Xbox 360 sales down by almost half

Xbox 360 sales down by almost half

Summary: Microsoft's Entertainment and Devices Division saw revenue fall by 16 percent to $1.62 billion, with the company placing much of the blame on a "soft gaming console market."

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Digging through Microsoft's third quarter earnings uncovers evidence that suggests sales of the company's Xbox 360 games console may be past their peak, falling dramatically over the last quarter.

Microsoft sold 1.4 million consoles during January to March of this year, a precipitous drop of 48 percent compared to the same period last year. This in turn resulted in a fall in revenue for the Xbox business of 33 percent, down to $584 million. Sales of the Kinect motion controller were also down, but Microsoft did not state by how much.

The only part of the Microsoft's Xbox business that saw growth during the period was Xbox Live.

Overall, Microsoft saw revenue from its Entertainment and Devices Division fall by 16 percent to $1.62 billion, with the company placing much of the blame on a "soft gaming console market."

Despite this, the Xbox 360 continues to enjoy its fifteenth consecutive month as the best-selling console in the U.S., according to NPD data. In March, 371,000 Xbox 360 units were sold, and total retail spending on the platform was $430 million.

There's no doubt that the Kinect 'hands-free' controller has helped to keep sales of the console, accessories, and games buoyant following its release in November 2010, but an accessory can only go so far is keeping an aging console relevant.

The problem with the Xbox 360 -- and Sony's PlayStation and Nintendo's Wii for that matter -- is the age of the platform. Microsoft's latest iteration of its popular console first debuted in November 2005, and while it has seen a few revamps since then, the underlying technology has essentially remained unchanged, with most of the design changes relating to cooling.

Can you imagine playing the latest games on a PC that was over six years old? It doesn't bear thinking about, but when you fire up that console of yours -- no matter if it's an Xbox 360, PS3 or Wii -- you're gaming on technology that is over five years old. Not only is console gaming suffering because of aging technology, it's having a knock-on effect on PC gaming also since many of the PC versions are actually ports of the original Xbox game.

The financials give us a hint that work on the next Xbox is well underway. Microsoft's Entertainment and Devices Division saw its research and development costs jump by 35 percent over the quarter to $335 million. It's hard to imagine that this increase is down entirely to research and development on the Windows Phone platform.

Not only are consoles expensive to develop, the process takes time. This development time is then followed by a period where Microsoft then works with game studios to bring a selection of must-have titles to the platform. The entire process consumes dollars, which is why Microsoft wants to squeeze all it can from the 360 before moving on.

How long will we have to wait for a new Xbox? Most of the rumors and predictions seem to predict a 2014 launch, putting the replacement console two holiday seasons away. It's possible that Microsoft has overestimated the lifespan of its Xbox 360, allowing sales to peak years before the replacement console is ready. If sales are already 'soft' then I can only imagine that they are going to get worse as the quarters go on.

Microsoft's Entertainment and Devices Division could be in for a rough ride.

Image credit: Microsoft.

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Topics: Microsoft, Hardware, Mobility

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21 comments
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  • It's SOFT because no one is bringing the excitement.

    Where is the new stuff? the 360 is yesterdays news and no one else is upgrading either so why buy a new one? If my old 360 still works I'm good and their is no reason what so ever to purchase again until something new and better comes along. Simple.

    Pagan jim
    James Quinn
  • Would be curious to see profit breakdown

    I was under the impression that the console market was similar to the razor blade market: sell the hardware at cost (if not below) and make it up later.

    MS clearly makes revenue from console sales, accessory sales, Xbox Live subscriptions and content sales, and game licensing. I would be shocked if game licensing didn't make up the bulk of whatever profit MS pulls in from its Xbox ecosystem.

    Just curious if anyone has any sort of a profit breakdown as to where MS's revenue and profits come from within the Xbox ecosystem.
    toddbottom3
    • On a side note -We should get a pool going

      bet on who's the first blogger here to say it's because they're being replaced by iPads.
      William Farrel
      • They are being replaced by iPads

        And you're being flagged for being an idiot.
        ScorpioBlack
      • Lol

        The arm processor in the ipad will explode running a typical xbox 360 game, so will the gpu.
        sjaak327
      • Lol indeed

        I think it'd be fantastic if the gaming device exploded during the game. It's solve for me a large antipodean problem. Can you confirm that they would?
        ego.sum.stig
  • The whole market is down, not just xbox, they're still #1 again.

