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VinFTW

Member
Oct 25, 2017
6,470
Not really. Over the course of the Xbox's existence, there have been quarters (and even a few years I think) where the division has turned a profit. As far as I know, it's been a while since one of those quarters.

Today, MS is back to investing pretty heavily in Xbox, and that, combined with aggressive hardware prices and the costs of running programs like Game Pass before they reach a critical mass of users means quarterly profit is not a priority, just like it isn't for most growing tech companies.

This is not a bad thing. It is better for the future of the business to focus on growth rather than profit.
No, I agree with you.

I just wish people would be more specific, but I don't think people have the data/sources to be more specific. Would be interesting to see where they are now, and where they will be in 2-3 years after all of these investments (payoffs vs not).
 

Deleted member 43

Account closed at user request
Banned
Oct 24, 2017
9,271
Maybe it was profitable that quarter, but I believe by "growing profitably" Nadella meant they are making more on their "growth" than they are spending to achieve it. That's not the same as the entire business being profitable, but it is a very good sign, as it shows they are on the right path.

And again, Xbox being profitable is not really what fans who want the business to expand and bring them more value should want. Profit in this case would be money flowing out of the division that we want to be reinvested inside of it.
 

null_

Member
Oct 27, 2017
262
Not really. Over the course of the Xbox's existence, there have been quarters (and even a few years I think) where the division has turned a profit. As far as I know, it's been a while since one of those quarters.

Today, MS is back to investing pretty heavily in Xbox, and that, combined with aggressive hardware prices and the costs of running programs like Game Pass before they reach a critical mass of users means quarterly profit is not a priority, just like it isn't for most growing tech companies.

This is not a bad thing. It is better for the future of the business to focus on growth rather than profit.

You'd think that after 20 years they wouldn't still be treating the business like a startup lol
 

null_

Member
Oct 27, 2017
262
Why is that a bad thing? Amazon treats their business like a start up continuously reinvesting profits.
This is how tech companies work, it's not strange.

amazon, like most companies, reinvest in areas where they can make more profits -- not spend 20 years trying to "start" a business. so yes, i think it's strange.

for instance, both google and amazon are getting into gaming and i bet if they're not making consistent profit after a couple years they'll drop out.

edit: and i'll put this in the lens of that they are already making crazy profits in other areas, that's where they should be focusing (as a business) -- but i don't mind that they're in gaming, it just seems weird to me
 

Deleted member 43

Account closed at user request
Banned
Oct 24, 2017
9,271
amazon, like most companies, reinvest in areas where they can make more profits -- not spend 20 years trying to "start" a business. so yes, i think it's strange.

for instance, both google and amazon are getting into gaming and i bet if they're not making consistent profit after a couple years they'll drop out.
I mean, Netflix is older than Google and not profitable, and both Google and Amazon have continued to run business for a very, very long time without being profitable. Uber won't be profitable for the foreseeable future, if ever.

If you don't need to profit, there is very little reason to force it. That can hurt growth and diminish future profits.

For MS, the massive potential in gaming is worth the losses, even over ~20 years. It's not like they are hurting for cash, and it's an investment. If it never works out, oh well.
 

christocolus

Member
Oct 27, 2017
14,931
amazon, like most companies, reinvest in areas where they can make more profits -- not spend 20 years trying to "start" a business. so yes, i think it's strange.

for instance, both google and amazon are getting into gaming and i bet if they're not making consistent profit after a couple years they'll drop out.

edit: and i'll put this in the lens of that they are already making crazy profits in other areas, that's where they should be focusing (as a business) -- but i don't mind that they're in gaming, it just seems weird to me
some businesses run this way especially when there is the potential to make even more money in the future also MS isn't Google or Amazon and they will focus their investments where they see fit, currently they see a lot of potential and they will keep investing there it doesn't matter if other divisions are churning out a lot more cash. They see an opportunity to expand and make even more from gaming and they are going for it.
 
