Is the 360 a "bomb"? - AVS Forum
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post #1 of 28 Old 04-20-2007, 12:40 PM - Thread Starter
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When Will Microsoft Own Up to the XBox 360 Bomb?

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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post #2 of 28 Old 04-20-2007, 12:44 PM
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If the 360 is a bomb then the PS3 is a nuke.

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post #3 of 28 Old 04-20-2007, 12:45 PM - Thread Starter
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Quote:
Originally Posted by BoomerBrian View Post

If the 360 is a bomb then the PS3 is a nuke.

PLEASE don't turn this into a xbox vs. PS3 war.
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post #4 of 28 Old 04-20-2007, 12:46 PM
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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.

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post #5 of 28 Old 04-20-2007, 12:49 PM - Thread Starter
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Quote:
Originally Posted by bpmurr View Post

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.
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post #6 of 28 Old 04-20-2007, 12:52 PM
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The entertainment division of MS has been a big loser for MS. Its lost tons of cash, but MS expected this when they decided to enter into the console arena. They are trying to turn it around, but it isn't going to happen that quickly. This guy is just writing and using numbers and spinning it for what he wants to present. Statistics can always be made to make whatever point you want it to. MS has a lot riding on the XBox brand, and it has a lot of potential to be a future money pot. The brand is something that has public consciousness and that alone is priceless.
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post #7 of 28 Old 04-20-2007, 12:55 PM
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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.

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.
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post #8 of 28 Old 04-20-2007, 12:56 PM
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Simple. Microsoft doesn't have to make money on it, and they set their sights on taking out Sony. Kind of like when Ford wanted to win LeMans in the late 60s. It has never been disclosed how much money they spent doing it, but they won...they dominated for years. Just to do 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.
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post #9 of 28 Old 04-20-2007, 12:57 PM
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Quote:
Originally Posted by LandShark22 View Post

PLEASE don't turn this into a xbox vs. PS3 war.

It is a joke. Now unpucker you a$$checks and smile.

"220. 221. Whatever it takes."
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post #10 of 28 Old 04-20-2007, 12:59 PM
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Good gracious, the author's logic fails at so many points that I had a hard time reading through his analysis. The most glaring problem is his confusion between correlation and cause, especially vis-a-vis the success of game consoles in Japan.

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post #11 of 28 Old 04-20-2007, 01:04 PM
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Strictly speaking the numbers are completely true, they've lost a crapload of money on the Xbox/Xbox 360. The only profitable quarter the division has had was when Halo 2 was released.

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.
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post #12 of 28 Old 04-20-2007, 01:07 PM
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I thought Microsoft knew all of this up front. From what I remember reading Gates was willing to take huge losses to get Microsoft in everyones living room. He sees these things being more than gaming consoles in the future.

"220. 221. Whatever it takes."
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post #13 of 28 Old 04-20-2007, 01:12 PM
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Quote:
Originally Posted by BoomerBrian View Post

If the 360 is a bomb then the PS3 is a nuke.

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.

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post #14 of 28 Old 04-20-2007, 01:58 PM
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Quote:
Originally Posted by Corvall View Post

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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post #15 of 28 Old 04-20-2007, 02:04 PM
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As pointed out, the author's lack of understanding that correlation does not equal causation (even though he shows almost no correlation anyway) regarding success in Japan makes the bulk of his analysis of worldwide success pretty worthless (since that's what he underpins it with).

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.
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post #16 of 28 Old 04-20-2007, 02:15 PM
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Originally Posted by plasmalover View Post

Sony made a crap load of money when they first introduce the Playstation and then became console leader after the Playstation 1 ended.

...and?
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post #17 of 28 Old 04-20-2007, 04:22 PM
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Quote:
Originally Posted by BoomerBrian View Post

I thought Microsoft knew all of this up front. From what I remember reading Gates was willing to take huge losses to get Microsoft in everyones living room. He sees these things being more than gaming consoles in the future.

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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post #18 of 28 Old 04-20-2007, 06:20 PM
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Japan grows less relevant to the North American videogame industry with every passing year.

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post #19 of 28 Old 04-20-2007, 07:37 PM
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It isn't news to anyone that gaming isn't a quick path to riches for most companies.

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post #20 of 28 Old 04-20-2007, 08:48 PM
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The majority of the losses that you see people quoting as facts, is mostly the losses that resulted from the original Xbox. But that was expect. I'm sure the 360 is doing far better then the xbox1 did.

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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post #21 of 28 Old 04-20-2007, 09:10 PM
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Well I dunno but out of the 5 friends and me that got one on launch day, mines the only one still working! lol thats just sad (well for them not me )

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post #22 of 28 Old 04-21-2007, 04:39 AM
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Last time I checked Microsoft made money on every console sold already and to consider the 360 a bomb or perhaps a dud this early is just ridiculous.

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"..
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post #23 of 28 Old 04-21-2007, 05:03 AM
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Quote:
Originally Posted by HeadRusch View Post

Japan grows less relevant to the North American videogame industry with every passing year.


The Pal territories are also growing every year.

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post #24 of 28 Old 04-21-2007, 05:04 AM
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^^

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.

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post #25 of 28 Old 04-21-2007, 05:18 AM
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some people are just jelous that Bill has more money to toy with than themselves so they write articles out of boredome stating what is already stated by bill himself losing money. I know when I won the powerball at 100k only I had so many jelous fcks out of the lurches it was not funny after the money you know who your true friends are and who are not. This guy who wrote the article well.......
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post #26 of 28 Old 04-21-2007, 12:08 PM
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If MS is doing so bad......why in the world would they produce an Elite version of their system?!?!? To lose more money perhaps?!?!?

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post #27 of 28 Old 04-21-2007, 12:19 PM
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post #28 of 28 Old 04-22-2007, 10:32 AM
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There seems to be a popular misconception that because Microsoft's Entertainment Division is losing money, that means the 360 is losing them money. The reality is that the Zune player and other "entertainment" products are the money losers for them right now and it's all in the same division.

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.
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