Digging into Microsoft's recent earnings report - the one that stated that the Entertainment and Devices Division over-performed
- one element of that division stood out.
Certainly, recent Xbox 360 offerings and price-cutting save a healthy uptake of that part of the division. On the downside, however, was the Zune. If you're British, you may only have seen Microsoft's iPod beater in mythologies. If you're in the USA, where the device has been on sale since 2006, it's possible you've seen boxes of the music player lying around the place.
Well, here's what Microsoft's most recent Form 10-Q
has to say:
"Zune platform revenue decreased $100 million or 54% reflecting a decrease in device sales."
Ouch. This text is followed by a slightly more detailed look at the division as follows:
"EDD operating income decreased primarily due to increased cost of revenue, research and development expenses, and sales and marketing expenses, partially offset by increased revenue. Cost of revenue increased $139 million or 7%, primarily driven by increased costs associated with the Xbox 360 platform reflecting the increase in console and video game sales. Research and development expenses increased $106 million or 29%, primarily reflecting increased headcount-related expenses associated with the Windows Mobile device platform. Sales and marketing expenses increased $83 million or 19%, primarily reflecting an increase in product advertising and channel marketing."
The six months ended December 31, 2008 compared with six months ended December 31, 2007 are described as follows:
"EDD revenue decreased primarily due to decreased Xbox 360 platform and PC game revenue, partially offset by increases in other EDD product revenue. Xbox 360 platform and PC game revenue decreased $196 million or 5%, primarily as a result of the $330 million of incremental revenue from the launch of Halo 3
in the first quarter of fiscal year 2008 and decreased revenue per Xbox 360 console as a result of price reductions during the past 12 months.
"We shipped 8.3 million Xbox 360 consoles during the first half of fiscal year 2009 compared with 6.1 million Xbox 360 consoles during the first half of fiscal year 2008. Other EDD product revenue increased $169 million or 15%, led by increased sales of application software for Apple’s Macintosh computers and mobile and embedded device platforms.
"EDD operating income decreased primarily due to increased research and development expenses, partially offset by decreased cost of revenue. Research and development expenses increased $251 million or 37%, primarily reflecting increased headcount-related expenses associated with the Windows Mobile device platform, driven by recent acquisitions. Cost of revenue decreased $112 million or 4%, primarily driven by decreased Xbox 360 manufacturing and warranty costs."
So, year-on-year, Microsoft's game revenues decreased. Although, "decreased revenue per Xbox 360 console (came) as a result of price reductions during the past 12 months", the company did manage to get 2.2 million more 360s into homes than the previous year