Oct 27, 2017
8,617
The World
amazon, like most companies, reinvest in areas where they can make more profits -- not spend 20 years trying to "start" a business. so yes, i think it's strange.

for instance, both google and amazon are getting into gaming and i bet if they're not making consistent profit after a couple years they'll drop out.

edit: and i'll put this in the lens of that they are already making crazy profits in other areas, that's where they should be focusing (as a business) -- but i don't mind that they're in gaming, it just seems weird to me

They have made profits in gaming before and believe they can reach to a point to make consistent profits again. Doesn't seem strange, if Nadella did not believe it MS would have already started going in a different direction.
 

Deleted member 49804

User requested account closure
Banned
Nov 21, 2018
1,868
Ohh we have the profit discussion again?

rRSnctR.png


Microsoft's More Personal Computing division profits went up from a little over $6 billion to nearly $13 billion in the last 4 years.
But the profitability increase in gaming, every other platform holder and publisher sees, has nothing to do with that? Not to mention Microsoft is a leader in digital adoption, GaaS, MTX and paid services in this space. These are all categories with higher margins compared to hardware for example.
I could also make a different graph for Xbox hardware and Xbox Software & Services and the picture would look even more drastic.
Hardware share decreased from around 45% of gaming revenue to around 25%, while total revenue increased.

Don't take just my word for it:
FY19* compared with FY18: Gross margin increased $1.5 billion or 9%, driven by growth in Windows, Gaming, and Search. Gross margin percentage was relatively unchanged, due to sales mix shift to higher gross margin businesses in Gaming, offset by a sales mix shift to our lower gross margin Surface business.
FY18 compared with FY17: Gross margin increased $2.2 billion or 11%, driven by growth in Windows, Surface, Search, and Gaming.
FY17 compared with FY16: Gross margin increased $1.1 billion or 6%, driven by growth in Windows, Search advertising, and Gaming, offset in part by a decline in Phone and Surface. Gross margin percentage increased, due to favorable sales mix and gross margin percent improvements across Windows, Gaming, and Search advertising, offset by a gross margin percent decline in Devices

Maybe the $7bn profit increase from FY16 to FY19 could be 100% attributed to the $2.7bn revenue increase in Windows /s
Being real her
Windows revenue grew 15.2%
Gaming revenue grew 30.2%
Search revenue grew 39.8%
Device revenue declined 21.7% (Microsoft got rid of the loss making Phone business)
Operating Income grew 109.2%

You don't achieve those numbers with a loss making gaming segment, that makes up 1/4 of your MPC divison.
Don't listen to FUD. Look at the numbers and what makes sense. You can invest heavily and still be highly profitable.
Sony's gaming division profits increased 250% in the last 4 years. Lets be generous and say Microsoft was able to do a tenth of that and managed 25%.


*FY19 Q4 is not yet reportet, but extrapolated from the general trend of the 9 months period in FY19 for each individual segment.
 

tareqsalah

Banned
Nov 6, 2017
243
Serious question, if xbox is going to focus more on services and selling their games on other systems, do you think it is a good idea to release their exclusives on playstation? How many more millions can they sell of forza, gears, halo, even cuphead, ori if they release them on ps4 and ps5.
 

MaulerX

Member
Oct 30, 2017
2,691
Serious question, if xbox is going to focus more on services and selling their games on other systems, do you think it is a good idea to release their exclusives on playstation? How many more millions can they sell of forza, gears, halo, even cuphead, ori if they release them on ps4 and ps5.


