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Tech journalist and Microsoft insider Paul Thurrott: "Xbox has never been profitable"

Jan 20, 2010
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Commenting on Microsoft's latest quarterly earnings report, respected journalist and Microsoft insider Paul Thurrott, had the following to say:

One of the dirty little secrets of Microsoft's Xbox/gaming business is that it has never actually turned a profit. So I was curious to hear Mr. Nadella utter these contorted words last night: ”Our gaming business is now more than $9 billion, and growing profitably." So. $9 billion is revenues, not profits. So growing means that revenues are growing. And growing profitably means ... what? That the business is ”becoming profitable"? Or is it just growing revenues positively? Was this a misstatement? What does that mean? Here's my guess. He means usage and engagement are growing. Because I can state this with certainty: Microsoft's gaming business is not profitable. In fact, it's undergoing a digital transformation of its own.
I'm sorry, this a few weeks old, but it's a very interesting quote, and I didn't find a thread with forum search. We often have discussions about whether or not Xbox is profitable (Microsoft certainly doesn't make it easy to answer that question) so I thought it would be thread-worthy. Close this thread and mock me for being a fanboy
(which I admittedly am)
if you disagree and/or a thread has in fact been made.

https://www.petri.com/paul-thurrotts-short-takes-microsoft-earnings-special-edition-7
 

Maxey

Member
Nov 14, 2015
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If this is true, it's gotta be a vanity project from some real important MS shareholder to go on for over 10 years without a profit.
 
Jul 28, 2014
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They said that the Xbox One broke even on its launch price right? What's their current margins on the S and later Xbox One models?
 
Jul 25, 2014
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Microsoft as a whole needs some major restructuring. I don't know how that company is profitable period.

Edit: I am very aware of the divisions that are their moneymakers and the ones that are not. I should have said "I'm shocked they are profitable considering how bloated and inefficient they are as a company". Bad post, my bad.
 

LeleSocho

Member
Jun 13, 2011
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We already knew it wasn't in the Xbox and X360 era... with how it's going this gen it's no surprise that continues to do so.
 

Chris1

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Jun 3, 2014
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Pretty sure he's talking about from the og Xbox. Which isn't really much of a surprise

It definitely been profitable since Xbox one and in terms of spending that year probably a good part of the 360 life cycle aswell
 

samred

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Jun 27, 2014
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Xbox has always been a part of MS's contingency plan for a "post-PC" future, as were products like Zune, Windows Phone, etc. Compared to most of those failures, it's doing remarkably fine. It'll never make up for their failure to succeed at mobile hardware/OS, of course.
 

pswii60

Member
Jun 28, 2006
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It's been painfully obvious just how much Xbox budgets have been cut over the last 10 years. Just compare now to what MS was doing in 2006/2007 in terms of first party, exclusives and huge marketing spends. I remember when MS had Xbox on the front of almost every free newspaper in Europe.

Back then there seemed to be no limit. Now we'll be lucky if they even invest in a new Gears. Xbox One X will launch with a mild whimper.
 
Jan 20, 2010
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....that's not a secret....
I mean, many people on gaf have interpreted recent (misleading) statements from Microsoft as if it actually is turning a profit, recently

Also, it is surprising, at least to me, that even during the height of 360 success, they never turned a profit
 

ianpm31

Member
Oct 15, 2016
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Pretty sure he's talking about from the og Xbox. Which isn't really much of a surprise

It definitely been profitable since Xbox one and in terms of spending that year probably a good part of the 360 life cycle aswell
He's talking about since day 1 the xbox brand has not turned a profit yet. All in all
 

Kyoufu

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Jul 26, 2007
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Jumeira

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Aug 11, 2015
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He has more accurate info then Nadella? Sorry but this is quite ridiculous, CEO's, especially in companies like MS are fully up to date with profit/loss of its products.
 

entremet

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Dec 6, 2008
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I mean, many people on gaf have interpreted recent (misleading) statements from Microsoft as if it actually is turning a profit, recently

Also, it is surprising, at least to me, that even during the height of 360 success, they never turned a profit
Well they were spending tons of money back then, plus the RROD disaster.
 

DxD

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Dec 13, 2016
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we knew this right?
No.

People are posting in the "Where are XB exclusives thread" that XB is profitable enough and there is no point in investing in making exclusives game like Sony/Nintendo.

So yeah...Who knows.
Maybe XB division is profitable or this guy is right.
 

Ashtar

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Aug 13, 2008
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That's crazy if true, they really been throwing money in a hole for 16 years ? Not even during the 360 era? Even with revenue from Xbox live ? I know the red rings cost billions but it's hard to think that they're still in the game
 

Deeke[VRZ]

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May 25, 2013
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They don't really make money from console sales, and now that they've unified PC and console, no one wants to really make exclusives because 1) lower XO install base and 2) they can just sell the game on all platforms separately instead of embracing cross-buy.

