Microsoft's Xbox 360 a Bomb?

[jpublic]

In an article over at Yahoo Finance (http://biz.yahoo.com/seekingalpha/070418/32642_id.html?.v=1) Roger Ehrenberg claims that Mircrosoft needs to own up to the financial disaster that the Xbox and the 360 have been, and give up the market.

Gaming has been a disastrous endeavor for Microsoft, particularly from an investment perspective

Although the report has sound financial data, it's highly suspect for being partisan by the fact that it's completely biased towards success in Japan as being critical to the success of a system, dismissing the value of the North American and European markets. However, I do have to agree that if MS doesn't figure out a way to make up their significant losses in the gaming market, they need to cut it loose.

[Kamalot]

Excellent point of note:
Before digging into the data, I'd like to clarify a key point: my perspective is that of a financial analyst. Therefore, my primary interest is in the strategic and financial implications of business decisions, in this case the Xbox 360 and Microsoft's Home & Entertainment strategy, and NOT whether or not the Xbox 360 is a rocking product.

[DaXIthR]

Valid thing to think about.

Like how many years is MS going to keep writing off the Xbox brand? How much have they lost since 2001? Or since 1998 when they started working on it?

Do they have a singe cent to show for it?

The only thing they brag about is finally making things difficult for Sony this year. But that's immediately putting money in their piggy bank?

Are they going to move on to Xbox720 as early as 2009? I think that's when we'll find out. If MS drops a third generation console still with the hope of making a long-run killing, they'll need to seriously think whether they belong here or not. When long-run kick in for them?

[Disgustipated]

Problem is, Microsoft can afford to throw money at the Xbox brand until it's just right.

[harle]

Eh. With all the Japanese developers jumping on the MS wagon, I do not think they should cut their losses. They will already have exclusive rights to or ports of the five most popular series (maybe more) on the PS2. Seeing as how it is software sales that end up making or breaking a system (besides Nintendo), I would say MS is in a pretty good spot for the next few years.

[Tyrant]

The Japanese market success portion of the article is kind of funny, considering that of the 3 markets, it is the smallest. Then there's his point about how success in Japan means more developers will flock to the console, in which he provides an example of Electronic Arts' Wii development...but EA also happens to be pretty active on the other 2 consoles.

See how the Xbox did better than the Xbox 360? Even the PS3 has done better than the Xbox 360. But success in Japan is not a guarantee of a run-away success, as the GameCube proved. Without question, Japan is an important and critical market for building a globally successful gaming platform, and an early read of the tea leaves does not bode well for the Xbox 360.

If Roger would just take a look at their table again, they would have taken note of how the PS1 did worse than the PS3 and how the GameCube did better than any of them.

[Achilles]

The 2006 numbers show a huge increase in revenue. Their expenses have grown as well. I wonder if Zune and Media Center PC are also in Home and Entertainment. I think they’ll be profitable in 2007.

About Japan, the 360 actually has a lot of Japanese support even though it’s not doing well in Japan. The Japanese games that have been distributed outside of that country have done really well, with at least 1 selling over 1 million. It may not matter if the 360 sells in Japan, as long as the Japanese can sell their games on 360 in other territories.

[Heretic Machine]

Microsoft is in position to take the throne with this generation. The only competition they have is Nintendo, who hasn't been able to get out of third place in the install base for two generations. The Wii is a success, but will that success carry it to the top? That is the question right now, and if not, then Microsoft will own this generation, and likely the next. Talking about pulling out now is about the stupidest thing I've ever heard.

As for Japan, it may trick quite a few people into believing that it is more important than 100% of the rest of the world, but I'm not buying it. There is this perception that if the 360 were successful in every part of the world except Japan, then it is still the loser. The loser there is Japan, no one else.

Anyhow, Yahoo Finance doesn't understand how this industry works, might as well take advice from Jack Thompson.