I don't think that'll ever happen and not necessarily because MS don't want to do it. But because Sony will probably never allow it. Doing so would mean that they would have to agree to having not just the games, but the core MS services that would go along with them (XBL, Gamepass etc...).
 

tareqsalah

Banned
Nov 6, 2017
243
I don't think that'll ever happen and not necessarily because MS don't want to do it. But because Sony will probably never allow it. Doing so would mean that they would have to agree to having not just the games, but the core MS services that would go along with them (XBL, Gamepass etc...).
You are right, but also don't forget that sony has the upper hand in negotiation so it would be xbox who would ask sony to put their games on ps, so they can refuse xbox live and pass because they dont need xbox exclusives to sell playstations. All i know is exciting and interesting times are coming.
 

nib95

Contains No Misinformation on Philly Cheesesteaks
Banned
Oct 28, 2017
18,498
Ohh we have the profit discussion again?

rRSnctR.png


Microsoft's More Personal Computing division profits went up from a little over $6 billion to nearly $13 billion in the last 4 years.
But the profitability increase in gaming, every other platform holder and publisher sees, has nothing to do with that? Not to mention Microsoft is a leader in digital adoption, GaaS, MTX and paid services in this space. These are all categories with higher margins compared to hardware for example.
I could also make a different graph for Xbox hardware and Xbox Software & Services and the picture would look even more drastic.
Hardware share decreased from around 45% of gaming revenue to around 25%, while total revenue increased.

Don't take just my word for it:




Maybe the $7bn profit increase from FY16 to FY19 could be 100% attributed to the $2.7bn revenue increase in Windows /s
Being real her
Windows revenue grew 15.2%
Gaming revenue grew 30.2%
Search revenue grew 39.8%
Device revenue declined 21.7% (Microsoft got rid of the loss making Phone business)
Operating Income grew 109.2%

You don't achieve those numbers with a loss making gaming segment, that makes up 1/4 of your MPC divison.
Don't listen to FUD. Look at the numbers and what makes sense. You can invest heavily and still be highly profitable.
Sony's gaming division profits increased 250% in the last 4 years. Lets be generous and say Microsoft was able to do a tenth of that and managed 25%.


*FY19 Q4 is not yet reportet, but extrapolated from the general trend of the 9 months period in FY19 for each individual segment.

Do you have a link or source to the $13bn profit figure for More Personal Computing?
 
Last edited:
Oct 27, 2017
6,942
Serious question, if xbox is going to focus more on services and selling their games on other systems, do you think it is a good idea to release their exclusives on playstation? How many more millions can they sell of forza, gears, halo, even cuphead, ori if they release them on ps4 and ps5.
It doesn't really benefit Sony to do that because that's another direct competitor to their own first party software. For example why would you buy a Sony open world racer when you have a world class Forza horizon game on the platform?

Also the games would be full to the brim of cbox live integration which is another thing that Sony would hate. The ball isn't in their court because MS is no where desperate enough to cave to their demands. We've seen what happened to Minecraft
 

Deleted member 49804

User requested account closure
Banned
Nov 21, 2018
1,868
Do you have a link or source to the $13bn profit figure for More Personal Computing?
All numbers are from official company reports.
http://view.officeapps.live.com/op/...?version=1fa40dc2-0351-d6f3-5360-674cc8640919

For the 9 months period from FY18 to FY19 Operating Income increased from $7,598bn to $9,261bn or 22%.
For the 12 months period in FY18 Operation Income was $10,610bn. That increased by 22% results in $12,944bn.
The reported actual could end up a few millions higher or a few millions lower, but will not be that significantly different. It's also in line with company expectations for the Q4FY19 forecast given in the last earnings call. $12.5bn at worst is my personal estimate.

Hence I gave the * on all FY19 figures. And due to seasonality in the gaming business, it's better to use full years instead of quarters to show this data.
I will update the graph wehen Q4 earnings are released.
 
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nib95

Contains No Misinformation on Philly Cheesesteaks
Banned
Oct 28, 2017
18,498
All numbers are from official company reports.
https://view.officeapps.live.com/op...?version=1fa40dc2-0351-d6f3-5360-674cc8640919

For the 9 months period from FY18 to FY19 Operating Income increased from $7,598bn to $9,261bn or 22%.
For the 12 months period in FY18 Operation Income was $10,610bn. That increased by 22% results in $12,944bn.
The reported actual could end up a little higher or a little lower, but will not be significant different. It's also in line with company expectations for the Q4FY19 forecast given in the last earnings call.

