Become a Member My Atlas
Insights
Training
Advisory & Negotiation
Free Resources
About
Contact Us
Search
Become a Member

Updated: July 9, 2020 (March 20, 2006)

  Analyst Report Archived

Beyond the PC

My Atlas / Analyst Reports

2,050 wordsTime to read: 11 min

Although Microsoft’s main home entertainment strategy is to establish the Windows PC as a digital media device, the company has two other major home entertainment businesses-Xbox and TV platforms. With the launch of Xbox 360, these products are beginning to fit into Microsoft’s home entertainment strategy as PC-connected devices. They also give Microsoft an entry into the homes of consumers who don’t yet see the PC as part of their home entertainment systems.

Xbox

Console gaming seems like a natural business for Microsoft. Overall, the home video gaming industry earns more than US$20 billion per year, and the main product sold is software-a very familiar business with high margins.

However, unlike Microsoft’s other software, Xbox requires the company to build hardware, which offers much lower margins. In fact, Microsoft sells each console at a loss, hoping eventually to make it up on game sales and through services such as Xbox Live. As a consequence, as of the end of 2005, Microsoft has probably lost between US$3 billion and US$4 billion on the business since its inception in fall 2001. (The company does not reveal Xbox profit or loss figures, but includes Xbox in the Home and Entertainment business segment, which has lost nearly US$4 billion since the first Xbox launched in Nov. 2001.)

Atlas Members have full access

Get access to this and thousands of other unbiased analyses, roadmaps, decision kits, infographics, reference guides, and more, all included with membership. Comprehensive access to the most in-depth and unbiased expertise for Microsoft enterprise decision-making is waiting.

Membership Options

Already have an account? Login Now

Updated: July 10, 2020 (January 10, 2005)

  Analyst Report

Beyond the PC

My Atlas / Analyst Reports

1,495 wordsTime to read: 8 min

Although Microsoft’s main home entertainment strategy is establishing the Windows PC as a digital media hub, the company has two other major home entertainment businesses-Xbox and TV platforms. Microsoft entered these businesses primarily as a hedge against market changes that could reduce the PC’s relevance in the home, and their development does not necessarily fit in with the company’s main home entertainment strategy. Nonetheless, these products, particularly Xbox, are beginning to fit in as spokes to the PC-based hub, and ties among them could grow stronger in coming years.

Xbox

Console gaming seems like a natural business for Microsoft to be in. Overall, the home video gaming industry earns more than US$20 billion per year, and the main product sold is software-a very familiar business for Microsoft, and one in which margins can be extremely high.

However, unlike Microsoft’s other software, Xbox requires the company to build hardware, which offers much lower margins. In fact, Microsoft sells each console at a loss, hoping eventually to make it up on game sales and through services such as Xbox Live. As a consequence, Microsoft has probably lost close to US$2 billion on the business since its inception in fall 2001. (The company does not reveal Xbox profit or loss figures, but includes Xbox in the Home and Entertainment business segment, which has lost more than US$2.5 billion since the company began reporting profit and loss by segment in July 2002.)

Atlas Members have full access

Get access to this and thousands of other unbiased analyses, roadmaps, decision kits, infographics, reference guides, and more, all included with membership. Comprehensive access to the most in-depth and unbiased expertise for Microsoft enterprise decision-making is waiting.

Membership Options

Already have an account? Login Now