[KingGorilla]

Hardware is a really tough market to get into. And, with the exception of mice and flight sticks, Microsoft does not have a sterling record. There is ALWAYS more competition, and better competition, and much more cut-throat behavior in hardware compared to software(in general).
With the Zune and the Xbox line, Microsoft has yet to make that profitable. Strangely, when MS was just a software focussed company, MGS was profitable and their Gaming division was very successful(Flight Sim, Fasa, Ensemble).

[harle]

The Japanese market success portion of the article is kind of funny, considering that of the 3 markets, it is the smallest.I think he was referring to the number of big developers as mostly being in Japan. I would argue that their influence on the rest of the gaming world is getting smaller, though.

[ProfPuppet]

I like having 3 competing consoles, though, and don't want to see any of them fail. Diversity and competition is a good thing. I'm astounded at how Sony dropped the ball. Then again, Microsoft also needs better/more diverse games, other than sports/blow things up/racing.

[Kamalot]

Do they have a singe cent to show for it?
I was thinking about this yesterday and came to the realization that the Xbox 360 Elite edition is going to be the 'profitable model' for Microsoft.

We know that Microsoft extended the warranty on the 360 from 90 days to a full year, retroactively. That must have cost them a small fortune in free repairs and refund checks for people who were covered retroactively. The more they spend on repairs, the longer it takes the 360 to become profitable.

Solution?
Take a 360
Make it marginally better unit
Paint it Black
Sell it for substantially more
Profit!

Even if they don't sell many units, each of them will be more profitable than regular 360 sales.

[KingGorilla]

Looking at what is in the box of the elite? I will drop the extra hundred bucks on a PS3.
Convince me, and then Joe Public that the elite is 200 dollars better than the core.

[NeoSuplex]

The headline is wrong... it doesn't stress how retarded the writer of this article is. Japan the most important market? XBox 360 losing money? Lacking developer support? Is there anything in this article that isn't utter bullshit?
Japan the most important market? Seriously? Wow.

[Tyrant]

I think he was referring to the number of big developers as mostly being in Japan. I would argue that their influence on the rest of the gaming world is getting smaller, though.

Perhaps, although I would certainly agree with your statement about their lessening influence considering the financial reports of companies the likes of EA and Ubisoft.

---

Quick: Can you name another senior gaming executive that was kicked upstairs after a disappointing product launch? You guessed it, Mr. Ken Kutaragi of Sony (NYSE: SNE - News). I feel like we've seen this movie before. And these movies tend not to end well.

What the? The "movie" hasn't even ended, but I guess he's already concluded that the PS3 is DOOOMED! *insert Doctor Doom picture here* and MS should just bail before they run out of money.

[KingGorilla]

To all the people discounting the Japanese and Asian markets. Has there been a highly successful, cutting edge, costs more to make than it sells, console that did well without support in Japan, America, and Europe simultaneously?

[Achilles]

Solution?
Take a 360
Make it marginally better unit
Paint it Black
Sell it for substantially more
Profit!

Even if they don't sell many units, each of them will be more profitable than regular 360 sales.Interesting theory, but if you look at the cost of the components, it would seem that the Elite is the more expensive model to make.

[DeadlyDonkey]

The headline is wrong... it doesn't stress how retarded the writer of this article is. Japan the most important market? XBox 360 losing money? Lacking developer support? Is there anything in this article that isn't utter bullshit?


Erm...hate to point it out to you, but the Xbox 360 division is losing money.

Their revenue may be up, but their initial costs were staggering (in the billions), and I can't see them even coming close to breaking even before their next console hits (starting the cycle again).

[Tyrant]

To all the people discounting the Japanese and Asian markets. Has there been a highly successful, cutting edge, costs more to make than it sells, console that did well without support in Japan, America, and Europe simultaneously?

Does the Atari 2600 count? I don't know if it cost more to manufacture than the price it sold for, but while some of it's major titles were developed in Japan, I don't recall any notable European titles.

[IrishWhiskey]

Solution?
Take a 360
Make it marginally better unit
Paint it Black
Sell it for substantially more
Profit!If that was their long term plan to financial viability, they'd probably have more than a very limited production run.

Either way I have a better plan.
Step 1: Collect Underpants
Step 2:
Step 3: Profit!