Hence I gave the * on all FY19 figures. And due to seasonality in the gaming business, it's better to use full years instead of quarters to show this data.

Unfortunately the link doesn't work. Are these operating income figures specifically for More Personal Computing? And do you have a link to the source for that image as well? I thought it was a Zhuge tweet but I couldn't find it on his account.
 

Deleted member 49804

User requested account closure
Banned
Nov 21, 2018
1,868
Unfortunately the link doesn't work. Are these operating income figures specifically for More Personal Computing? And do you have a link to the source for that image as well? I thought it was a Zhuge tweet but I couldn't find it on his account.
Then try this and click on the 10Q filling.
Yes, the Operating Income figures are specifically and only for the More Personal Computing division. Otherwise it would not make sense.
I made that graph, myself.
 

christocolus

Member
Oct 27, 2017
14,931
Good to see MS doing great as usual... continued investment in Xbox can only mean great things for the brand.
 

GamingCJ

Member
Apr 14, 2019
1,907
Ohh we have the profit discussion again?

rRSnctR.png


Microsoft's More Personal Computing division profits went up from a little over $6 billion to nearly $13 billion in the last 4 years.
But the profitability increase in gaming, every other platform holder and publisher sees, has nothing to do with that? Not to mention Microsoft is a leader in digital adoption, GaaS, MTX and paid services in this space. These are all categories with higher margins compared to hardware for example.
I could also make a different graph for Xbox hardware and Xbox Software & Services and the picture would look even more drastic.
Hardware share decreased from around 45% of gaming revenue to around 25%, while total revenue increased.

Don't take just my word for it:




Maybe the $7bn profit increase from FY16 to FY19 could be 100% attributed to the $2.7bn revenue increase in Windows /s
Being real her
Windows revenue grew 15.2%
Gaming revenue grew 30.2%
Search revenue grew 39.8%
Device revenue declined 21.7% (Microsoft got rid of the loss making Phone business)
Operating Income grew 109.2%

You don't achieve those numbers with a loss making gaming segment, that makes up 1/4 of your MPC divison.
Don't listen to FUD. Look at the numbers and what makes sense. You can invest heavily and still be highly profitable.
Sony's gaming division profits increased 250% in the last 4 years. Lets be generous and say Microsoft was able to do a tenth of that and managed 25%.


*FY19 Q4 is not yet reportet, but extrapolated from the general trend of the 9 months period in FY19 for each individual segment.
I know you are trying really hard, but in reality you can not deduce how much or even if Xbox is making or losing money since we only know exact numbers for a conglomerat of divisons. If MPC has made fucking $13bn profit last year, while Xbox' profit might be anywhere between a small loss and around $1bn profit, it becomes clear that other parts of MPC, e.g. Search, must be so amazingly profitable that it's impossible to deduce if Xbox is adding a single digit percentage to those $13bn or not.
Look at Sony's forecast for FY '19, they are fusing numbers for Mobile phones, TVs and Cameras, and voila the desastrous Mobile Phone loss is hidden (this is obviously an extreme example, but it makes clear that your claims about xbox profits are only guesswork).
 

Premium

Banned
Oct 27, 2017
836
NC
I know you are trying really hard, but in reality you can not deduce how much or even if Xbox is making or losing money since we only know exact numbers for a conglomerat of divisons. If MPC has made fucking $13bn profit last year, while Xbox' profit might be anywhere between a small loss and around $1bn profit, it becomes clear that other parts of MPC, e.g. Search, must be so amazingly profitable that it's impossible to deduce if Xbox is adding a single digit percentage to those $13bn or not.
Look at Sony's forecast for FY '19, they are fusing numbers for Mobile phones, TVs and Cameras, and voila the desastrous Mobile Phone loss is hidden (this is obviously an extreme example, but it makes clear that your claims about xbox profits are only guesswork).

