MS games division reports 21 percent drop in sales

By Games Industry.biz Published 27 April, 2007

But operating loss is down.

Microsoft has announced a reduction in losses for its entertainment and devices division, but also a fall in revenues - which the company is attributing to lower Xbox 360 sales, GamesIndustry.biz reports.

During the three months ending March 31 the E&D division made an operating loss of USD 315 million (EUR 232 million), compared to USD 402 million for the same quarter last year. Microsoft said the loss was due to costs related to the launch of media player Zune and expenses incurred by extending the warranty for Xbox 360.

Revenues were down from USD 1.2 billion to USD 929 million (EUR 683 million) - a drop of 21 per cent. According to Microsoft, the fall was due to "decreased Xbox 360 sales".

The company shipped 500,000 consoles during the period versus 1.7 million in Q3 2006, which was the first full quarter the console was on the market. The total number of Xbox 360s now shipped stands at around 11 million.

Sales of Xbox and PC software were also lower, down by 44 per cent to reach USD 393 million (EUR 289 million).

However, the picture is brighter when looking at the first nine months of the financial year for the E&D division. Overall, Xbox 360 console, peripheral and software sales were up, as were sales of Zune - resulting in a 42 per cent year-on-year increase in revenues to USD 4.9 billion (EUR 3.6 billion)

During the same period operating losses fell by 20 per cent to reach USD 693 million (EUR 510 million). Microsoft said this was due to the rise in 360 sales along with improved margins for the console.

The company expects a rise in revenue during the coming financial year, thanks to an increase in sales of Zune and wide availability of Xbox 360 leading to higher console sales.

Overall, Microsoft Corporation posted Q3 revenues of USD 14.4 billion (EUR 10.6 billion) - a year-on-year increase of 32 per cent. Net income stood at USD 4.93 billion (EUR 3.62 billion), while operating income was at USD 6.59 billion (EUR 4.84 billion). The company attributed the results to the releases of Windows Vista and Microsoft Office 2007.

For more financial fun, slide on over to GamesIndustry.biz.

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Comments (47) Latest comment 5 years ago

Comments threads automatically close after 30 days, but please feel free to continue chatting on the forum!

  • Dizzy #1 5 years ago

    4 billion Euro profit? Sick.

  • LeD #2 5 years ago

    Seriously, I don't understand a word of it. :(

    I'm teh finances noob.

  • jonsaan #3 5 years ago

    Who cares. Really?

  • infoxicated #4 5 years ago

    Cant you leave this kind of crap to Gamesindustry.biz and just talk about the goddamn games?

  • miiiguel #5 5 years ago

    Now, now, insert "360 is doomed"...

    Be sure to add: "MS makes cazillions, nevetheless..."
    Edited by 2 at 27/04/07 @ 10:06

  • Syrok #6 5 years ago

    Hmm Zune...

    [link url=http://youtube .com/watch?v=V5ENLm0JsQw
    ]http://youtube .com/watch?v=V5ENLm0JsQw
    [/link]

    http://youtube .com/watch?v=TyuDAzzKnz8

  • Killerbee #7 5 years ago

    A decline in 360 sales is surely predictable as the system gets older and - thus far - doesn't enjoy any meaningful sort of price cut. It's also now got some competition which it didn't have before the end of last year.

  • UncleLou #8 5 years ago

    Cant you leave this kind of crap to Gamesindustry.biz and just talk about the goddamn games?

    *whine* *moan* *whinge*

    Just don't read it if you're not interested.

  • Xerx3s #9 5 years ago

    So, this is bad, right? I'm just a bit puzzled why on earth they are comparing console sales fo the end year period to the drought period. Isn't it quit normal that sales drop?

    And wtf at those quarterly income! 4.93 billion in a quarter of a year. -!- -!!!!!!!!!!!!!!!!!!!!-

    They could completely fix a third world country every year for that money.

  • Syrok #10 5 years ago

    4.93 billion is the net income for one year. And not just the gameing divison but the whole company.