In terms of the article? I think the author vastly overestimates the critical role of the Japanese market, almost suggesting it won't get games if it can't get Japanese gamers. Which I think is just wrong.

More importantly, he's greatly underestimating the side benefits of Microsofts console business, such as building toward an entertainment console/PC in the living room, establish Live for both Windows and consoles, advancing their video marketplace, which will probably work with other service like the Zune soon, promoting MSN messenger, and more. They didn't get into the console business to make consoles. They did it because the future of consoles is very much connected to the future of online social and entertainment systems, including video, audio and gaming content for purchase, as well as their ability to promote cross platform windows based systems. Microsoft is in this one for the long haul.

[harle]

To all the people discounting the Japanese and Asian markets. Has there been a highly successful, cutting edge, costs more to make than it sells, console that did well without support in Japan, America, and Europe simultaneously?Come back in 2 years and ask this. I think the 360 might fit into that category by that time.

Edit: Either that, or the Japanese market can finally see it as a good system.

[arne]

Although the report has sound financial data, it's highly suspect for being partisan by the fact that it's completely biased towards success in Japan as being critical to the success of a system, dismissing the value of the North American and European markets. However, I do have to agree that if MS doesn't figure out a way to make up their significant losses in the gaming market, they need to cut it loose.


my bolding/italics for emphasis.

"After taking a step back and looking at some objective numbers - those taken from Microsoft's own financial statements and comparative console sales figures extracted from VGChartz.com and Wikipedia.org - I have concluded the following..."


starts off strong, then... i dunno, i wouldn't want to make any financial or investment analysis for even myself based on things i can find on wikipedia or vgcharts, er, vgchartz.

anyway.

[NeoSuplex]

To all the people discounting the Japanese and Asian markets. Has there been a highly successful, cutting edge, costs more to make than it sells, console that did well without support in Japan, America, and Europe simultaneously?

Well, define support. From consumers or from developers? Because 360 isn't exactly wanting for developer support from any region.

[Disgustipated]

my bolding/italics for emphasis.

"After taking a step back and looking at some objective numbers - those taken from Microsoft's own financial statements and comparative console sales figures extracted from VGChartz.com and Wikipedia.org - I have concluded the following..."


starts off strong, then... i dunno, i wouldn't want to make any financial or investment analysis for even myself based on things i can find on wikipedia or vgcharts, er, vgchartz.

anyway.

I agree, while Wikipedia and VGCharts CAN be good sources, making a professional financial analysis using only them is ludicrous. This is why we make fun of market analysts and don't hold them in high regard.

[NeoSuplex]

Erm...hate to point it out to you, but the Xbox 360 division is losing money.

Their revenue may be up, but their initial costs were staggering (in the billions), and I can't see them even coming close to breaking even before their next console hits (starting the cycle again).
The Entertainment division is losing money, a division that recently launched two new initiatives with Zune and Games for Windows. The XBox sector is turning a nice profit now.

[Tinderbox]

The one thing this article fails to take into account is that MS expects the HED division to be profitable in FY08 (which starts July 1st). Why would you abandon the xbox now when it's finally going to start turning a profit?

[GWhite]

Many of the less popular recent decisions by Microsoft have probably been influenced by investor perception like this. Thus the fact that we have yet to see any price cuts and their increased attempts the commercialize of the Live! marketplace. Microsoft needs/wants to demonstrate that the XBox can be a profitable enterprise.

At least that is my take on it.

[archon]

my bolding/italics for emphasis.

"After taking a step back and looking at some objective numbers - those taken from Microsoft's own financial statements and comparative console sales figures extracted from VGChartz.com and Wikipedia.org - I have concluded the following..."


starts off strong, then... i dunno, i wouldn't want to make any financial or investment analysis for even myself based on things i can find on wikipedia or vgcharts, er, vgchartz.

anyway.

I was going to post the same thing. You can't take this guy seriously as he doesn't know what he's talking about. It's a non-story.

