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News TheVerge: After Xbox testimony, Apple tells Microsoft to put up or shut up

Kyshakk

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As the first week of the Epic v. Apple trial comes to a close, Apple is picking a fight over one of Epic’s witnesses. The fight centers on testimony from Lori Wright, Microsoft’s vice president of Xbox business development, who testified about the distinction between “general purpose” and “special purpose” devices on Wednesday in favor of Epic’s claim. Wright’s testimony set off a day of confusion over whether Microsoft actually makes money selling Xbox hardware. Apple is now asking the judge for an “adverse credibility finding,” basically a determination that Wright’s testimony can’t be trusted because of irregularities in document production.
In a new filing, Apple argued that some of the documents referred to in Wright’s testimony weren’t produced in advance, and the entire testimony should fall under a cloud. Apple’s lawyers zeroed in on Wright’s claim that Xbox hardware was sold at cost in order to subsidize game sales.
“Ms. Wright testified about the supposed unprofitability of Microsoft’s console business without providing the P&L statement from her files that could have substantiated (or disproven) her testimony,” Apple’s filing argues.

Apple has actually made this case before, arguing back in April that Wright’s testimony should be stricken from the record because of irregular document production in the weeks leading up to the trial. Now, they’re arguing that Wright stepped outside of the preset parameters of her testimony, and her entire testimony should be deemed not credible.
And at the center of it all is Microsoft’s profit-and-loss analysis for the Xbox hardware, which no one on the Apple side has seen. It’s worth remembering here that Apple and Microsoft have been locked in heated competition for decades now, and while Apple doesn’t have a product competing specifically against the Xbox, the broader companies are tied up in a delicate balance of fierce competition and business cooperation. As a result, Microsoft really does not want to give Apple sensitive financial data about the Xbox — and Apple sees the P&L statement as a way to punch back at Microsoft for getting involved in the App Store fight in the first place.
 
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Bryank75

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Chukhopops

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Could it be that Microsoft's loss on hardware is actually compensated by some form of commission (somewhere in the range of 29 to 31 per cent of the amount) they would take on sales generated on their marketplace? Which would make their business overall profitable to an extent they would not want to disclose to a potential competitor, or to the general public?

Seems a bit of a stretch but who knows...
 

reksveks

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Could it be that Microsoft's loss on hardware is actually compensated by some form of commission (somewhere in the range of 29 to 31 per cent of the amount) they would take on sales generated on their marketplace? Which would make their business overall profitable to an extent they would not want to disclose to a potential competitor, or to the general public?

Seems a bit of a stretch but who knows...
Xbox is a profitable division, the issue apple has is with the statement that Xbox console hardware has never been sold at a profit.
 

Epic Sax CEO

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Wait so Xbox lie about that why would they lie about that make no sense lol

There's a confusion abut specific details.
Microsoft may had sold consoles at a profit at some point, and the hardware side even have operated at profit instead of loss. But when Microsoft says that they still didn't make money selling consoles they mean that they made an investment and the investment still didn't paid off. At least, the hardware side is still operating at a debt, the profit from the sales of hardware still didn't recover all their loses.

I don't think anyone can argue about this.
 
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smbu2000

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Well the first Xbox lost something like $4 or $5 billion USD. That certainly drags down hardware loss/profit even if they did make money on the HW near the end of the 360 lifespan and possibly the X1 lifespan.

Still it is strange that the MS witness would talk about all of this and not provide the requested documents that could prove/disprove the witnesses testimony. It was also requested by the court and should have been provided to Epic/Apple lawyers as well prior to the testimony.
Not a good look from the MS witness.
 

reksveks

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I agree with you but this is quite a controversial statement here, a lot of people claim it is overall losing money.
I know but the Microsoft CFO has said it publicly before and they then said it again to Tom Warren at The Verge this week. The more controversial position to me personally, is that a publicly traded company is outright lying to the market.

 
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PaintTinJr

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Well the first Xbox lost something like $4 or $5 billion USD. That certainly drags down hardware loss/profit even if they did make money on the HW near the end of the 360 lifespan and possibly the X1 lifespan.

