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[Mr Moose]

It's not just about costs. That 22 billion includes third party digital revenue, 70% of which doesn't stay with Microsoft.

That was a cost related to ABK specifically right? I don't believe MS gives profit figures for its individual sectors.

Yeah.

Microsoft says the net impact from the Activision Blizzard acquisition is just over $2 billion in revenue, but the cost of integration, transaction costs, and other costs of revenue all total $930 million. With other operating expenses ($1.59 billion) it works out to an operating loss of $440 million.

 

[Woopah]

Now let's see Microsoft's profits. Oh wait, they don't release them specifically for gaming. Funny, that.

When was the last time they reported profit for the gaming division?
They would have to be working real hard to not be making a profit with the hardware dying and not sucking up cash.

Around the time they reported Xbox sales. Now it's all revenue.

Let's put this another way. If they were making a profit, with all the acquisitions and push for a subscription, they surely would be shouting it from the rooftops? Yet, they don't do so. Which leads me to conclude, they are not making money. Revenue, sure. But living off purely revenue may be suitable for a startup, not a listed company.

MS doesn't share profit numbers for any of their business units. Its not Xbox-specific.

Acquisitions do not put a company in the hole (unless they have to borrow the money). It is a change of assets. If I buy a beach house for $1 million cash then I'm not $1 million "in the hole". My assets are just less liquid. If I rent out that beach house then the question is what is my ROI. The same is true for corporations.

Thank you! People really don't understand acquisitions.

 

[Hudo]

It's a little more impactful then just maximizing profit. They're announcing they're done losing money on Xbox, so the argument that it's just chump change to MS and they could do it forever and not care doesn't hold water. They're also admitting defeat in the HW biz.

Of course they're loosing money. It's just not a threatening amount. But to investors, it will still look like shit, so they either need to justify why Xbox is worth keeping and/or they need to make it profitable.
My only point was that the money they're loosing on Xbox right now is not putting Microsoft out of business. I am not contradicting that they won't do anything to Xbox, though.

 

[viveks86]

What I don’t understand is, why is the HW selling at a loss while PS5 is making profit hand over fist? Is their BoM that much more than PS5?

 

[poppabk]

Around the time they reported Xbox sales. Now it's all revenue.

Let's put this another way. If they were making a profit, with all the acquisitions and push for a subscription, they surely would be shouting it from the rooftops? Yet, they don't do so. Which leads me to conclude, they are not making money. Revenue, sure. But living off purely revenue may be suitable for a startup, not a listed company.

They don't give operating income for a lot of sectors anymore or they report for huge groups, after 2015, xbox for example was folded into personal computers for awhile.
They aren't going to shout from the rooftops a couple of hundred million in profit because that's pathetic relative to their profit in other sectors.

 

[Woopah]

Of course they're loosing money. It's just not a threatening amount. But to investors, it will still look like shit, so they either need to justify why Xbox is worth keeping and/or they need to make it profitable.
My only point was that the money they're loosing on Xbox right now is not putting Microsoft out of business. I am not contradicting that they won't do anything to Xbox, though.

Why do you think they are losing money?

 

[Jigsaah]

Acquisitions do not put a company in the hole (unless they have to borrow the money). It is a change of assets. If I buy a beach house for $1 million cash then I'm not $1 million "in the hole". My assets are just less liquid. If I rent out that beach house then the question is what is my ROI. The same is true for corporations.

Ok yea I see your point. So let me ask you this. Why is it when Microsoft bought ABK, people were saying they need to make that money back? Wouldn't it be better to say that Microsoft needed to make sure they are getting good ROI?

Furthermore, would it matter from a financial perspective where Microsoft's revenue comes from? I seem to remember people boohooing Microsoft's growth YOY largely to the ABK acquisition.

 

[Madserb2023]

What are their costs though. Have they spent $81 billion. The thing with Nintendo is that their costs are low.

 

[Thief1987]

Damn, makes Sony's revenues seem like chump change. Sony bros, I don't feel so good

At first I thought that OP just mixing revenue with profits, but since he is completely disappeared from the thread it's become obvious silly troll from the beginning. Sigh...

 

[normalguy09x]

Wake me up if MS ever announces actual profits from gaming.

You're gonna be asleep for a very very long time.

 

[nowhat]

MS doesn't share profit numbers for any of their business units. Its not Xbox-specific.

They did, however, report sales of consoles. Up until about two years into the One generation. That stopped. I wonder why.

