Xbox One Sales Still Dragging Microsoft Down

Image via Flickr/ Major Nelson

While Sony attempts to organize the entire resurrection of its company around gaming, Microsoft continues to embarrassingly shuffle Xbox numbers into the background of its reports. During a good quarter for the firm, the Xbox division was once again a weak spot. The company’s report, however, made it appear as if a victory had been won, though in terms difficult to compare to previous years.

Microsoft sold fewer units of its Xbox console during the Christmas 2014 period than it did during the same period in 2013. The company revealed total shipments of 6.6 million for the most recent three-month reporting period. That compares poorly to the 7.4 million shipped in the comparable quarter of 2013. Revenue in the division dropped by 20 percent year on year.

Microsoft Hides Xbox Figures

There’s no way to get a good read on the Xbox numbers because Microsoft hides them using a number of obfuscating accounting processes. The Xbox hardware and games are recorded in the “consumer devices and software” segment, which bundles the Xbox with sales of the Surface tablet and other sources of income. This makes it almost impossible to see where the money in Microsoft is actually going, particularly with regard to the Xbox One.

Microsoft fills publications with the most desirable of sales numbers, concentrating on those from the U.S. — a market that the Xbox 360 won convincingly — and failing to release Xbox One sales figures should they not be complimentary. Sony shipped 4.1 million PS4 units over Christmas. Microsoft sold 6.6 million Xbox One and Xbox 360 units altogether in the entire three months.

Microsoft isn’t hiding these figures in order to lure Sony into a false sense of security; it’s hiding them because it’s losing in the market, and it’s losing money on the back of every move made by the Xbox division. The company is selling the console at $50 less than the PS4 and, though it’s clawing back market share at that price, it’s burning cash as a result.

Will Microsoft Kill Xbox?

With a strong brand behind it, it’s difficult to assert that Microsoft would just kill off its Xbox division. Brand recognition, alas, isn’t everything, and exactly what people think of when it comes to the Xbox — living room gaming — appears to lose the company money.

Various possible buyers have been mooted in the past, including Amazon and Google, but neither are likely that excited about a business that will drain their cash despite existing in a mature market. According to analysis that emerged last year, all profits associated with gaming at Microsoft are actually a result of Microsoft’s Android royalties.

This was a big story around the time of the original release of the Xbox One, and became a lead narrative when Satya Nadella took over at the helm of the firm. Microsoft proper has made relatively little mention of the Xbox One as part of its major strategy, though it still seems important at the company. New technology like the firm’s holographic computer, the HoloLens, appears to owe much to innovations at Xbox.

So is Microsoft going to kill the Xbox One? The answer is probably no. The company sees some kind of value in the business, which is why it’s kept at it for all these years. On the other hand, people aren’t going to stop talking about the possibility. Not, at least, until Microsoft actually records a clear profit on the business.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.