Still it is strange that the MS witness would talk about all of this and not provide the requested documents that could prove/disprove the witnesses testimony. It was also requested by the court and should have been provided to Epic/Apple lawyers as well prior to the testimony.
Not a good look from the MS witness.
Does that $4-5billion include the money they lost from studios they setup/bought and then shuttered for the Xbox division? RRoD also was a big loss for them IIRC.

IMHO common sense tells me that Xbox was and currently is still a loss leader for giving Microsoft control over gaming technology on Windows via the DirectX dependency - and DirectXbox console is the vehicle for that, even now/, I assumed they probably needed additional projects like Kinect or gamepass/xCloud to fund the R&D for new consoles - like the X1 and Series - to avoid shutting the division down in the last decade, so Apple needing that proven seems a bit like a delaying tactic, as Microsoft will definitely have the receipts IMO

As a guestimate I would reckon Xbox would need to sell PS4 level numbers for two generations back to back just to recoup what they've subsidized the division with since about 2002.
 

jroc74

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Aaww shit.....

MS will just politely decline....
 

Endless Fluff

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I can actually see the Xbox One hardware not making a profit. I mean... they sold this thing for under 200€ and on special sales I've seen it for 130€ and less.

But it is hard to believe that they never made a profit on the last gen machine which wasn't exactly cutting edge at any point in its life. I hope they produce documents, but I don't think we are going to see any of it. It will be behind closed doors, just like a lot of the stuff that came after the initial fuck up of making all the documents public by accident.
 

Smoke6

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I know but the Microsoft CFO has said it publicly before and they then said it again to Tom Warren at The Verge this week. The more controversial position to me personally, is that a publicly traded company is outright lying to the market.

Well that even more odd seeing MS don’t sell games anymore on the first party side so they’re eating all that dev costs and marketing for subs!

I been smelling something fishy going on with regards to there gaming division financials and I fear when the shit hits the fans the gamers gonna lose especially the die hard ones at that
 

MrS

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So they make a loss on Xbox hardware. They're directing all efforts to get more people on to Game Pass, a service which is not profitable. And they've just paid $8billion to buy a set of game studios just to give the games away on a sub model that doesnt turn a profit on a system that they sell at a loss.

Who is greenlighting this shit?
 
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PaintTinJr

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I think Microsoft will disclose the numbers, even if it feels similar to the pain of Bond in this scene.



Us learning just how much they've lost to keep the Xbox division alive will probably help them garner sympathy for the brand - and more sales. Normally disclosing the figures would make them look bad, but doing it in this context is them actually doing it in support of gamers and the industry. And maybe when they weigh up what gamepass/xcloud have to gain by Epic beating Apple, they'll see the disclosure in context as a big gain.
 

Kilau

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I would imagine that the accountants at MS are very creative when finding losses to adjust tax liability.

While the cost of making a particular console at some point in the production cycle may indeed be below the selling price resulting in a small profit, MS will surely wrap in the whole divisions losses in addition to whatever sectors they’ve lumped in with Xbox

Apple knowing hardware and production costs looks at an Xbox and says bullshit you didn’t sell that at a profit. So yeah they are trying to see everything to show that MS distorted the truth and their testimony isn’t valid.
 
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Plantoid

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So they make a loss on Xbox hardware. They're directing all efforts to get more people on to Game Pass, a service which is not profitable. And they've just paid $8billion to buy a set of game studios just to give the games away on a sub model that doesnt turn a profit on a system that they sell at a loss.

Who is greenlighting this shit?
Who cares, the company makes billions upon billions, gotta spend it somewhere
 
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Pallas

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Yeah, what can courts and judges do? They're Microsoft. They're above the law.
You don’t really believe that and you’re joking I hope. If so you’re either delusional or ignorant.


Aaww shit.....

MS will just politely decline....

Maybe, but I think it’ll be interesting to look at how much they’ve invested and their loses in Xbox. Apple has a point, I’m just not sure if Microsoft can be forced to show the documents if they continue to testify. I’m no law major so anyone that is, would love to hear their input on this.
 