 

[Topher]

Ok yea I see your point. So let me ask you this. Why is it when Microsoft bought ABK, people were saying they need to make that money back? Wouldn't it be better to say that Microsoft needed to make sure they are getting good ROI?

Furthermore, would it matter from a financial perspective where Microsoft's revenue comes from? I seem to remember people boohooing Microsoft's growth YOY largely to the ABK acquisition.

Yeah....the ROI is what is important. Corporations want to use their money to make more money and this is one of the ways to do that. If the world suddenly stopped playing COD then the ROI wouldn't be very good and this would probably be viewed as a bad investment in hindsight. I'm guessing folks saying MS needs to make the money back are looking at it as if it were some kind of debt, but it isn't.

Because MS broke out ABK from Xbox in their statements for a time, we were able to see the impact of the acquisition. Folks, including myself, have pointed out that without ABK, Xbox revenue would be incredibly flat. That's just about the non-ABK side of Xbox though. Microsoft Gaming, as a whole, has benefitted quite a bit from the acquisition from a revenue standpoint from what I see.

 

[Jigsaah]

Yeah....the ROI is what is important. Corporations want to use their money to make more money and this is one of the ways to do that. If the world suddenly stopped playing COD then the ROI wouldn't be very good and this would probably be viewed as a bad investment in hindsight. I'm guessing folks saying MS needs to make the money back are looking at it as if it were some kind of debt, but it isn't.

Because MS broke out ABK from Xbox in their statements for a time, we were able to see the impact of the acquisition. Folks, including myself, have pointed out that without ABK, Xbox revenue would be incredibly flat. That's just about the non-ABK side of Xbox though. Microsoft Gaming, as a whole, has benefitted quite a bit from the acquisition from a revenue standpoint from what I see.

Ok the way folks were talkin' back then I started to think I was missing something.

See my post from April 2024, regarding an earnings report that you're alluding to. Am I crazy?

So at what point is ABK considered synonymous with Xbox?

The money is still going in Microsoft's pocket is it not?

It kinda like how people say they are gonna buy a PC because they don't want to own an Xbox. But...Microsoft also owns Windows....soooo...you're still paying them.

Same with Xbox games on PS5...people laugh about this happening, but Playstation owners are sucking these games up...at full price or close to full price no less while Xbox owners with Gamepass are paying much less,,,,and for all those games amongst others. Still paying Xbox.

When software is the major revenue driver for all gaming companies, including Sony, you start to see the slow creep...this trojan horse that Microsoft is delivering to every screen as they've portended to do.

The hardware sales are worrying because even with ABK it didn't push console sales on the one hand, but everything is multiplat anyways so that's pretty much what Microsoft said during the ABK hearings would happen.

The question is, can Xbox survive without the hardware sales? I think it depends on how quickly and effectively they transition to this "xbox on every screen" mantra. Also, there's still next gen and the rumor that an Xbox handheld is in the works.

Could they prove to be as successful as a Steam Deck? Given that they want Steam and Epic on their device? With a console that now has access to a good majority of PC exclusive games...pretty much instantly on release?

I dunno honestly. The only thing I'm sure of is this game is far from over.

 

[Topher]

Ok the way folks were talkin' back then I started to think I was missing something.

See my post from April 2024, regarding an earnings report that you're alluding to. Am I crazy?

I think the debate there is due to the fact that we could see the impact of ABK and how the non-ABK side wasn't growing. You are right that it is all Microsoft's money in the end, but the ABK impact highlighted that disparity.

 

[Astray]

These posts contradict each other.

In all likelihood, I imagine they're making money, but not a lot, and certainly not enough money to qualify as a solid growth opportunity for shareholder investment. Hence why they remain mum on the matter.

They're not contradictory. I have never ever seen any public company being profitable and not sharing the numbers, the entire point of that quarterly earnings cycle is to tout your good news to get the share price higher.

If they had profits on the gaming division, they'd declare them, or at least give percentage increases/decreases like they do with revenue numbers. But they don't so they don't.

Also, low profits generally do not prompt the kind of pivot the Gaming division is having at the moment, especially when you consider the speed in which things are happening. This is a division in crisis mode, not a thriving one that wants to merely get better.

 

[Woopah]

They did, however, report sales of consoles. Up until about two years into the One generation. That stopped. I wonder why.

Because the hardware numbers stopped being good. It has nothing to do with how MS as a whole reports profits.