The poster you quoted provided actual numbers sourced directly from MS own financial report and you're claiming he's wrong with absolutely nothing but anecdotes ...
 

khamakazee

Banned
Oct 27, 2017
3,937
Do you have reading comprehension issues?

The only thing we really need to know is your stance on Microsoft and how little optimism you have for them. The fact is the direction they are going is the right direction. They are building towards the future and yes it's great to see Sony put out their quarterly results to such fanfare but look at Sony as a whole. They are certainly not the company they once were and I wonder where they will be in 10+ years from now as the industry continues to evolve. Nintendo is also using its handheld success but are they really a bigger and better company overall? I remember when the DS was selling huge, now that the Switch is basically amalgamting both platforms what is their future like?

Azure has shown massive growth and all the jokes of cloud computing is looking to be paying off and will also pay off in gaming. The success of Microsoft outside of Xbox right now is going to pay huge divedends in the future.
 

Deleted member 49804

User requested account closure
Banned
Nov 21, 2018
1,868
I know you are trying really hard, but in reality you can not deduce how much or even if Xbox is making or losing money since we only know exact numbers for a conglomerat of divisons. If MPC has made fucking $13bn profit last year, while Xbox' profit might be anywhere between a small loss and around $1bn profit, it becomes clear that other parts of MPC, e.g. Search, must be so amazingly profitable that it's impossible to deduce if Xbox is adding a single digit percentage to those $13bn or not.
Look at Sony's forecast for FY '19, they are fusing numbers for Mobile phones, TVs and Cameras, and voila the desastrous Mobile Phone loss is hidden (this is obviously an extreme example, but it makes clear that your claims about xbox profits are only guesswork).
No you can't 100% certainly deduct the exact amount. But you can make an educated guess. And making a loss for the gaming segment is not one of them. Not with anything known about the current gaming business and Microsofts own numbers. Just like Xbox making $5bn in profits a year would not be one.

Bing turned a profit for the first time in Q1FY16, before that Bing was making a loss.
How much that segment contributes now? Lets have a look at Google or Yahoo and what margins their search business have.
Bing made $7.5bn revenue in FY19. The profits? Around a 35% margin would be a decent guess? So Bing is making $2.5bn out of the $13bn total.
That leaves over $10.5bn for Windows, Gaming and Surface


I'll give you a few examples and you say to me if they make sense or not:

FY16
Bing turned a profit for the first time. 5% margin resulting in $300m OI
Gaming being unprofitable and having a (1%) margin resulting in ($100m) OI
Devices with the phone business highly unprofitable and having a (15%) margin resulting in (1.2bn) OI
Windows makes up the rest with 7bn OI and a margin of 40% to get to the total of $6bn for the whole division

FY19
Bring profitability increased a lot. 33% margin resulting in $2.5bn OI
Gaming still being unprofitable and even more investment. (2%) margin resulting in (250m) OI
Devices without phones and high price premium Surface. 20% margin resulting in 1.25bn OI
Windows a mature business, but still a lot of margin growth. 47% margin resulting in 9.5bn OI

You have the actual revenue figures for every segment.
You have the actual Operation Income total.
You know how the segments changed over time.
You need margins that make sense and reflect the reality of the business.


So does it make sense, that Microsoft was able to constantly increase their Windows margin percentage points by a total of 7% in the last 4 years? That alone would be huge and unprecedented for the business and the state it is in. Because if not, the profits had to come from somewhere else. The profits are there and they have to come from one of the 4 divisions.
33% margin for the search advertising business is already on Google level by the way. Is Bing more profitable than Google already?
20% margin for devices. The Surface segment at half the margin of Apple, but still way ahead of any other PC manufacturer with single digit margins?


