NEWS - Friday, May 4, 2007
Bach: Xbox Will Make a Profit in 2008Robbie Bach said: "Its a business that will be profitable next year. Well make money next year and that will be the first time, which is pretty exciting." Microsoft announced last week that falling Xbox 360 sales contributed to a 21 per cent drop in revenues for the entertainment and devices division. The first quarter of 1007 saw an operating loss of USD 315 million (EUR 232 million) for the division, which also makes the Zune mp3 player. But these losses were reduced from the same period last year. Bach told eWeek that he expects Microsoft to stop making a loss on console production soon, with revenue from games, Live and peripheral sales contributing to positive cashflow some time in 2008. "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 wed like". Microsoft doesnt expect to make a profit on hardware alone, but "well probably be gross margin neutral on that over the life cycle of the product, and try to break even on that". But he feels growth in the rest of the business is increasing fast enough to offest production costs. "Right now were doing a pretty good job. Were 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 also commented on Microsofts competition, saying he felt Nintendos Wii put it in a much stronger position than Sony. "I think Nintendo and Microsoft are clearly in the drivers seat on whats happening in this generation," he said. "Sony I think has some real challenges. Theyve got a pricing problem, they have a cost problem, they have a content problem, and they dont have an online service." He also added that the Wii had received "more broad-base acclaim that I would have expected" and was "a very nice product, but it actually has a relatively specific audience and a fairly specific appeal." The challenge it presented to Microsoft was how to compete with it in the casual market, on both Xbox 360 and Windows, he said.