 

[Beechos]

Depends on the data. I don't have it, so it's hard to argue either way.

Though iirc, didn't the Xbox division have €400m operating loss after they acquired ABK?
Then I suppose it depends how much revenue they made last year and how much it cost them the run the didivision.

People also have to realize too if they were ever force to break up and sell all these different parts. There's alot of equity in them.

 

[Jigsaah]

I think the debate there is due to the fact that we could see the impact of ABK and how the non-ABK side wasn't growing. You are right that it is all Microsoft's money in the end, but the ABK impact highlighted that disparity.

And I suppose the same comparison couldn't be made of Sony because they haven't made an acquisition of that caliber and their initial structure remained a major driver of revenue and profits. It's not like they would separate Bungie, Bluepoint or Firewalk, etc. Although maybe it could go in the opposite direction. I don't even remember the name if the studio who made Concord, but I guess people could say Sony was profitable and growing and then point out this is despite Concord and the studio's failure and closure. Essentially saying they would have been even more successful if not for this mishap. Obviously wouldn't go over well with investors...but I'm sure some folks on GAF could appreciate that.

 

[onQ123]

The good PlayStation numbers really did a number on the Xbox community lol

 

[DeepEnigma]

WTF weird ass desperation is this metric?

 

[Topher]

And I suppose the same comparison couldn't be made of Sony because they haven't made an acquisition of that caliber and their initial structure remained a major driver of revenue and profits. It's not like they would separate Bungie, Bluepoint or Firewalk, etc. Although maybe it could go in the opposite direction. I don't even remember the name if the studio who made Concord, but I guess people could say Sony was profitable and growing and then point out this is despite Concord and the studio's failure and closure. Essentially saying they would have been even more successful if not for this mishap. Obviously wouldn't go over well with investors...but I'm sure some folks on GAF could appreciate that.

I don't think it would be controversial at all to say acquiring Firewalk Studios was a bad investment. Frankly, the jury is still out on Bungie as well.

 

[Woopah]

They're not contradictory. I have never ever seen any public company being profitable and not sharing the numbers, the entire point of that quarterly earnings cycle is to tout your good news to get the share price higher.

We do have an example of this and it's MS. They share overall profits but not for individual segments.

 

[DeepEnigma]

They make that cash back in approximately one fiscal year so really it sounds like an enormous amount but even if that asset went to zero they will be very much okay.

Is what they bought worth 80 big today? Probably not but it’s certainly not worth zero dollars…

 

[Astray]

We do have an example of this and it's MS. They share overall profits but not for individual segments.

They probably have quite a few loss-making divisions they're trying to hide, my mind immediately goes to Gaming and Surface (which has been struggling in recent years).

At some point we all have to point at the naked emperor and call it like it is. No one gets to defy gravity forever.

 

[XXL]

They make that cash back in approximately one fiscal year so really it sounds like an enormous amount but even if that asset went to zero they will be very much okay.

Is what they bought worth 80 big today? Probably not but it’s certainly not worth zero dollars…

 

[Woopah]

They probably have quite a few loss-making divisions they're trying to hide, my mind immediately goes to Gaming and Surface (which has been struggling in recent years).

At some point we all have to point at the naked emperor and call it like it is. No one gets to defy gravity forever.

Potentially, but we don't know that. Gaming could be profitable for MS and we can't claim it isn't just because MS doesn't reveal profits for the division.

 

[newtypepilot]

revenue =/= profit

uber makes billions too but has been losing money since its inception.

 

[Killjoy-NL]

Potentially, but we don't know that. Gaming could be profitable for MS and we can't claim it isn't just because MS doesn't reveal profits for the division.

True, but it goes both ways. One can't claim Xbox is profitable either.

 

[VAVA Mk2]

Would be a lot more if more people wanted to buy an Xbox Series X/S...

 

[Astray]

Potentially, but we don't know that. Gaming could be profitable for MS and we can't claim it isn't just because MS doesn't reveal profits for the division.

In the absence of concrete info (which in itself is a massive red flag), we can intuit.

There's no way this division is making any kind of profit with the amounts of money being burnt, this entire multiplatform push is about dousing a fire, not about making more profits and adding to the pile.

Generally, big tech is known for keeping entire money-burning divisions up and running, just look at Amazon and their Alexa division, or Google with their thousand boondoggles, Meta with the Quest..etc.

It's not a Microsoft-exclusive phenomenon.