This is what it would take for Gaming to be unprofitable.
Or does it make more sense, that Gaming has a profit margin somewhere between 5 and 15%?
I just find it funny who some people desperately want to believe, that Microsoft has extremelye profitable search and hardware businesses with industry leading profit margins, but gaming has to be on the exact opposite side with the industry lowest figures and probably even in the loss.
One could argue, that the Windows division has to make more profits and a higher margin like they used to have in 2010 - 2013 (between 48 and 63%) for example. But that would require Gaming, Search and Devices to make an additional combined loss of $1.5bn to $4bn in FY16. And that again does not make sense.
 
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christocolus

Member
Oct 27, 2017
14,931
No you can't 100% certainly deduct the exact amount. But you can make an educated guess. And making a loss for the gaming segment is not one of them. Not with anything known about the current gaming business and Microsofts own numbers. Just like Xbox making $5bn in profits a year would not be one.

Bing turned a profit for the first time in Q1FY16, before that Bing was making a loss.
How much that segment contributes now? Lets have a look at Google or Yahoo and what margins their search business have.
Bing made $7.5bn revenue in FY19. The profits? Around a 35% margin would be a decent guess? So Bing is making $2.5bn out of the $13bn total.
That leaves over $10.5bn for Windows, Gaming and Surface


I'll give you a few examples and you say to me if they make sense or not:

FY16
Bing turned a profit for the first time. 5% margin resulting in $300m OI
Gaming being unprofitable and having a (1%) margin resulting in ($100m) OI
Devices with the phone business highly unprofitable and having a (15%) margin resulting in (1.2bn) OI
Windows makes up the rest with 7bn OI and a margin of 40% to get to the total of $6bn for the whole division

FY19
Bring profitability increased a lot. 33% margin resulting in $2.5bn OI
Gaming still being unprofitable and even more investment. (2%) margin resulting in (250m) OI
Devices without phones and high price premium Surface. 20% margin resulting in 1.25bn OI
Windows a mature business, but still a lot of margin growth. 47% margin resulting in 9.5bn OI

You have the actual revenue figures for every segment.
You have the actual Operation Income total.
You know how the segments changed over time.
You need margins that make sense and reflect the reality of the business.


So does it make sense, that Microsoft was able to constantly increase their Windows margin percentage points by a total of 7% in the last 4 years? That alone would be huge and unprecedented for the business and the state it is in. Because if not, the profits had to come from somewhere else. The profits are there and they have to come from one of the 4 divisions.
33% margin for the search advertising business is already on Google level by the way. Is Bing more profitable than Google already?
20% margin for devices. The Surface segment at half the margin of Apple, but still way ahead of any other PC manufacturer with single digit margins.


This is what it would take for Gaming to be unprofitable.
Or does it make more sense, that Gaming has a profit margin somewhere between 5 and 15%?
I just find it funny who some people desperately want to believe, that Microsoft has extremely profitable search and hardware businesses with industry leading profit margins, but gaming has to be on the exact opposite side with the industry lowest figures and probably even in the loss.
One could argue, that the Windows division has to make more profits and a higher margin like they used to have in 2010 - 2013 (between 48 and 63%) for example. But that would require Gaming, Search and Devices to make an additional combined loss of $1.5bn to $4bn in FY16. And that again does not make sense.
well said.
 

THEVOID

Prophet of Regret
Member
Oct 27, 2017
22,829
Serious question, if xbox is going to focus more on services and selling their games on other systems, do you think it is a good idea to release their exclusives on playstation? How many more millions can they sell of forza, gears, halo, even cuphead, ori if they release them on ps4 and ps5.

They would put Gamepass on PS today if they got the opportunity. I don't think Sony would allow it.
 
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Spider-Man

Banned
Oct 25, 2017
2,353
Is XBL numbers Gold? If so they're almost double the PS+ members. Damn. Despite a lower install base.
 

khamakazee

Banned
Oct 27, 2017
3,937
They would put Gamepass on PS today if they got the opportunity. I don't think Sony would allow it.

Sony doesn't even allow EA Origin so they certainly would not want their most direct competitor to be on there either. Especially considering their reluctance for console crossplay as well. Microsoft also wants to sell you hardware so I'm not sure what GamePass is going to look like in 10 years from now.
 

