Zorotrav
11-26-2002, 05:46 AM
Rob Fahey 16:16 26/06/2002
We knew they were going to lose money, but not this much.
Sources within Microsoft have quoted internal estimates showing the company losing £525m ($750m) on the Xbox project this fiscal year (which ends this month), with next years losses expected to top £720m ($1.1bn).
The quotes, which appeared in an article in US technology magazine Red Herring this week, compare with an estimated loss of £590m ($900m) over a period of eight years, which is what Bill Gates was allegedly presented with for Xbox in 1999.
The article in Red Herring goes on to discuss the hardware unit costs of the Xbox, which it estimates at $325 per unit – resulting in a $150 loss on each console sold in the USA, where the system is sold to retail at about $175. Per-unit losses will be somewhat higher in Japan, where the console has had its (already very low) price slashed aggressively in order to shore up weak sales. Here in Europe, where the Xbox is most expensive, losses will still be in the order of at least $50 per console.
The news is not good for Microsoft in the long term, either. Although Nintendo and Sony can expect their hardware costs to fall massively over the coming years (Sony has already integrated some of the biggest components in the PS2 onto a single chip, reducing their manufacturing cost significantly), Microsoft’s use of third-party “off the shelf” components precludes such a strategy. Red Herring predicts that it will take five years for the cost of building an Xbox to drop from $325 to $225 – by which point the console will probably be verging on obsolete and retailing at well below $99.
Although the figures make for grim reading, these kinds of losses are not unsustainable for a company the size of Microsoft, and the Seattle-based giant’s commitment to the videogames market is unlikely to waver. Microsoft sees the Xbox as simply the first shot in a lengthy battle, and if it can gain significant market share in people’s living rooms, multi-billion dollar losses will be no doubt be perceived as a worthwhile investment.
Microsoft is rumoured to be considering a second roll-out of Xbox hardware next year, featuring TiVo style digital video recorder technology. The new device, which would reinstate the TV decoding abilities of the NVIDIA chipset in the Xbox as well as adding a larger hard drive and MS’ UltimateTV recorder software, could retail for about $500 in the USA at launch.
Link (http://gamesindustry.biz/content_page.php?section_name=pub&aid=210)
We knew they were going to lose money, but not this much.
Sources within Microsoft have quoted internal estimates showing the company losing £525m ($750m) on the Xbox project this fiscal year (which ends this month), with next years losses expected to top £720m ($1.1bn).
The quotes, which appeared in an article in US technology magazine Red Herring this week, compare with an estimated loss of £590m ($900m) over a period of eight years, which is what Bill Gates was allegedly presented with for Xbox in 1999.
The article in Red Herring goes on to discuss the hardware unit costs of the Xbox, which it estimates at $325 per unit – resulting in a $150 loss on each console sold in the USA, where the system is sold to retail at about $175. Per-unit losses will be somewhat higher in Japan, where the console has had its (already very low) price slashed aggressively in order to shore up weak sales. Here in Europe, where the Xbox is most expensive, losses will still be in the order of at least $50 per console.
The news is not good for Microsoft in the long term, either. Although Nintendo and Sony can expect their hardware costs to fall massively over the coming years (Sony has already integrated some of the biggest components in the PS2 onto a single chip, reducing their manufacturing cost significantly), Microsoft’s use of third-party “off the shelf” components precludes such a strategy. Red Herring predicts that it will take five years for the cost of building an Xbox to drop from $325 to $225 – by which point the console will probably be verging on obsolete and retailing at well below $99.
Although the figures make for grim reading, these kinds of losses are not unsustainable for a company the size of Microsoft, and the Seattle-based giant’s commitment to the videogames market is unlikely to waver. Microsoft sees the Xbox as simply the first shot in a lengthy battle, and if it can gain significant market share in people’s living rooms, multi-billion dollar losses will be no doubt be perceived as a worthwhile investment.
Microsoft is rumoured to be considering a second roll-out of Xbox hardware next year, featuring TiVo style digital video recorder technology. The new device, which would reinstate the TV decoding abilities of the NVIDIA chipset in the Xbox as well as adding a larger hard drive and MS’ UltimateTV recorder software, could retail for about $500 in the USA at launch.
Link (http://gamesindustry.biz/content_page.php?section_name=pub&aid=210)