 

[Mr Moose]

True, but it goes both ways. One can't claim Xbox is profitable either.

We know the console(s) itself isn't and has never been.
They made this statement in 2021, but they aren't exactly known for being truthful.

"With more than 23 game studios creating games, more than 100 million monthly active Xbox players, and more than 18 million Xbox Game Pass subscribers across console, mobile, and PC, the gaming business is a profitable and high-growth business for Microsoft," they wrote in a statement. "The console gaming business is traditionally a hardware subsidy model. Game companies sell consoles at a loss to attract new customers. Profits are generated in game sales and online service subscriptions."

 

[Hudo]

Why do you think they are losing money?

I am not an expert and I don't know all the insides of Microsoft and their strategy. But to me, Xbox feels like they don't know what they want to be, so they dabble in everything without a plan. They do hardware and behave like a platform holder but they also publish like a third-party publisher but they also do streaming and subscription stuff. And maybe that is the reason they're loosing money. But again, that's just from my limited perspective.

 

[Killjoy-NL]

Nvm, misinterpreted.

 

[Woopah]

True, but it goes both ways. One can't claim Xbox is profitable either.

Correct!

In the absence of concrete info (which in itself is a massive red flag), we can intuit.

There's no way this division is making any kind of profit with the amounts of money being burnt, this entire multiplatform push is about dousing a fire, not about making more profits and adding to the pile.

Generally, big tech is known for keeping entire money-burning divisions up and running, just look at Amazon and their Alexa division, or Google with their thousand boondoggles, Meta with the Quest..etc.

It's not a Microsoft-exclusive phenomenon.

It's only a "massive red flag" if we consider every single division in Microsoft to have a massive red flag. Which obviously doesn't male sense.

It's very plausible that Xbox is profitable. Probably not very profitable but we don't have enough information to claim that they aren't making any profit at all.

I am not an expert and I don't know all the insides of Microsoft and their strategy. But to me, Xbox feels like they don't know what they want to be, so they dabble in everything without a plan. They do hardware and behave like a platform holder but they also publish like a third-party publisher but they also do streaming and subscription stuff. And maybe that is the reason they're loosing money. But again, that's just from my limited perspective.

Xbox did have an identity crisis, but it's very clear they are now transitioning to being a third party publisher.

None of this means they are losing money though.

 

[OmegaSupreme]

And they only had to spend 100 billion to get it. Amazing!

 

[kaizenkko]

Why this guy is so desperate to make people think that Xbox numbers are good? It's the same guy who was claiming that Xbox sold 35 million copies. lol

 

[Astray]

It's only a "massive red flag" if we consider every single division in Microsoft to have a massive red flag. Which obviously doesn't male sense.

It's very plausible that Xbox is profitable. Probably not very profitable but we don't have enough information to claim that they aren't making any profit at all.

No one ever hides stats that would make them look good. That's a general human nature that very few stray from.

Look at how Greenberg couldn't even resist crowing about Avowed being #1 on Steam (it ceased to be within less than a day lol). You're telling me this guy is secretly making his bosses billions of dollars and not telling us or anyone else? Absurd.

Also everyone knows what the moneymakers in MS are: Cloud, Azure, Office 365 and Windows, they're trying to make Gaming and AI into further pillars. It's not that complex.

Why this guy is so desperate to make people think that Xbox numbers are good? It's the same guy who was claiming that Xbox sold 35 million copies. lol

If you're talking about Derek, he's still going on Twitter.

At this point I think this meltdown of his is less about Sony's financials being good and more about letting pent-up rage out.

 

[panda-zebra]

What I don’t understand is, why is the HW selling at a loss while PS5 is making profit hand over fist? Is their BoM that much more than PS5?

• Economies of scale - everything custom costs more in smaller volume.
• Adding to this, there's 2 wildly different SKUs that pressure this further.
• Little done in terms of cost reducing since launch.
• Sitting on inventory for longer - see anecdotal evidence in for of mfg dates on recently purchased console.

Wombo combo of the above.

Why this guy is so desperate to make people think that Xbox numbers are good? It's the same guy who was claiming that Xbox sold 35 million copies. lol

 

[Unknown Soldier]

We do have an example of this and it's MS. They share overall profits but not for individual segments.

