Andre Yoskowitz
4 May 2007 10:29
According to an interview with eWeek, Robbie Bach, the president of Microsoft's entertainment and devices division, has said that the company's console business will begin making a profit starting next year.
"It's a business that will be profitable next year. We'll make money next year and that will be the first time, which is pretty exciting," he said.
This interview comes on the heels of last weeks announcement that falling Xbox 360 sales had led to a 21 percent drop in revenue for the entertainment and devices division in the first quarter 2007. Although the losses were less than the comparable period of 2006, they were still a hefty $315 million USD.
Bach noted that revenue from games, Xbox Live, and accesory sales would help contribute to bringing the console production back int profitability.
"Xbox is the hardest piece of consumer electronics hardware to produce in the world, no debate," he said, admitting that "costs are a little higher than we'd like".
Microsoft doesn't expect to make a profit on hardware alone, but "we'll probably be gross margin neutral on that over the life cycle of the product, and try to break even on that".
Bach also added that he feels production costs wont be an issue due to increaded sales in the rest of the business. "Right now we're doing a pretty good job. We're humming pretty well in the business. Game attach rate [is at the] highest level in history for a game console at this stage in the life cycle. The same with our peripheral attach rate. Xbox Live has over 6 million members. The pieces are in place to drive the proverbial billion dollars."
Bach, during the interview, also took time to coment on the competition, the Nintendo Wii and the Sony PlayStation 3.
"I think Nintendo and Microsoft are clearly in the driver's seat on what's happening in this generation," he said. "Sony I think has some real challenges. They've got a pricing problem, they have a cost problem, they have a content problem, and they don't have an online service."
Source:
GI.biz