Feeds

MS to lose $2bn on Xbox – analyst

Consoles to be sold at a loss! Shock! Horror!

  • alert
  • submit to reddit

Internet Security Threat Report 2014

Merrill Lynch has come to the shock conclusion that Microsoft is going to lose a lot of money on Xbox. The console could drain up to $2 billion from the Beast of Redmond's coffers before break-even.

As the world+dog knows, consoles are sold at a loss in the early days, as manufacturers subsidise the low price points needed to drive sales of the machine.

Microsoft has yet to announce Xbox pricing, but most observers put it at around $250. Merrill Lynch reckons each console will cost around $375 to produce - simple maths tells you Microsoft is flushing $125 down the pan. The figure might be higher or lower depending on what Microsoft ultimatly asks punters to pay. The Xbox price tag isn't expected to be much higher than the $299 Sony currently charges for the PlayStation 2.

All that's before you take into account the half a billion dollars Microsoft has already said it will spend marketing the new machine.

The trade-off comes in brand licenses - the cut the console maker takes from software sales - but clearly these take time to accumulate, as the number of console owners grows.

Merrill Lynch's estimates - calculated without input from Microsoft - put shipments at five million units to 30 June 2002, the end of Microsoft's current fiscal year. That figure will grow to around ten million units in fiscal 2004. By then, volume production will have cut the cost of the console, reducing the per-unit loss (price cuts permitting), and software revenues should have rocketed (or so Microsoft hopes).

In just under a year, Sony has shipped eight million PlayStation 2s. ®

Providing a secure and efficient Helpdesk

More from The Register

next story
Scrapping the Human Rights Act: What about privacy and freedom of expression?
Justice minister's attack to destroy ability to challenge state
WHY did Sunday Mirror stoop to slurping selfies for smut sting?
Tabloid splashes, MP resigns - but there's a BIG copyright issue here
Google hits back at 'Dear Rupert' over search dominance claims
Choc Factory sniffs: 'We're not pirate-lovers - also, you publish The Sun'
EU to accuse Ireland of giving Apple an overly peachy tax deal – report
Probe expected to say single-digit rate was unlawful
Inequality increasing? BOLLOCKS! You heard me: 'Screw the 1%'
There's morality and then there's economics ...
Hey Brit taxpayers. You just spent £4m on Central London ‘innovation playground’
Catapult me a Mojito, I feel an Digital Innovation coming on
While you queued for an iPhone 6, Apple's Cook sold shares worth $35m
Right before the stock took a 3.8% dive amid bent and broken mobe drama
EU probes Google’s Android omerta again: Talk now, or else
Spill those Android secrets, or we’ll fine you
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.