I've noticed Microsoft's gaming efforts have gone considerably downhill when the Xbox One was revealed. Now MS is playing it safe with money-making strategies instead of filling out its console platform.

Theyve changed the way the game is played for sure. And if Microsoft reported more info in their financials we'd be able to tell just how profitable (or not profitable) Xbox is. If it weren't profitable I don't see why MS would do it.
 

gogosox82

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May 24, 2014
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So they never turned a profit even during the 360 era? That's surprising honestly. I wonder what is keeping it going then if it hasn't turned a profit in 10 years?
 

HeatBoost

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Jan 1, 2016
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This wouldn't be an issue if Microsoft had a clear cut agenda for the Xbox that they could use to measure the value of their ongoing investment...

But they don't, do they? All of 360's momentum was building to "owning the living room" with Xbox One and they screwed that up really bad. They're now on their back foot with having to grow their strength as a destination for games again, and with stuff like Halo and Gears of War not being as big of a deal anymore, I wonder if they'll eventually run out of big flashy things to gesture at as reasons to keep the Xbox brand going
 

snap

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Feb 20, 2017
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Microsoft as a whole needs some major restructuring. I don't know how that company is profitable period.
This just in: internet armchair analyst claims that multibillion dollar goliath Microsoft, posting some of the largest profit amounts in the industry, "needs major restructuring", questioning how the company is even profitable


christ
 

JP

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Mar 7, 2010
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I'll be honest, I had absolutely no idea that it's never been profitable for them.
 
Aug 9, 2013
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That feels so crazy. I would have thought during the 360, this wouldn't have been true, but then again, the RROD was really, really bad.
 

Toki767

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May 8, 2009
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He has more accurate info then Nadella? Sorry but this is quite ridiculous, CEO's, especially in companies like MS are fully up to date with profit/loss of its products.
Revenue is not the same as profit.

Just as MAUs don't make up for hardware numbers.

Microsoft always gives out the thing that makes them look good even if it hides the more telling numbers.
 

Bronetta

Ask me about the moon landing or the temperature at which jet fuel burns. You may be surprised at what you learn.
Feb 24, 2013
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This just in: internet armchair analyst claims that multibillion dollar goliath Microsoft, posting some of the largest profit amounts in the industry, "needs major restructuring", questioning how the company is even profitable


christ
OPs about the Xbox division, not MS overall. Did you even read the OP?
 

neojubei

Will drop pants for Sony.
Dec 21, 2005
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Don't most companies who are not Nintendo take a loss on the hardware and make up the money with software? oh its the xbox division that's losing money.
 

bitbydeath

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Nov 25, 2015
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I'll be honest, I had absolutely no idea that it's never been profitable for them.
Makes sense though given they appear to be given bugger all funding.

People hate on Spencer but he really is doing the best with what he's got.
 

David___

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Dec 29, 2013
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So they never turned a profit even during the 360 era? That's surprising honestly. I wonder what is keeping it going then if it hasn't turned a profit in 10 years?
Probably figured they can push Windows/ their own PC store front into living rooms with it instead of just dropping it
 

CaviarMeths

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Mar 20, 2015
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Eh I think there's some level of selectivity required in saying that Xbox is not profitable. I mean, Xbox Live subscriptions alone are taking in hundreds of millions of dollars per month.

Microsoft as a whole needs some major restructuring. I don't know how that company is profitable period.
It's pretty ironic that you think you know better when you don't even understand how Microsoft is profitable.

OPs about the Xbox division, not MS overall. Did you even read the OP?
Did you even read the post he's quoting?
 

Jumeira

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Aug 11, 2015
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Revenue is not the same as profit.

Just as MAUs don't make up for hardware numbers.

Microsoft always gives out the thing that makes them look good even if it hides the more telling numbers.
Thats not really the issue, Nadella knows the numbers, every detail, unless you believe he basing it on the same info MS release to the public, i hope thats not what your implying.

They have some of the best minds in the world assessing and forecasting, he's fully aware of what profit is lol.
 

LiquidSolid

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Aug 15, 2010
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Pretty sure he's talking about from the og Xbox.

It definitely been profitable since Xbox one and in terms of spending that year probably a good part of the 360 life cycle aswell
I'm not sure how you could get that idea from his full quote. It reads like he's pretty specifically talking about the current profitability of the division.

If the Xbox division WERE profitable, why would they obfuscate the details? Surely they'd be out there with the specific numbers, telling shareholders that this is a valuable division of the company, not hiding the details in amongst a ton of other stuff.