Microsoft just reported the earnings for the second quarter of its fiscal 2015, and while the Xbox One sold well, its price dragged down the company’s earnings.
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The corporation revealed that it shipped 6.6 million Xbox consoles to retailers (this includes both Xbox One and Xbox 360 systems) during the three-month period ending Dec. 31. That was down from 7.4 million during the same period in the prior year. That is also more than 4.1 million that Sony said it sold during the same period, but it’s important to note that Sony is measuring how many people bought a PS4 and Microsoft is counting how many it sold to retailers. So the comparison isn’t all that effective, and you can get a better perspective on the console race by reading our recent report here.
Microsoft’s Device and Consumer division, which includes Xbox and Surface tablets, generated $473 million in revenue during Q2. That is down 11 percent year-over-year. The vastly reduced price of the Xbox One, which sold for $350 through much of the holiday season, was a big reason for that dip in sales. Microsoft did note that the divisions profits were up 12 percent to $49 million. The Surface Pro 3 and the shift from Xbox 360 to Xbox One were responsible for the increase in profits.
Microsoft made a decision prior to the holidays to maximize the Xbox One’s appeal to consumers. That forced it to make a drastic price reduction, which the company knew would cut into its revenues. The $350 price represents a $150 cut from the Xbox One’s $500 price at launch — although the $350 version does not come with the expensive Kinect microphone-camera peripheral.
While the sale price, which Microsoft ended in early January before reverting back to last week, did dampen revenues for the company’s device division, it also helped the Xbox One gain some ground on Sony’s PlayStation 4.
The Xbox One outsold PS4 in November and December, which are the two biggest months for game spending worldwide. This will help Microsoft compete for gamers’ dollars on the long term. With more Xbox Ones in consumers’ hands, software on Microsoft’s latest device will sell better. This manifested itself in December, when multiplatform games on Xbox One did better than they did on PS4.