DISCLAIMER: This IS NOT flame bait. The article is NOT saying the 360 is a bad product, he is strictly analyzing it from a business standpoint. I have a 360 and absoloutely love it. I'm just wondering if some of you who follow the gaming industry closely (unlike me) think this guy knows what he's talking about.
The article basically says gaming has been a complete financial disaster for MS. He seems to harp on the fact that it is unsuccessful in Japan as the main indicator that they are in trouble.
"Sometimes these cold, stark facts seem to get lost in the shuffle. Xbox 360 (a meaningful part of H&E) might be a fine product, but if so, why is it so financially disastrous to its maker? I understand the concept of selling a console at a loss in order to lay the foundation for recoupment of original investment + operating losses + attractive financial return through gaming, but what is it going to take to turn things around? Nothing short of a tectonic transformation in perception of the Microsoft offering relative to its competitors."
What do you guys think?
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If you look at from the aspect of making money it hasn't been a success yet. However MS new it would have to take a big hit to get into the market. Now they are making money on the 360 and related items. At the end of this generation MS should have a pretty solid and profitable gaming division.
That's what I've always thought too, but this guy lists some some pretty bleak numbers. But like any numbers, they may be skewed to present the view that the author wants.
The fact is MS is sitting on more cash than they know what to do with. They can't invest any more into their existing revenue streams, so they have to look for new markets. I wouldn't be surprised to hear if the idea for the original XBox came from a higher-level meeting where the execs were just trying to figure out what the hell they can do with the billions they have lying around.
"What about making a video game system?"
"Why not, it's making money for Sony, right?"
"Yeah, that sounds good. Let's throw a few billion at that and see what sticks."
And if MS loses a few billion over this? Yeah it hurts, but the company certainly isn't going to tank because of it.
"Sure, the Xbox 360 can be righteous and cool with hard-core gamers, but this is not a sufficiently large user base to recoup the magnitude of investment Microsoft has made in its gaming platform."
Um..so the 360 is outselling the PS3 monthly and already has over 10mil lead. I dont know this author but I didn't agree with more than a few points in his article.
Japan? WHO CARES. Forza2, Oblivion, Halo. Not Japanese, and are goign to be the hottest titles this year.
It is a joke. Now unpucker you a$$checks and smile.
However, most of the divisions at Microsoft are not self-sustaining - Windows, Windows Server and Office are the only consistently profitable divisions at Microsoft, but the profits from those divisions alone are far more then enough to fund everything else Microsoft does. For them it's not about just the Entertainement division - it's about how the entertainment division boosts Windows and Microsoft's image, and positions a set-top box in the living room for MS to forward various initiatives. It's somewhat similar to one of the PlayStation 3's goals being to become a trojan horse for Blu-ray.
In other words, it's not about the battle for console supremacy, it's about the war for overall industry dominance.
I agree, no war between these two, however he has a valid point and its not just the PS3. They all seem to loose money now. The PS3 is loosing a LOT, so is Microsoft. I think they understand that now and they want other income sources, i.e. Live, exclusive games, movie rights, pay for TV and movie downloads, pay for arcade games, etc. etc. they need the console in there first and then want to make money other ways.
There's no way MS could have expected to jump into this industry and hope to turn a profit soon. The XBox was a foundation, laid to be respected players. The 360 is their play for the top where they can try to be the top player. Then, when they're established there, they can start making money. I'd think they would hope to turn a profit by the end of this generation and going into the next, but not before.
Sony made a crap load of money when they first introduce the Playstation and then became console leader after the Playstation 1 ended.
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He also tries to make Japan sound far more important than it is. He notes "For historical reference, consider that over 19 million PS1s and 20 million PS2s were sold in Japan alone. . .", but neglects to also point out that sales of PS2 units in Japan were exceeded by the US in 9 months, and by Europe in 18 months. This is even giving the Japanese numbers a 9 month head start. If you look simply at units sold since worldwide launch, Japan was dwarfed immediately upon release by both the US and Europe. He also doesn't point out out of all units sold, Japan accounts for only 20% of them, with the other 80% going nearly equally to the US and Europe. How exactly does this translate to Japan being anything but a very small factor for worldwide success?
The section on losses is accurate, but rather pointless, given Microsoft's stated desire to be in this category at almost any cost.
Overall I'd say that the article linked is partially true, but completely pointless, from an investment or any other perspective.
This is what I think too. Take losses now but get the name established and become the console leader, then in the next generation (Xbox 720?), make it profitable. I think they're in a good position, unless of course they release the XBOX 720 with a $599 price tag, but only an idiot would do that.
Sorry about going there, but I really do think Sony fumbled the ball this generation, leaving the door wide open for MS to establish itself for the next (profitable?) generation of a home entertainment "hub" of sorts.
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The Xbox 360 is just a stepping stone to Bill Gates' big plan. Microsoft is already dominant in the office place and home office. Now they are beginning to get a foot hold in your living room. Next Microsoft will be, basically, in your walls. I believe this is Gates and Microsoft's ultimate plan, to have a MS product in every room, being able to control you house from a touch screen anywhere in you home.
Eventually they'll get chips in your brain. :P
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Their is another system doing much worst in every single country it launched in in comparison to the other consoles and are losing a much larger amount on each console sold.
I think Microsoft is doing everything right this go around and the massive amount of good games on the shelf are proof of that. You dont have a solid lineup in the store and a release schedule for the upcoming months thats just as solid as what you already have and rivals your other competitors releases and be considered a "bomb"..
The Pal territories are also growing every year.
If you're looking at it from the viewpoint of a shareholder (owner), which is the viewpoint of the article, your opinion would be different.
Investors want money now & in the future, but they dont like to hear that they'll have their money tied up in multibillion dollar losses without hope of breaking even/recouping the losses somewhat timely.
Unlike Nintendo (which is entirely gaming) and Sony (which has a specific gaming division), Microsoft lumps their gaming division in with other entertainment products.
The result is that it consistently paints a grim picture of Microsoft's profits from the Xbox360, when in reality, they have sold a ton of accessories since day 1 and have the best game attach rate of any system ever and make a profit now on systems sold.
So I find it impossible to believe that the 360, accessories, and games are still losing them money. I personally think it's the Zune not making a dent in Ipod sales that's causing their entertainment division to look like crap in the profits department. But I don't think anyone really knows (outside of Microsoft itself) exactly how the profits break down within the entertainment division as far as 360 profits compared to Zune losses.