THEVOID

Prophet of Regret
Member
Oct 27, 2017
22,829
Sony doesn't even allow EA Origin so they certainly would not want their most direct competitor to be on there either. Especially considering their reluctance for console crossplay as well. Microsoft also wants to sell you hardware so I'm not sure what GamePass is going to look like in 10 years from now.

What does the hardware have to do with GamePass? If MS had their way they'd but it on every device known to man.
 

THEVOID

Prophet of Regret
Member
Oct 27, 2017
22,829
Well you could be right, I guess the hardware is just a loss leader anyways. Money is made on software so my question is how do you design your hardware and games if they are not dedicated to your Xbox or are those days done now anyways since they've gone pretty much full PC support?

That's where Xcloud comes in for non consoles and PC's.
 

GamingCJ

Member
Apr 14, 2019
1,907
No you can't 100% certainly deduct the exact amount. But you can make an educated guess. And making a loss for the gaming segment is not one of them. Not with anything known about the current gaming business and Microsofts own numbers. Just like Xbox making $5bn in profits a year would not be one.

Bing turned a profit for the first time in Q1FY16, before that Bing was making a loss.
How much that segment contributes now? Lets have a look at Google or Yahoo and what margins their search business have.
Bing made $7.5bn revenue in FY19. The profits? Around a 35% margin would be a decent guess? So Bing is making $2.5bn out of the $13bn total.
That leaves over $10.5bn for Windows, Gaming and Surface


I'll give you a few examples and you say to me if they make sense or not:

FY16
Bing turned a profit for the first time. 5% margin resulting in $300m OI
Gaming being unprofitable and having a (1%) margin resulting in ($100m) OI
Devices with the phone business highly unprofitable and having a (15%) margin resulting in (1.2bn) OI
Windows makes up the rest with 7bn OI and a margin of 40% to get to the total of $6bn for the whole division

FY19
Bring profitability increased a lot. 33% margin resulting in $2.5bn OI
Gaming still being unprofitable and even more investment. (2%) margin resulting in (250m) OI
Devices without phones and high price premium Surface. 20% margin resulting in 1.25bn OI
Windows a mature business, but still a lot of margin growth. 47% margin resulting in 9.5bn OI

You have the actual revenue figures for every segment.
You have the actual Operation Income total.
You know how the segments changed over time.
You need margins that make sense and reflect the reality of the business.


So does it make sense, that Microsoft was able to constantly increase their Windows margin percentage points by a total of 7% in the last 4 years? That alone would be huge and unprecedented for the business and the state it is in. Because if not, the profits had to come from somewhere else. The profits are there and they have to come from one of the 4 divisions.
33% margin for the search advertising business is already on Google level by the way. Is Bing more profitable than Google already?
20% margin for devices. The Surface segment at half the margin of Apple, but still way ahead of any other PC manufacturer with single digit margins.


This is what it would take for Gaming to be unprofitable.
Or does it make more sense, that Gaming has a profit margin somewhere between 5 and 15%?
I just find it funny who some people desperately want to believe, that Microsoft has extremely profitable search and hardware businesses with industry leading profit margins, but gaming has to be on the exact opposite side with the industry lowest figures and probably even in the loss.
One could argue, that the Windows division has to make more profits and a higher margin like they used to have in 2010 - 2013 (between 48 and 63%) for example. But that would require Gaming, Search and Devices to make an additional combined loss of $1.5bn to $4bn in FY16. And that again does not make sense.
Isn't it the other way around? There are people desperatly convinced that Xbox currently must be profitable, while others - including me - say that there's just no way to know.
The problem with your calculations is, that they are build on educated guesses for every division in any FY. So as reasonable as your numbers might sound, multiple small mistakes are certain and they add up. This is just no reliable way to determine if xbox contributes $0, $0.2bn or $0.8bn to a $13.5bn mass of 4 different divisions.
 

