Xbox profits (*Accountability Margin) revealed in new FTC leak

[John Elden Ring]

Via:

Xbox profits revealed in new FTC leak

Gamers, investors, consumers and competitors finally get a concrete answer on just how profitable Microsoft's Xbox video games division actually is.

www.tweaktown.com

Microsoft is very selective in what data it releases on its various divisions. This includes gaming, which is now Microsoft's fourth best-earning business in terms of revenue with $15.4 billion earned in FY23. Every quarter, Microsoft will report three metrics on the Xbox business: content & services earnings, hardware revenues, and a finalized Xbox gaming number. Sometimes Microsoft will also release a new Xbox Game Pass figure, but they haven't done that for some time.

This is a big departure from Nintendo and Sony, both of which reveal revenue and profit numbers for their games businesses. Microsoft, however, has never discussed Xbox's profits. Now thanks to a series of documents and files that were accidentally leaked as part of the FTC v Microsoft federal trial, we have an idea of how healthy Xbox actually is.

According to an internal Gaming CSA (Customer Service Area) slide deck, the Xbox games division had an accountability margin of $1.5 billion for the first 9 months of FY22 (July 2022 - March 2023)

According to our findings, Xbox gaming had a 12% accountability margin (AM) for 9 month period in FY22. However, in the aforementioned testimony, Spencer says that "the Xbox business today runs at a single-digit profit margin."

Comparing this number with the other Big 3 players isn't exactly straightforward. The accountability methods may be different. We're not entirely sure how Microsoft calculates its accountability margin, but the closest comparisons we have are PlayStation's $1.419 billion in operating income, which represents a 7% margin, and $2.977 billion in net profit from Nintendo, which represents a strong 25% margin.

 

[JAHGamer]

Common disingenuous reporting from that DeekeTweak clown

 

[Zzero]

Me before reading the article: "Well, there are none."
Me after reading the article: "See."

edit: Actually, I think I'm misreading the slides. So there actually is profit, just not a lot of it? Why aren't they crowing that from the rooftops? Doesn't literally everyone think the division loses money?

 

[KiryuRealty]

Well, I guess there's one upside to their hardware sales tanking. It means they aren't losing as much money on it, making the division SLIGHTLY less abysmal.

It still doesn't begin to fill in the hole that their financials have been for 22 years, though.

 

[Darth Vader]

Complete bullshit. People extrapolating "profits" from "accountability margin" need a kick in the balls. Accountability margin is pretty much this:

Contribution Margin: Definition, Overview, and How To Calculate

Contribution margin is a cost-accounting calculation that measures the profitability of a product or the revenue that is left after covering fixed costs.

www.investopedia.com

Contribution Margin vs. Gross Profit Margin

The contribution margin is different from the gross profit margin, the difference between sales revenue and the cost of goods sold. While contribution margins only count the variable costs, the gross profit margin includes all of the costs that a company incurs in order to make sales.

The contribution margin shows how much additional revenue is generated by making each additional unit product after the company has reached the breakeven point. In other words, it measures how much money each additional sale "contributes" to the company's total profits.

So basically, this accountability margin very likely ignores fixed costs. Fixed costs include things like salaries, rents, etc. I'd also love to know if they calculate the amount owed to 3P developers from inapp purchases and store sales as fixed or variable costs - my gut is at variable.

Sony and Nintendo, on the other way, kind of present clean gross profit margins, so they can be compared in isolation.

edit: Actually, I think I'm misreading the slides. So there actually is profit, just not a lot of it? Why aren't they crowing that from the rooftops? Doesn't literally everyone think the division loses money?

Answered your question above.

TLDR - The division could very well be making profit, but nobody can claim that only from a positive accountability margin.

Edit - To add upon the above, the usage of accountability margin makes me believe that, even internally, they are misrepresenting the financial black hole Xbox is. Think about it, 1.5B in accountability margins, which don't include salaries, studio costs, insurance, bills, etc, and will probably not include their variable costs with store sales and in-app stuff, owed to third parties?

 

[Entropi]

Back in 2018, people on the internet kept saying Xbox had higher profits than PS by a wide margin. It was a blatant lie.

So is this.

 

[daniel5043]

Does anyone know how they accounted that

 

[Deleted member 223]

This is not apples to apples but presented as such, with just a disclaimer on top that your average sheeple will not read, and even if they do, do not understand. Which begs to reason the whole pitch of the exercise being nothing more than clickbait by the source (who understands this). This will obviously have legs for the console war, it thrives on misinformation and ignorance after all, and that's where the source cashes in. It's not "industry" and "news reporting", it's diahrrea slightly packaged as chocolate candy.

Without a breakdown of what "accountability margin" means strictly for MS, from their own mouth, that number is just, well, a number. Unless we get a leak that strictly breaks down how accountability margin for MS is calculated, and most importantly, what is left out of the equation, nobody outside MS knows what that number ultimately represents.

 

[Darth Vader]

Do any one how they accounted that

I highly suspect they are using accountability margin in a similar manner to contribution margin.

Xbox profits revealed in new FTC leak

Via: https://www.tweaktown.com/news/93375/xbox-profits-revealed-in-new-ftc-leak/index.html Microsoft is very selective in what data it releases on its various divisions. This includes gaming, which is now Microsoft's fourth best-earning business in terms of revenue with $15.4 billion earned...

icon-era.com

 

[Johnic]

What a load of BS. Not a single honest number in that report.

 

[Papacheeks]

I posted this on Discord and going to post it here with time stamps:

David Faulkner is a Financial Analyst over in Australia.

Then a clown appears :

 

[Bryank75]

It's an outright lie to try and conflate this "accountability margin" with net profit.

Shameless. This is the standard of reporting now. Just thinly veiled fanboyism.

 

[AshHunter216]

I posted this on Discord and going to post it here with time stamps:

David Faulkner is a Financial Analyst over in Australia.

Then a clown appears :

PostUp being a weird MS defender as usual.

 

[Johnic]

The truth comes out...again. Do they think people are idiots?

 

[Papacheeks]

The truth comes out...again. Do they think people are idiots?

Yup! Should see idiots like Destin on twitter...jesus big Yikes.

 

[AshHunter216]

Yup! Should see idiots like Destin on twitter...jesus big Yikes.

Those people are obsessed with Xbox having more of everything than Playstation. Terrible influence on the gaming community.

 

[Darth Vader]

@Papacheeks he basically confirms what I said, good to see.

 

[Killer_Sakoman]

I think accountability margin should be around 40% to start turn operating income.

 

[KiryuRealty]

Those people are obsessed with Xbox having more of everything than Playstation. Terrible influence on the gaming community.

Well, one thing Xbox will ALWAYS have over PlayStation is that Xbox has lost FAR more money than Playstation has, historically.

 

[ethomaz]

That is not profit...
It is not even close to it... weird how people are trying to extrapolate profit from it.