[Qoz]

We have to remember, that the Xbox brand is not only a console in the future. Microsoft want as many MS products in your livingroom and making them "talk together". It is already here (in a small way) with the Xbox-streaming-extender and it will be a primary focus for the next Xbox.

So Xbox as a console might not be as profitable, but the overall strategy will probably be just that. I'm sure we will see many features, where you need MS technology to make it happen. Like an MS NAS/Videorecorder server in your basement and Xbox/Vista streaming from it. With an Xbox already sitting in peoples homes, they can build features to make the public buy all the "MS Media Home System Hardware".

[menage]

Hey, someone making a buck saying something isa a failure. I would like a job like that.

You could arhue the same for PSP, PS3, PC. But the race is just beginning so he shoulld just shut up.

[Vandenh]

Shitloads of MS products have lost money. Sometimes after a few years they become winners, sometimes they don't. That is the business of MS. If MS should stop all products that lose money, what fun would that be? They would not be able to go after new markets and ideas.

It is a bit strange for a financial analyst to write this. He should know MS business better.

Maybe they should dump the Visual Studio product. That doesn't make them any money. Oh wait...

[Hemalin]

Hey, someone making a buck saying something isa a failure. I would like a job like that.

You could arhue the same for PSP, PS3, PC. But the race is just beginning so he shoulld just shut up.
He's talking financially. The Xbox cost Microsoft $5 billion. Even if the 360 sells 100 million systems, if they lose billions on it, the system is a failure.
Problem is, Microsoft can afford to throw money at the Xbox brand until it's just right.
While they can afford to throw money away, it is unlikely that they will blow $5 billion every console cycle for very long. If the price of entry gets too high, Microsoft will cut its loses and run. They made sure that the 360, hardware wise at least, will be profitable this gen so I don't see them pulling out anytime soon.

[Kolreth]

Loss = Tax Deduction.

When it starts making money, MS will come out with something else that makes a loss for them.

And I seem to remember when the original was being developed, Bill said somewhere that he'd drop $10billion before he cared how much it lost.

[wangstramedeous]

"This early failure in the key Japanese market has a compounding negative effect on worldwide console sales, as game developers are less willing to invest in high-risk projects for console platforms that are shaky out-of-the-gates, which makes it less attractive for gamers to buy these consoles, and so on."

This guy must be going senile and probably thinks that we are stuck in the 80s. You do not need critical success in Japan anymore to consider a console product successful. Are you going to say that the massively popular Halo franchise that cut paths for MS in the Americas did the same thing in Asia? Of course no. Did that make it an less successful? No.

If anywhere, companies should be looking to China, Vietnam and Indonesia. NOT Japan.

"Making money, e.g., the creation of long-term shareholder value, has got to be the ultimate driver of Microsoft's gaming (and H&E) strategy, right?"

What a presumptuous fucker. Microsoft would obviously like to make money but perhaps their actual long term goals go a bit farther: stemming SONY's march into the living room and creating a system of interoperability between their OS. Just a guess.

I do agree that Microsoft needs to reevaluate its strategy and try to put forward their best points more strongly. The wii is proving to be wildly popular but compared to the 360 is a severely limited media center.

I'm confident that as we fast forward to the fall things will change dramatically. I really do hope that for their sake the have a price drop so that they can compete with the wii on price. They get the IPTV rolling, extend Movie section and get the message out to the common folk of what's available.

[wangstramedeous]

Erm...hate to point it out to you, but the Xbox 360 division is losing money.

Their revenue may be up, but their initial costs were staggering (in the billions), and I can't see them even coming close to breaking even before their next console hits (starting the cycle again).


The Xbox division isn't losing money. The entertainment division is. It includes Xbox, Live, Zune, Games for Windows and IPTV.

[Yellowman]

Guys seriously, in this time of terrorist threat is it really appropriate to make colourful analogies like that? I mean, I read the headline and immediately drop kicked my 360 out the nearest window and covered my ears...

[Wolvie]

Considering the fan base and the loyal XBL players, it'd be sad day if MS ever left the console biz. That being said, I still think MS and Sony should team up and make a super console. Sony provides the tech, and MS provides the software and online service... I can dream can't I?

