If you’ve ever wondered why only three major companies remain in the video game console business, it’s simple mathematics. You’ve got to spend money – a lot of it – to make money.
Despite losses in its game division of $1.26 billion for the fiscal year 2006, which ended June 30, Microsoft remains committed to the Xbox 360.
Microsoft COO Kevin Turner has been quoted as saying the company continues to “believe” in the gaming system. “This is a company that is committed to sticking to things that we believe in. Certainly, this is a space we believe in.”
With less than a year into the new console’s sales, and more importantly, game sales for the next-gen machine, why wouldn’t they?
For any doubters, Turner pointed out this little fact: “People forget. Steve [Ballmer, Microsoft CEO] reminds me it took seven, eight, or nine years before Windows was profitable.”
It takes an ability to handle big loss in the beginning to front a system like the Xbox 360. Microsoft has that ability and the intestinal fortitude to back it up Turner says. “To invest for the long term, you have to believe and you have got to be committed. That commitment gets tested when things get tough.”
It’s expected the 360 will take losses again in 2007 and start turning a profit in 2008. And, with all kinds of announcements about the Halo franchise, Gears of War and other 360 titles creating major buzz, this could be more than possible.
It’s likely the PlayStation 3 will also start off in the red, while some believe the Wii will be profitable very shortly after its launch.