Do you think that Microsoft forgot to count its software revenues from Xbox games and licensing?

“EDD products include the Microsoft Xbox video game console system, PC games, consumer software and hardware products, the Zune digital music and entertainment device, TV platform products for the interactive television industry, and mobile and embedded devices (Windows Mobile software platform, Windows Embedded device operating system and Windows Automotive).”

Microsoft raked in about $6 billion in all those sales. But the Xbox lost so much money, that Microsoft burned up those $6 billion PLUS another $1,892,000,000. That’s what a “loss” is.

Even if Microsoft is selling 8 games per console, it’s still losing phenomenal amounts of money. So much that it has blow away any profits from all of its Windows Mobile licensing and PC games as well.

Microsoft keeps burying more things in the black hole of its EDD (Entertainment and Devices Division) because it doesn’t want to make public how big of a failure Xbox 360 and Zune are. It’s not selling the Zune. The huge losses are coming from the Xbox, which it has been selling at a loss, and paying to fix repeatedly.

By the way, I live in SF and have worked for a variety of significant video game houses. That doesn’t change how math works. Two billion dollars is a lot of money to lose on top of destroying $6 billion in revenue. Repeating the idea that Microsoft will somehow “makes it up in software sales” is absolutely absurd. It’s games software is losing money, too.

http://www.microsoft.com/msft/earnings/FY07/earn_rel_q4_07.mspx

I know a lot of people who work in the industry (I live around the corner from big names such as Criterion and Lionhead). Game developers love making games for the Xbox 360 because the tools are great and Xbox 360 game sales are better than any other console. The average Xbox 360 owner owns roughly 8 games. That compares to 3-4 on the PS3 and only 1-2 on the Wii. Just look at the sales of Halo 3 – just the pre-orders in the US were phenomenal.

Microsoft should be lambasted for the reliability of the Xbox 360 but that’s the only thing wrong with the console. Everything else is pretty much perfect. At least they admitted their mistake and took (very expensive) measures to satisfy their customers. I’ve lost a console to the 3 red lights myself. I was incredibly annoyed – because I was having so much fun on my Xbox 360 and knew I would be without it for several weeks.

“There aren’t that many titles for gamers to even buy.”

Out of the current generation of consoles (360, PS3, Wii), it has the most games. According to respected games magazines such as GamesTM, it also has the best games. GamesTM rates two Xbox 360 games as 10/10. The Wii has one game, the PS3 has none. Other top 10 games on the Xbox 360 score 8s and 9s, whilst on the Wii and PS3 the games are mostly scored around 7.

“I understand the need to defend your platform of choice, but don’t post stuff that isn’t accurate.”

What specifically have I said that’s inaccurate?

Zune has established a loser brand name. Microsoft has done nothing to fix its retail problems, and its WiFi still does nothing. The highly touted idea of sharing tunes doesn’t work for 2/3 of the songs you buy from Microsoft, and when it does, they evaporate after a couple days. A slight hardware upgrade isn’t enough, particularly when compared to what Apple’s offering.

Some people do like music subscriptions, but not enough to matter. The number of subscribers hasn’t grown since Rhapsody began a half decade ago. It’s a dead end loser of a product. Most people don’t want to pay $240 a year to rent music that explodes after they stop paying. No music subscription rental service has ever been successful for that reason, although many have failed trying. Microsoft is copying failure.

The original Xbox had some problems, but the 360 has overshadowed them. It scratches discs, is loud, and cooks itself to death (the cause of the Red Ring of Death, above). No amount of game sales for ~13 million devices can make up for $1 Billion in hardware losses and another billion in warranty crisis. There aren’t that many titles for gamers to even buy.

I understand the need to defend your platform of choice, but don’t post stuff that isn’t accurate.

The Zune was a disaster but the second iteration actually looks pretty good. The battery life is disappointing but a lot of the problems with the original Zune have been ironed out – including the WiFi. Kudos to Microsoft for including a music subscription option too.

Again, Microsoft got it completely wrong with the Xbox but the Xbox 360 is a fantastic console. It’s got a great games catalogue backed by an amazing online service. The Wii might have the hardware sales but the game attachment rate is phenomenal on the Xbox 360 and it’s games sales where the real profit is to be found.