[51|RandoM]

Seems like a silly point in time to pick to pull the plug on Microsoft's effort. If you want to use the Japanese market as a barometer for the success of an American console, you might as well never make an American console. That is just the way Japan is, and most likely will continue to be.

To really have any chance over there you'd have to remove Nintendo and Sony from the game. Not just beat them, but have them not producing console hardware, and no other established Japanese company producing console hardware.

[bjornbarspingvinen]

they money lies in the future, creating a brand, and loyalty, and sales wise Xbox360 does well, and Xbox live has to be considered a success. This is a BS story, PS3 is a much worse disaster if you look at it like that.

And , gaming is the biggest entertainment sector now. MS won´t leave it, they are in it for the long run. And they grab marketshare as it is.

[Evil Avatar]

You have to love it when people who have NO ACCESS to Microsoft's internal financial reports try to talk about how much money has been spent and/or profit made on any individual product.

As someone who has seen a lot of information over the years that people outside of Microsoft don't usually get to see I can honestly say that I don't think anyone at Microsoft is worried about the Xbox 360 or the Xbox brand.

One mistake that these people often make is that they look at the totality of the money spent on the Xbox brand - instead of looking at what the hardware itself or the software itself is bringing in and with the 360 now you have a whole new product to figure into the mix - the Xbox Live Marketplace and we all know that the prices on the Marketplace are outrageous and people are still snapping up everything they release.

Do you honestly think that this dumbass even knows that the Marketplace exists? I tend to doubt it.

[Evil Avatar]

The Xbox division isn't losing money. The entertainment division is. It includes Xbox, Live, Zune, Games for Windows and IPTV.

You, Sir, are correct.

[crashedout]

As stated before MS aims for market domination and does not care if takes 3, 5... tries to get there. Windows 1.0, 2.0? It looks like they want the living room and portable audio and will keep trying there as well. I am sure they employ way smarter CPA's than this analyst and are playing with tax laws that would make my head spin.

[grognard66]

Not surprising to hear yet another uninformed statement from a financial analyst. That has to be the best job in the world - you can always be wrong and still make several hundred K per year.

Anyway, this guy must not have been listening to MS' often stated goal to use the gaming division as a Trojan Horse into the living room. MS has the largest cash reserve of any corporation in the world (and largest in history for that matter) and is more than happy to use the gaming division as a loss-leader to extend mindshare into the more lucrative living room space.

One need only look at what they are doing with TV/Movie downloads and the upcoming IPTV to understand their long-term strategy. Integration with the media center and testing the waters with portable devices (Zune) and Live! integration with cell phones/computers/etc. offer further evidence. The reason MS is successful (and this analyst is not) is that they are not basing decisions on a quarterly basis (what will drive up stock just this quarter) but looking decades into the future. They want MS to become a household name not just for PC's but for every electronic device you own.

[menage]

He's talking financially. The Xbox cost Microsoft $5 billion. Even if the 360 sells 100 million systems, if they lose billions on it, the system is a failure.

I was too. PS3 costs Sony a fortune, PS2 also in the beginning. And PC gaming isn't that hot a sector (vista upgrades, dx10, etc) to invest in. How can he tell what a 360 will earn in a few years.

[bapenguin]

I actually heard the Microsoft is very close to making money on each 360 sold now.

[Virtuoso]

OK, I don't know if its been said, but I gotta leave for class so I don't have time to read every post.

If it weren't for the Zune division of Microsoft Entertainment, they would have posted a relatively large return this year. Unfortunately for them they sunk several billion into a larger than iPod piece of shit (hence the brown color).

MS makes 70 or so bucks on the console (premium) and tons of money on the games. How could the XBOX360 platform by itself not be profitable?

[Virtuoso]

I actually heard the Microsoft is very close to making money on each 360 sold now.


I heard the cost of each console is 323 per. Can't remember when.

http://www.videogamesblogger.com/2006/11/16/ps3-loses-up-to-306-per-unit-xbox-360-profits-76-per-sale.htm

Don't know how reliable it is, but there.