  • mattigan #11 5 years ago

    Xbox is teh d00med!!11!!eleven


    Seriously, they aren't doing too badly, and as I've maintained in previous posts, I think that they will suffer more losses as long as it leads to long term domination of the market, its the way they work.

    There are more than a few AAA titles due out this summer that should keep sales strong for quite a while. Also, don't forget all the digital distribution pies they are currently getting their grubby little fingers into.

  • PlugMonkey #12 5 years ago

    "A decline in 360 sales is surely predictable as the system gets older and - thus far - doesn't enjoy any meaningful sort of price cut."

    No, a decline in 360 sales is surely predictable when comparing the christmas period to the not-christmas period...

  • MrBiggles #13 5 years ago

    I hate gamers who try to analize sales of consoles, pretending they're on the ******* board of directors at Nintendo or some **** like that. makes there pointless lives seem somewhat important I guess.

    Neogaf is the worst for this, truly sad people who spend all there lives trying to guess next months sales for hardware and software, God I hate them sad *****

  • the_sas_man #14 5 years ago

    Expect to see a big price drop soon. I reckon Microsoft is ready to put some major pressure on Sony now. While sales have dropped they have done absolutely brilliantly up untill now. This news was inevitable.

    What you reckon, a premium pack for 230 quid? Within 3 months?

  • kaosridder #15 5 years ago

    Isnt the Elite sold out most places in the US? How many postponed their 360-purchase to wait for that I wonder? 50.000 k perhaps? Questions, questions.

  • kangarootoo #16 5 years ago

    I mentioned a while back on a different thread that one of the issues MS have is that 360 owners buy plenty of games, but that they aren't expanding the 360 installed base they would like.

    Initially that sort of model is great as your early adopters create a high games per copsole ratio, but after a while it stop being enough. And I think that is what we are seeing here. Compared to some of the other systems out there, the 360 is a lot more focussed. MS are trying to expand the appeal, but I guess it will take a while.

  • kaosridder #17 5 years ago

    kangarootoo - true. Probably why they bought Rare in the first place. To get that diversity. But they are getting there. Xbox was all racing and FPS. The 360 is now racing, FPS, rpg and now even a bit RTS. Imo.

  • gth #18 5 years ago

    "Clearly they sold MORE than 500k to customers since Jan, so this essentially means that they SHIPPED 500k more to retailers."

    They overstocked the months before.

    "That means, at the very least, they have actually sold 10.5 million 360s to consumers. "

    No, not at all.

  • Khanivor #19 5 years ago

    Top marks on the misleading and sensationalist headline.

    The Zune really is a piece of shit, innit/ It could have been such a smart bit of kit if only there was an ounce of creative thinking in the team.

  • miiiguel #20 5 years ago

    Just received my VT3; Open Season; Enchanted Arm and LOTRII from the States, so please update your info, mr. analists!

    Khanivor : do you have one? It isn't out yet, here at least. Mine is on its way. Care to share some info ?
    Edited by 1 at 27/04/07 @ 11:19

  • Tonka #21 5 years ago

    Lack of vision

  • Gurgeh #22 5 years ago

    Here's a question: Has MS gaming division *ever* made a profit?

    AFAIK in the US the Elite seems to have solid orders which I find odd given the price - although you do get a decent HDMI cable with it. There are some decent bundles out there:

    Rock Bundle ($569.98):
    Elite System
    Guitar Hero 2 with Guitar

  • Aurifex. #23 5 years ago

    Made extra dosh from making you buy games you aready own again from cracked discs.

  • mingster #24 5 years ago

    O well at least Sony made a $2 billion loss on the games division this year so its not so bad then.

  • Eighthours #25 5 years ago

    Here's a question: Has MS gaming division *ever* made a profit?

    Just once. Q4 2004, when a certain little game known as Halo 2 was released...

  • Xerx3s #26 5 years ago

    Just once. Q4 2004, when a certain little game known as Halo 2 was released...

