Console launches are an expensive affair. It takes a considerable investment to make the tech in the first place, and consoles often have to be sold at a loss just to make them appealing enough to consumers. Microsoft isn’t in any financial trouble, but the Xbox One certainly isn’t making them any dough at the moment.
Over on NeoGAF, user zomgbbqftw got a hold of Microsoft’s 10k filing. In it is the following quote:
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.
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.
Okay, so the increase in Xbox platform revenue was 34% bringing in $1.7 billion. However, Xbox platform cost increased 72%, costing $2.1 billion. The difference is $400 million. Now, obviously there are all other sorts of things to take into account – an increase in sales and future sales, Xbox Live subscriptions, all that good stuff. However, it is interesting to see that while Microsoft keeps lauding their launch as a huge success, they’re laying off tons of people and reporting some rather extensive losses in the Xbox department.
Do you think this is part of the normal ebb and flow in business? Will we see this turned around in future financials or should we start comparing the Xbox One to the Wii U? I might be helping to contribute to their income soon – not long now until the Xbox One launches in South Africa; who will be joining me in dishing out some precious dough for one?
Last Updated: August 8, 2014