It’s Schadenfreude Friday!

Microsoft’s Xbox division has announced their results for Fiscal Year 2006. Highlights:

  • Total loss of $1.2 billion.
  • Operating losses up 183%.
  • Revenues down 10% YTY in Q4 because of “decreased Xbox 360 console sales”; specifically…
  • Sales dropped from 1.8 million units per quarter to just 700,000 units per quarter, YTY.
  • Revenue from sales of games down 28%.

This is awesome news, making it six years of losses to date.

Microsoft say they expect to make a profit in the upcoming year. O RLY? They couldn’t make a profit during a year in which they basically had no competition, so how do they expect to do better now that the Wii is outselling their console by a factor of 3:1 or more and Wii games are already outselling Xbox games? Nintendo makes a profit on every Wii console, while Microsoft has apparently lost money on every Xbox 360 they’ve sold, even after you factor out the huge losses from replacing broken consoles under warranty.

Added to that, the PS3 is going to see its first “must have” games ship towards the end of this year. Grand Theft Auto IV looks incredible, but the Xbox 360 version is apparently in trouble because it’s hard to cram the game onto a DVD. Demos to date have been the Xbox version, but there’s a good chance the PS3 version is going to end up looking significantly better. Then there’s Ratchet and Clank Future: Tools of Destruction, Heavenly Sword, the new Indiana Jones game, Killzone 2 (with its 2GB levels), LittleBigPlanet, Metal Gear Solid 4, Uncharted: Drake’s Fortune, and so on.

Basically, Microsoft have already been squeezed out of the low end of the market by the Wii, and the hardcore gamers are likely to start getting more interested in the PS3 soon. I suspect Microsoft has much less chance of turning a profit next year than it did this last year.