MS has been doing this for decades and it's intentional. They don't share numbers for divisions that lose money and they get away with it because they are so massively profitable from things that matter like Windows, Office, and Azure

 

[demigod]

Why this guy is so desperate to make people think that Xbox numbers are good? It's the same guy who was claiming that Xbox sold 35 million copies. lol

One idiot that can’t do math is sourcing another idiot who can’t do math. Xbox is nowhere near the 36m these tools are claiming.

 

[ShaiKhulud1989]

Profit should be the gold standard for measuring any company's health. Microsoft should've not hide Xbox division profits details.

Playstation and Nintendo in the last 6 years

And even this is kinda fallacy. SIE division is not showing merchandise, IP rights, music profits, all sorts of cross-branding deals, movie profits, licensing deals, etc. It is handled by Papa PlayStation and it's other divisions (Inzone brand, for example, is Sony Electronics, not SIE).

Nintendo profits are acutally accounting for freaking everything, including the amusement parks, Sad Meals and even hanafuda sales. Consolidate Sony profits on the other hand... But we don't want to go there.

 

[pulicat]

And even this is kinda fallacy. SIE division is not showing merchandise, IP rights, music profits, all sorts of cross-branding deals, movie profits, licensing deals, etc. It is handled by Papa PlayStation and it's other divisions (Inzone brand, for example, is Sony Electronics, not SIE).

Nintendo profits are acutally accounting for freaking everything, including the amusement parks, Sad Meals and even hanafuda sales. Consolidate Sony profits on the other hand... But we don't want to go there.

Video game is accounted for 95% of total profits for Nintendo.

Please learn how to read financial reports next time.

 

[Woopah]

No one ever hides stats that would make them look good. That's a general human nature that very few stray from.

Look at how Greenberg couldn't even resist crowing about Avowed being #1 on Steam (it ceased to be within less than a day lol). You're telling me this guy is secretly making his bosses billions of dollars and not telling us or anyone else? Absurd.

Also everyone knows what the moneymakers in MS are: Cloud, Azure, Office 365 and Windows, they're trying to make Gaming and AI into further pillars. It's not that complex.

I'm telling you that the decision Microsoft made years ago to not share division profits is not related to anything Greemburg tweets. You don't just tweet profit numbers against your employer's wishes.

If "No one ever hides stats that would make them look good", why are you saying Azure and Windows are moneymakers?

MS has been doing this for decades and it's intentional. They don't share numbers for divisions that lose money and they get away with it because they are so massively profitable from things that matter like Windows, Office, and Azure

They don't share profit numbers for Windows, Office or Azure either. That's why the logic "they don't share numbers for divisions that lose money" doesn't work.

You can't use the lack of shared profit numbers to determine profitability.

 

[6502]

Sweet news. Do I have good games to play now?... worth the investment suddenly?? Good job MS... still switch 2 / urgh.. ps6 for me next.... great jobs theys/thems!

 

[twilo99]

I don’t think they make 24 billion every single quarter but they’ve been chilling in the 20s for a while now

 

[nowhat]

I don’t think they make 24 billion every single quarter but they’ve been chilling in the 20s for a while now

That graph is supposed to show exactly... what? If anything, it hides the entirety of the Xbox division into something where we have no idea how it is doing.

 

[Bungie]

Sweet news. Do I have good games to play now?... worth the investment suddenly?? Good job MS... still switch 2 / urgh.. ps6 for me next.... great jobs theys/thems!

Good satire! Honestly, Gamepasses line up for 2024 was truly full of good games imo. It's a easy investment to find a cheap Series S plus Gamepass saved me a good amount of money, on multiplats especially.

 

[kapshin]

Revenue is not the same as profit, I hope they pull through competition in the market is important.

 

[Bungie]

Xbox did have an identity crisis, but it's very clear they are now transitioning to being a third party publisher.

None of this means they are losing money though.

You think the 20/30 million people on Gamepass & Xbox is something they will drop just to publish games?! They can afford to do both, that's it.

 

[yurinka]

Profit should be the gold standard for measuring any company's health.

That would be dumb.

A company that generates $200B in revenue and has $0 in profits and loses is way healthier than a company with $100K of revenue and $1K profit.

If desired, the $200B can make a slight cost adjustment or to reinvest a bit less the revenue they generate and would have tons more of profit than the one that has $1K profit. Or can reinvest part of that revenue in other things that in long term could help them like tweaking their products to try to also approach new markets, or in acquisitions.

Instead the company that makes $100K with that money doesn't have that much margin to do other things.

To make it short this is why normally the main reference is the revenue and not the profit.