During the past decade Microsoft has broken into the gaming market successfully with its Xbox brand, using the Xbox 360 as a trojan horse of sorts. With over 80 million units sold and dominance in the North American market, it appears markedly triumphant for Microsoft. But there’s more than meets the eye.
Rick Sherlund, an analyst for Nomura, estimates that Microsoft’s Entertainment and Devices division is losing $2.5 million per year, with Xbox responsible for $2 million of that figure.
This comes as a huge surprise given Xbox has been reported as “in the green” for several years, due in-part to its lucrative Xbox Live subscription model.
Microsoft has reportedly hidden this significant loss with Android royalties, which it makes billions from each year. The way these are reported in fiscal reports gives the illusion that its Entertainment and Devices division is efficient and profitable.
Xbox One is about to launch and has a steep hill to climb with a high price point of $499 and some consumer disinterest caused by the earlier announcement of DRM integration. Several analysts, including Sherlund, believe that it would be in Microsoft’s best interest to separate itself from Xbox.
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