[Telefrog]

This guy is an ass. He doesn't even mention the profitablility of the Marketplace, which is obviously where MS is aiming.

[Gott]

How about the millions and millions of downloads 360 users are buying...f'ing instant money over and over and over.

This guy probably has a Hold on microsoft and trying to make sure it stays that way...Analysts are always just looking out for their ass.

[bean19]

Do you honestly think that this dumbass even knows that the Marketplace exists? I tend to doubt it.

Exactly.

He also fails in several other ways:

1. He doesn't seem to know what conditions cause a console to "win" each generation. Right now, the 360 is by far the leader in that it has the largest game library and it looks like it will keep this title at least into 2007. The other big factor in winning is to have the least expensive (or within $20-$50) console in comparison to the other offerings and the 360 should be able to compete with the Wii in this regard by this Xmas.

2. He doesn't seem to be aware of the importance of the market to Microsoft's longterm plans. Having the 360 work as a "cable box" and Tivo for IPTV is a really big deal and being the hardware manufacturer that dominates once we move to digital distribution means being the de facto publisher of EVERYTHING.

[Johan]

When a company has $36 billion in cash, is consistently minting more cash, and is in a market in part as a way of defending its cash cow (Windows OS), it's pretty stupid to make it seem as if the sky is falling...

But, what the hell. Analysts gotta eat, too!

Edit: I see it this way. If I have a golden goose that lays money-eggs, and I build a fence that I lose a ton of money on to defend that golden goose, and to perhaps even encourage more eggs...am I making a bad business decision to build the money-losing fence?

No. Good decision.

[bapenguin]

I heard the cost of each console is 323 per. Can't remember when.

http://www.videogamesblogger.com/2006/11/16/ps3-loses-up-to-306-per-unit-xbox-360-profits-76-per-sale.htm

Don't know how reliable it is, but there.

Probably about right. Also have to factor in packaging, accesories included, etc.

[Dr.Finger]

You could make an argument that the original XBox was a financial failure, but saying that about the 360 is either willful blindness or woeful ignorance.

[Serapth]

There is a simple explanation for the Xbox 360, Zune, IpTV, plus other products most of you probrably arent familiar with ( Great Plains, Navision, etc... )

Microsoft has 90+% of a commodity OS market.
Microsoft has 95+% of a commodity office suite market.

Microsoft pretty much owns its two core markets... winning an extra 1% of market share really isnt going to do jack shit. If Microsoft wants to see growth ( and I want MS to see growth as an MS investor!!! ), they need to enter and conquer new markets.


Why the game console market? Thats pretty easy... A game console is a flip of a switch away from being a home PC. Add a keyboard, email, websurfing and basic word processing, in addition to games and you pretty much have a PC. Sony was talking shit with the PS2 about how it was going to conquer the home, you think Microsoft wanted that? Its Ironic all the shit Sony talked back before the PS2 was released about how it was a super computer for your home, how it would replace your PC, etc... woke the sleeping giant. Had Sony not talked shit they couldn't deliver, would they be in competition with Microsoft today?

[GWhite]

Actually Microsoft was very worried about having their base eaten out from under them. The way they figured it the PC as a platform may only have a finite life-span. As it stands right now all of their eggs are in one basket. To mitigate that they have been trying to muscle into as many different markets as possible.

[51|RandoM]

Windows 1.0, 2.0? It looks like they want the living room and portable audio and will keep trying there as well. I am sure they employ way smarter CPA's than this analyst and are playing with tax laws that would make my head spin.

Poor example.

Windows had no competitor in the GUI space on PC until OS/X. They had a bit of competition for multitasking from quarterdeck in the form of DESQview. They stuck X on top of DESQview and called it DESQview/X, but that was short-lived and not as reliable as DESQview.

I used to run a 4-line BBS on DESQview, one application it was very popular/well respected for. It provided stable multitasking in an era where that word was Sci-Fi in Redmond. OS/X was better at that particular job than Windows was for a long time as well, which is why you can still find embedded OS/X running in some old communications systems.