    You seem to forget that the gaming division has been around for about 2 decades now.

  • kangarootoo #27 5 years ago

    @kaosridder

    Absolutely. Oblivion really helped the system a lot in particular I think. Viva Pinata is another step in the right direction as you say, though its effect is not quite as strong of Obliv I think.

    Certainly they are far from "doomed" and in fact are quite aware of the issues facing them.

  • kangarootoo #28 5 years ago

    @Gurgeh

    "Here's a question: Has MS gaming division *ever* made a profit?"

    MS gaming division has been around for ages. They were probably making games and peripherals before the first Playstation now I think on it.

  • kangarootoo #29 5 years ago

    There is not much that is more moronic than someone taking the time to tell everyone else that they "don't care".

    Its like ringing up a phone poll to tell them you have no opinion on the matter. In other words, bonkers.

  • Sid-Nice #30 5 years ago

    People need to know the long list of killer titles that are coming to the 360; then they'll buy the console. 11 million consoles shipped is fantastic news.

  • miiiguel #31 5 years ago

    Zune rocks!
    360 => best thing that happened to video-gamers since PS2!

    Jump In!
    Edited by 1 at 27/04/07 @ 13:42

  • miiiguel #32 5 years ago

    Hummm... "MS Games" is at least 25 years old.

    Microsoft Flight Simulator version 1.0 debuted in 1982.
    Edited by 1 at 27/04/07 @ 13:47

  • hoos30 #33 5 years ago

    Dear Peter Moore:

    Price drop please. I'll take $100.

    Thank you!

    All non-hardcore gamers

  • rudedudejude #34 5 years ago

    [link url=http://www.rlslog.net/legendary-ps3-creator-leaves-sony/
    ]http://ww w.rlslog.net/legendary-ps3-crea...[/link]

    !!

  • Wash #35 5 years ago

    @frod...

    I dunno theres a few big hitters for around then. Namely Halo 3. Halo 2 being the last release that brought profits to the entertainment division.

    Is interesting though, there really isnt that much out to buy on the Wii, except the initial frenzy of seeing ur gran play wii sports, that aside when your alone back from a day work there isnt much to hold attention. I brought zelda for my cube. I digress, theres not alot of things a rival company can do about that sort of momentum - releasing AAA games is nither here nor there. Nintendo are on a wave, regardless of the critical success of their titles - they could probably allow there games to slip in quality and get 3 or 4 titles out in the space they take for 1 aslong as they appeal to that mass demographic.

    I'd go as to far as to say Nintendo have achieved this success with no real quality in the gaming catalogue... not to the defacto nintendo standard... maybe the next mario/metroid will change this.

    It will be interesting to see the situation in 4years time. What will nintendo do next generation?

    As for price cut - do the numbers 11x £280 or wotever for the 360 against 5.5 £180

    As kangartoo suggests tho, the owners of a 360 will buy alot of games with their console, so a 3rd party publisher will see sales of 1million plus on games like crackdown, oblivon, dead rising, lost planet, gow etc.

    How do game sell on the wii and ps3?

  • wired009 #36 5 years ago

    Microsoft is not doing a good job of keeping the X360 game lineup fresh. Having loads of FPS, a GTA, a PGR, a Bioware RPG, and an off the radar JRPG is too similar to the Xbox 1 lineup. Xbox 1 was buried in terms of sales because of the same formulaic rut. The most impressive game that I've played on X360 so far has been Dead Rising. For whatever reason, the flow of creative titles like Dead Rising hasn't continued and it's very worrying. I like FPS, and Halo 3 will help X360 but this console is going the same way as the Xbox 1 if MS doesn't get their act together.

  • smelly #37 5 years ago

    "Microsoft is not doing a good job of keeping the X360 game lineup fresh."

    Shhhhh! Now you're asking for trouble, we'll just get Truth coming on posting a long list of games which no-one wants to read.

    Comments like this are sure to stir up insecure fanboys... not good.