    And they still have HALO4 coming out. And no one planning on buying anything else besides the next xbox so they're just fine.
    Johnny Vegas
  • Xbox 360 sales down by almost half

    No big deal, they have a new Xbox in the works and they made more than enough profit over the lifetime of the Xbox 360. A lot of people already have one so sales of them to go down is to be expected.
    Loverock Davidson-
  • Ebb Before the Next Generation

    This may be partly because of the interest in Android and iOS gaming (though to be honest, touchscreen gaming is decent for just a few types of games and kind of stinks for everything else). However, it has also been a while since a new generation of consoles have come out, and gamers know they are coming soon. Interest in the current platforms is going to be at a low ebb as announcements of new platforms are anticipated very soon.
    CFWhitman
  • or maybe just consumer tastes are changing

    i used to play bigtime in console game under the old Nintendo-64 system, and bigtime on PC games. however, my tastes have changed. with my smartphone, i can play a quick game of many titles. additionally, who has time (unless you are a 14-17 year old boy) to sit down and play for hours on a game console? i'd prefer to play a quick game (15-20 minutes) of something that can be saved anywhere i am.
    brentgee
    • Not true

      Not true at all I am 25 and I work full time and I goto school at night for my MBA. I currently have a 3.26 GPA and I put over 45 hours in Mass Effect 3. Stop generalizing and assuming video games are just for children because its not and I am so sick of that argument. Adults spend countless hours watching movies, and prime time TV, sports on Sunday, the list goes on. People have the time, its just what you decide to do with your time.
      SEANPAT05
  • Well done ...

    ??? for pointing out that Xbox360 sales have dropped to half the volume of the previous Xmas/holiday quarter. I am more surprised that you think that is news.
    bitcrazed
    • I'll bet

      He will be amazed when more consoles and gaming devices are sold in the October through December Months too. Shocking!!!
      bobiroc
  • No Worries here.

    From what I understand Microsoft is going to update the XBox's graphics API sometime soon after the release of Windows 8 via a download (to Direct X 11.1 I assume which is outstanding). There are also rumors of new consoles from both Microsoft and Sony in response to the new Nintendo thingy (very unlikely though). Also Microsoft has just released a desktop SDK for the Kinect. There are already a whole slew of animated indie films and games that have used the Kinect as a motion capture device (it's an awesome, extremely low cost alternative to the systems places like ILM use for films like Pirates of the Carribean). All in all by this time next year artists will be able to generate a far broader variety of games and the like which will undoubtedly create entirely new genres of games.
    kennyrosenyc
  • Actually I take that back...

    There is a new XBox coming out in 2013 it's codenamed Durango.

    16 core IBM Processor
    AMD 7000 series graphics (Direct X 11.1)
    All new Kinect which reads all the way down to fingertips.

    How's that??
    kennyrosenyc
  • Ipad ya got to be kidding

    Did I hear someone say its because of Ipad that xbox sales are down LMAO

    K well its very simple why its down for the following reason

    - the console lasts longer now (Not as many RROD issues anymore)
    Dus its not replaced as much anymore ;)

    If you look at that xbox live sales have gone up instead makes sense

    If you think Ipad will replace xbox your dreaming or have a lot invested in Facebook/Apple stock ;)
    dbpvr@...
  • People are buying iPads instead of consoles.

    Apple killed yet another old market segment.
    MSFTWorshipper
  • and your point

    can you saturation.d'oh
    sarai1313@...
  • iPad are you serious?

    The fact is the bothing has changed in the console market except the games. Most families have at least 2 gaming consoles now. The games I have collected, for my XBOX 360, over the years have really piled up. Of course sales are going to go down, but it is not because of the iPad, give me a break. It simply that the demand has gone down. The tablet market is completely seperate from the console market. The only devices being hit hardest are the Nintendo 3DS and Playstaion VITA.
    trainguy555
  • It's not so much about "old Tech."

    According to an article on geekwire, the initial sales may be down by comparison to last year???s marks; however, the Xbox 360 sales are still slightly ahead of the WII and ps3. Whatever, I???m hardly worried about any of the three consoles drying up and blowing away tomorrow, Lol

    As far as all of us poor console and or pc gamers suffering the agonies of old technology???that???s hardly an issue. The issues are the lack of quality games being produced anymore. The actual game development process itself (e.g. graphics rendering, game engines, particle systems and so forth) is evolving nicely, which translates into better ???looking??? games that run efficiently on this ???old technology???.

    Ultimately, I can???t imagine there are very many gamers out there who are dropping their controllers and or mouse/mice because there are not enough snowflakes or raindrops being rendered in real-time. LOL When your sighting down the barrel of your rifle, is the lack of a building or tree rendering at 1000ft causing you any grief because technically it should be rendering at 600ft? I thought not.

    Game sales are what ultimately push a consoles success and if the quality isn???t there, than neither are the sales. Obviously some games CAN get away with this (e.g. C.O.D. Dead Island, M.O.A.) but most cannot.

    Maybe if game developers??? would stop taking the McDonald's cheeseburger approach to game development and quit regurgitating the same old games as NEW, only because they???ve taped MULI-PLAYER capabilities on, people would be more inclined to open their wallets. This cheeseburger approach to game development is nothing more than a cheap and dirty way to make an easy buck while NOT producing anything genuinely new and or original.

    As far as PC gamers writhing in agony over console ported games, and again, the ???old technology?????? Please. LOL We have MODS. ???Old tech.??? isn???t an issue.
    Start producing high quality, ORIGINAL games and you???ll probably see some sales rise??? that???s just my 2 cents. ;-)
    Oddmoore