat out Halo 2 for the number one most played game on Live.
Hands down, it’s quite indisputable that the Xbox 360 has far surpassed its first-generation sibling, in both hardware and software sales. So in essence, it appears the success of the Xbox 360 is quite successful, so far. I mean, it’s certainly not a blockbuster success like the Nintendo DS, the Nintendo Wii, or the PS2, but in regards to Microsoft’s console efforts the Xbox 360 isn’t quite slothing around like the original Xbox. We’ll have to track how well Microsoft fares by the end of this year to see if the software continues on an upward trend, especially with triple-A PS3 titles on the horizon.

News source: cinemablend.com/games/Is-Microsof

[MadonnaProject]

another pathetic attempt at giving the 360 a bad rap. somethings gotta have turned around afterall.

i dont give a fukk as to if its a success or not. i like the console. you can go shove a roadside cone up your asses.

[So-Unreal]

If you only look at units sold vs the Wii then yes. ~6.5m ~10mto11m. ~5 months vs ~15 months.

[Robotron]

No I don't think it's that successful and even MS knows this.
That is why they had to channel stuff last year to keep the investors impressed.
http://www.informationarbitrage.com/2007/04/microsoft_phili.html

[sigma8]

another pathetic attempt at giving the 360 a bad rap. somethings gotta have turned around afterall.

i dont give a fukk as to if its a success or not. i like the console. you can go shove a roadside cone up your asses.
Apparently you didn't read the article? It sounded upbeat to me. The end conclusion was that it's doing well, but is not a runaway success like the DS or the PS2.. I think that's hard to deny.

He seems more gung ho about its prospects than the posters who commented (on that site) below the article.

[RiPPn]

If Microsoft wants to win this generation all they need to do is drop the price of the 360 by $100.00. This would make the core system only $199.00 besting the Wii. The premium would be $299.00, only $50.00 more than the Wii and $300.00 less than the PS3 now that the 20 gig model is gone. And even the Elite would only be $379.00 still $220.00 cheaper than the PS3 and only $120.00 more than the Wii. But for some reason it seems like Microsoft is waiting for the competition to make this move, which if and when this happens it will not make the pricing look as dramatic. To me that's why the PS2 always had a 1up on the Xbox cause it was always Sony who made the price cuts and then Microsoft followed.

[laesperanzapaz]

another pathetic attempt at giving the 360 a bad rap. somethings gotta have turned around afterall.

i dont give a fukk as to if its a success or not. i like the console. you can go shove a roadside cone up your asses.

read the foking article, kiddie

[wkndplaya]

It is not and will not be a runaway success Nintendo, the sneaky little devils, have that department locked down which means everyone else is playing catchup. on a side note my 360 finally decided to commit suicide so I call up m$ expecting to have to walk across a river of lava to get them to replace the the unit and pay as little as possible, imagine my surprise when I was told they would send me a prepaid box, pay for the shipping both ways and replace the system without hassle! I think they read that post about Nintendo :D.

[sigma8]

If Microsoft wants to win this generation all they need to do is drop the price of the 360 by $100.00. This would make the core system only $199.00 besting the Wii. The premium would be $299.00, only $50.00 more than the Wii and $300.00 less than the PS3 now that the 20 gig model is gone. And even the Elite would only be $379.00 still $220.00 cheaper than the PS3 and only $120.00 more than the Wii. But for some reason it seems like Microsoft is waiting for the competition to make this move, which if and when this happens it will not make the pricing look as dramatic. To me that's why the PS2 always had a 1up on the Xbox cause it was always Sony who made the price cuts and then Microsoft followed.
Ripp, people can only reduce prices so much. I mean, geeze, you might as well suggest they sell them for $99, or hand them out for free. Sure, that would lose them a lot of money, but when they launched, they lost..hm...what..$200 per console? roughly? They could easily handle triple that amount...well, let's say sextuple, since there will be higher demand for such a cheap, powerful machine. They would have an installed base of 50 million within 15 months if they made it $99, I bet.

They'd lose a crap-ton of money, but they'd have their installed base. Hey, Sony could do the same thing. Sure, they are losing money now...what's losing a little more? The losses are still only a small fraction of their overall revenue.

I can't really say why they don't do this. I could only conclude that the reason would be: it's an extremely expensive gamble. Maybe the reason MS doesn't lower the price so much, is because they know Sony can do the same thing...and so they wouldn't necessarily win over mad-crazy install base, they'd still be competing neck-to-neck with Sony, except now both would be losing massive amounts of money.

It would be a contest to see who would bleed the other dry first. The problem is, is after we have a winner, would the company still be in good health? Or would it be ripe for some other company to just swoop in and kick their butts. Right now it's only Sony, MS, and Nintendo...but they can't operate like that's the only possible reality. A new competitor might arrive at any time, they can't leave themsevles so vulnerable that their entire company might be destroyed. If MS was weakened by a war of attrition with Sony, it's not like only videogame companies would pay attention to that.. Apple, IBM, even Linux hippies...would be hovering over them like vultures.

[Xenogears V]

It follows a normal run, even if I have to say that Wii is selling to the great!, But I am convinced that in 3-4 years the Ps3 will be first among the consoles more sold!.