Mr Moot

Member
May 10, 2018
590
Annecy, France
What does the hardware have to do with GamePass? If MS had their way they'd but it on every device known to man.

Because they need hardware to get their cut on third party games of course. One of the virtue of Game Pass - according to Microsoft- is to drive sales of game and dlcs. Putting the service on Sony's plateforme would prevent them to get any money on that.

I think it's a rather different thing than putting Xcloud on third party's devices.

Edit : autocorrect is a bitch specialy coming from another language.
 

christocolus

Member
Oct 27, 2017
14,931
Amazing results from MS. Now they just need to go all out at E3.

Aren't you the one who just said we can't infer anything because MS hasn't told us directly lol
Dude infer/speculate all you want and trying to look for stuff where there is nothing to find is funny. Lol. KennyX's post is speculative as well but put together and makes a lot more sense than most of the stuff I've read here so far also the guy posted links to back up his post... so I really don't care if you or the guy above have a problem with that. I'm glad MS is as healthy and as profitable as ever and Xbox will only continue to benefit from it :)
 
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christocolus

Member
Oct 27, 2017
14,931
You don't, and MS doesn't care either way. You're either on Windows or Xbox.
This. people don't seem to understand MS doesn't care. They want you to play Xbox games where ever you like, They are still going to get your cash either way and if you have to create an Xbox account to do so then you are counted as one of their MAUs.
 

Deleted member 49804

User requested account closure
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Nov 21, 2018
1,868
Isn't it the other way around? There are people desperatly convinced that Xbox currently must be profitable, while others - including me - say that there's just no way to know.
The problem with your calculations is, that they are build on educated guesses for every division in any FY. So as reasonable as your numbers might sound, multiple small mistakes are certain and they add up. This is just no reliable way to determine if xbox contributes $0, $0.2bn or $0.8bn to a $13.5bn mass of 4 different divisions.

Most recent Operating Income profit margins for select gaming companies
Sony G&NS: 13.5% (April '18 - March '19)
Nintendo: 20.8% (April '18 - March '19)
Activision: 26.5% (January '18 - December '18)
EA: 29.3% (April '18 - December '18)


I just can't take anyone serious who wants to tell us the margin would likely be between (3%) and 1.7% for Microsoft.
Especially if they don't even bother to provide numbers on how those would actually materialize, but only give vague generalized statements.
Where exactly does Microsoft spend more? Where does Microsoft has lower gross margins? Where does Microsoft invest more?
All while Microsoft constantly states, they have a profitably growing gaming business and the most engaged and highest monetized userbase.

Sales and Marketing: Microsoft does spend a lot on discounts to keep the entry price in the ecosystem low, but they heavily cut down on traditional marketing like TV ads. Today you don't need that anymore, where word of mouth and content creators is the way to let people know about your games.
https://www.resetera.com/threads/tw...ng-industry’s-most-seen-tv-ads-ranking.84487/
And that is not only a snapshot, It's a trend that continues for years now. Microsoft dropped co-marketing deals with Call of Duty and Fifa. Sony also has Rockstar. So the biggest and most expensive are all gone.
Buying new studios? The acquisition price does not impact your Operating Income at all. That is accounting 1x1. Only running the studio and the incorporation affects your top line.
Research and Development: Well Microsoft spends a lot! on R&D. Some years a little more and some year a little less. They have a huge baseline, tho. But Microsoft has a hardware team responsible for both Xbox and Surface. The costs to develop the new Xbox SOC will be leveraged by Azure, too (again not something that is made up by me, but said by the company itself). Anything they spend in software and new features? The same with Windows. Baseline code and basic research is not uniquely done only for Xbox. Microsoft has a ton of synergy effects.
That is by the way one of the main reasons why Microsoft is highly profitable in the first place, unlike Sony for example. Sony's divisions are much more different and not that tightly incorporated with more overhead.

Your 0.8bn number would be a profit margin of 6.7% and at least a reasonable low end estimate.