    (hmm then again, the insecure fanboys are probably still in the nintendo/ps3 threads telling everyone how great their machine is and how crap the other one is)

    Edited by 1 at 27/04/07 @ 18:57

  • yagisencho #38 5 years ago

    Numbers, percentages, figures, blah blah blah.

    I want my Forza 2 and Mass Effect...NOW!!

  • Khanivor #39 5 years ago

    I do hope they refresh the Zune and make it fulfil its potential (MS shouda sold the Zune on the basis of its future potential. Worked so well for a competitotr. Oh, wait..)

    I'd buy one on the back of functioning wirless and if was recognised as an HD by the 360 and could be used for tansporting save games and the like. At the moment its a minimal looking MP3 player with minimal functionality.

  • immateriaux #40 5 years ago

    Microsoft expect people to buy a Zune ...??? Have they completely lost their grip on reality?

  • beep #41 5 years ago

    Microsoft are so funny... It's like saying "ooh look, the cancer on my bollocks has spread less this year than last year! Let's have a partay!!!"

    Seriously though, I think Microsoft have been excellent for gamers. If I were to buy a next gen system, it would probably be a 360 as I can think of at least two games I actually want...

  • kangarootoo #42 5 years ago

    @Wash

    "with no real quality in the gaming catalogue... not to the defacto nintendo standard... maybe the next mario/metroid will change this. "

    I agree, and its really disappointing. I was really hoping for great things from the Wii, but there has been a shower of dire 3rd party titles. In particular titles that aren't really in keeping with the whole "everybody can play" spirit of the Wii (all this talk of everyone's mum and grandad playing it, then a load of hardcore audience games like CoD and FarCry stumble out of the brush, and not even that well made).

    Part of what is hitting their attach rate is the lack of decent titles. So many people that buy the Wii only have a handful of games for it. Once you have Wii Sports and Zelda under your belt, there is nothing else that really jumps out at you (thats not to say that there aren't other perfectly good titles, but there are no other killer apps).

    I too am waiting for the next round of first party titles, as there is no doubt Nintendo know how to make good games. Mario Galaxy is a system seller, and Metroid certainly won't hurt sales either. SOme 3rd party companies know how to make the magic (the next proper ResEvil should be worth the wait methinks), but so many devs don't seem to be able to work effectively with the controller (like the sixaxis in some cases, though at least that can be used as a traditional pad with no ill effects). I really hope the Wii catalogue gets back on its feet long term, otherwise I would worry about where the system will be in 3 years time. Like I said, selling loads of systems is great but if people stop buying games in decent numbers it will disappear off the shelves pretty quickly.

  • kangarootoo #43 5 years ago

    BTW, this thread is funny.

    So many people essentially saying,

    "Look here, this billion dollar company, this company that has never come so much as close to bankruptcy or buyout since its inception over 20 years ago, probably one of if not the most successful company on the PLANET, doesn't know how to do business.

    Whereas we, internet forum business collective 101, could tell them a thing or two about how to make money, if only they would listen".

    Funny.

  • BonzoBanana #44 5 years ago

    Both xbox's have been a big money pit that Microsoft have poured money into. Microsoft make their money from the pc side and squander part of it trying to make their xbox consoles the worlds main console format. So yes I personally think it is resonable for it to be open season comment wise on how microsoft sell their consoles. Lets face it both xboxs have been huge financial failures.

  • Penguinzoot #45 5 years ago

    Kanga -

    I know - you gotta larf! ;)

  • Jas315 #46 5 years ago

    It's all good when MS recieves drops in sales...

    "Who cares??" they say...

    But when Sony start up...

    Oh no.. let's all bash & moan like little bitches!

    Pathetic.

  • kangarootoo #47 5 years ago

    @BonzoBanana

    It all comes down to what business plan they are following.

    "Lets face it both xboxs have been huge financial failures."

    They have been expensive ventures, but that doesn't necessarily amke them failures. You assume that the beginning, middle and end of their plan is to sell 360s and 360 games and make direct profits from those sales.

    I do not.