Dr Bass

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I think Microsoft will disclose the numbers, even if it feels similar to the pain of Bond in this scene.



Us learning just how much they've lost to keep the Xbox division alive will probably help them garner sympathy for the brand - and more sales. Normally disclosing the figures would make them look bad, but doing it in this context is them actually doing it in support of gamers and the industry. And maybe when they weigh up what gamepass/xcloud have to gain by Epic beating Apple, they'll see the disclosure in context as a big gain.
People don’t buy products because they feel sorry for trillion dollar companies.
 

Dabaus

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What’s apples end game here? Expose that Xbox has been a money sink for 20 years to the public and hope MS shareholders start to question why they’re burning piles of money so apple can try being a console manufacturer? Surely Microsoft investors know what a black hole the Xbox division has been all this time right?
Does this really help them win the court case with epic or are they twisting this knife for other reasons?
 

Mattyp

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I’m a shareholder, I don’t care.

All shareholders see the long game they’re playing here with gamepass.

I believe that they don’t make profit on initial release but if they’re trying to say they don’t as the hardware ages then yeah... Even I don’t believe that. But have they been made to specify yet.
 

Three

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What’s apples end game here? Expose that Xbox has been a money sink for 20 years to the public and hope MS shareholders start to question why they’re burning piles of money so apple can try being a console manufacturer? Surely Microsoft investors know what a black hole the Xbox division has been all this time right?
Does this really help them win the court case with epic or are they twisting this knife for other reasons?
If MS refuse then their testimony becomes less credible. If they do show it then Apple has data and lose nothing.
 
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SlimySnake

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This is embarrassing for Microsoft. Console makers do end up turning a profit once they release slim versions of the consoles. I thought for sure they were making profit from the 360 slim and the xbox one s and x. especially the x which sold at $500.

i highly doubt that sony wasnt making profits on the ps4 slim and the pro. same goes for nintendo with the switch.
 

Derift

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I think Microsoft will disclose the numbers, even if it feels similar to the pain of Bond in this scene.



Us learning just how much they've lost to keep the Xbox division alive will probably help them garner sympathy for the brand - and more sales. Normally disclosing the figures would make them look bad, but doing it in this context is them actually doing it in support of gamers and the industry. And maybe when they weigh up what gamepass/xcloud have to gain by Epic beating Apple, they'll see the disclosure in context as a big gain.
lol my friend.... games sell systems not sympathy...
 
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Menzies

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What’s apples end game here? Expose that Xbox has been a money sink for 20 years to the public and hope MS shareholders start to question why they’re burning piles of money so apple can try being a console manufacturer? Surely Microsoft investors know what a black hole the Xbox division has been all this time right?
Does this really help them win the court case with epic or are they twisting this knife for other reasons?
This is about Epic and Microsoft making the argument that consoles are deserving of keeping their walled gardens and that iOS is not.

They made the case of single-purpose vs. general purpose devices as well as the highly subsidized hardware business model.

Apple is asking for evidentiary proof of the claims, not just witness testimony.

Not sure why you keep twisting this as Xbox as a division being a black hole, when they are reporting otherwise. This is specifically about console sales operating profit. Not subscriptions, games, DLC, Minecraft etc. off-setting those loses.
 

reinking

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What’s apples end game here? Expose that Xbox has been a money sink for 20 years to the public and hope MS shareholders start to question why they’re burning piles of money so apple can try being a console manufacturer? Surely Microsoft investors know what a black hole the Xbox division has been all this time right?
Does this really help them win the court case with epic or are they twisting this knife for other reasons?
The end game when it comes to this question is to get Microsoft's testimony stricken from the record. I am sure they would love to see those financials but what the judge has to decide is if the testimony will be stricken from the record. That is all that is at question here.
 
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hlm666

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Wasn't microsofts credibility already a bit questionable after they lied on the stand already about the 88/12 industry standard questions.
 
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ethomaz

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If he said something then he will need to provide evidence... without evidence the MS guy works will be ignored in this case.

The Judge will probably ask to show some evidences and so I don’t know what MS will disclose.
 
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