Microsoft’s COO has reiterated that the software giant “believes” in the gaming space, even though the Xbox 360 continues to be a money-losing business—after all, “it took seven, eight, or nine years before Windows was profitable.”
Since Microsoft entered the console market in 2001, the Xbox strategy has been one of heavy investment, leading to significant losses in its home and entertainment division.
The losses are clear in recent financial reports. For fiscal year 2005, Microsoft’s game division posted a $485 million net loss. In fiscal 2006, ended June 30, 2006, the division lost $1.26 billion.
Microsoft COO Kevin Turner (pictured) told San Jose Mercury News journalist Dean Takahashi that the heavy losses are all part of making Microsoft an increasingly viable player in the games space.
“…It's important for us to have multiple pillars for growth,” Turner said. “We think we are uniquely positioned to be able to invest what it takes to be successful in areas like entertainment and gaming.”
He continued, “People forget. Steve [Ballmer, Microsoft CEO] reminds me it took seven, eight, or nine years before Windows was profitable. People forget that. We're in it for the long term. This is a company committed to invest for the long term. We would like to make money quickly. But that's not what changes the world. That's not what innovation allows you to do. Regardless of what you look at, it takes a lot of years. This is a company that is committed to sticking to things that we believe in. Certainly, this is a space we believe in.”
Although financial losses have been part of the Xbox’s tradition since its launch, Microsoft entertainment and devices president Robbie Bach said earlier this year that he expects that to change in the next couple of years. During the 2006 Microsoft Financial Analyst Meeting, he said that fiscal 2007 would again show losses for the company’s games business, but in fiscal 2008, he said that gaming would turn a profit, which would be a first for a full fiscal year.
Turner added, "To invest for the long term, you have to believe and you have got to be committed. That commitment gets tested when things get tough."