OS/X lost by making a GUI only a techie could love and by not playing that well with 3rd party software developers.

Prior to Windows, there was a bit of a fight over DOS, with MS-DOS, IBM's version and DR-DOS.

The first real challenge MS faced was MS Word vs. WordPerfect. WordPerfect pretty much handed that over to them by being inable to make a decent Windows version of the product. MS still had to make Word near as good(and better in some things)as WordPerfect and fight the uphill battle of getting companies to retrain all of those WordPerfect people.

The second real challenge was for the LAN vs. Novell and some smaller players like Lantastic.

The 3rd, and final challenge, was the browser war.

After that it was just duels here and there with the likes of Sun on this and that 'net-related technologies.

Some Mac nut will bring up Apple next. Don't bother. Microsoft and Apple have been in a symbiotic relationship for a LONG time. One that probably started around the point in time when Word was the #1 word processing package on Apple. Nowadays they feed off of each other's innovations, adopting the best and ignoring the rest. The flipside of that relationship is that Apple is just big enough to keep Microsoft from being a monopoly and benefits themselves by having the appeal of the underdog. It keeps their main market relatively stable while they pursue new revenue in other markets.

[KingGorilla]

Random, Microsoft is not afraid of apple. They are afraid of Linux and the open source community right now. Mozilla is constantly taking away their web browser usage. Open Office and Linux may severely cut into their business PC monopoly. More and more corporations are getting Linux Servers, Linux computers, and Open source suites of software.

[Serapth]

Random, Microsoft is not afraid of apple. They are afraid of Linux and the open source community right now. Mozilla is constantly taking away their web browser usage. Open Office and Linux may severely cut into their business PC monopoly. More and more corporations are getting Linux Servers, Linux computers, and Open source suites of software.


Actually, Microsofts share in the server market has done nothing but increase in the last 5 years. Linux isnt really stealing marketshare from Microsoft, Microsoft and Linux are stealing marketshare from Unix ( Hp/UX, Solaris, Irix, etc... ) and the mainframe marketplace.

[KNOTE]

So how many dooms? Can someone hit me with 3 Doctor Dooms please?

[Virtuoso]

Probably about right. Also have to factor in packaging, accesories included, etc.

Yeah, but I work at Best Buy and our cost on the accessories included in the premium kit (wireless controller, cables, etc) comes out to be not that much, so worst case scenario the console is being sold at cost and they are making tons of money on downloadable content, games, and the accessories they sell a la carte.

The XBOX 360 has to making money, plain and simple.

Also, I always think its kinda funny how in EvAv there seem to be 2-3 discussions going on at once.

[KingGorilla]

Actually, Microsofts share in the server market has done nothing but increase in the last 5 years. Linux isnt really stealing marketshare from Microsoft, Microsoft and Linux are stealing marketshare from Unix ( Hp/UX, Solaris, Irix, etc... ) and the mainframe marketplace.
The general trends from the major PC manufacturers and the demand for open source compatibility with Windows Servers, and Windows PC's with Linux servers speaks to the contrary. Fortune 500 companies are going open source with their laptops and desktops, and if Microsoft continues to be hard about compatibility with those units, their servers will be lost as well.

Dell, one of the largest makers of bulk computers, has seen as much as 80 percent of their desktop sales go with Linux, rather than windows.

And if Microsoft were not scared of it, Balmer would not be jockying for position about how Open Office and Linux and all open source software are violating "copyrights" that Microsoft apparently has(I think they have a patent on Times New Roman font).

Will it become number 1? No, but there is a big possibility for Linux systems to take as much as 10 percent, if not more, by year's end of business computers(Where Microsoft makes a large part of their money mind you).

EDIT: In particular, Microsoft is afraid that Linux and other free and open source options could turn out like Firefox(as much as 30 percent of the market).

[Serapth]

The general trends from the major PC manufacturers and the demand for open source compatibility with Windows Servers, and Windows PC's with Linux servers speaks to the contrary. Fortune 500 companies are going open source with their laptops and desktops, and if Microsoft continues to be hard about compatibility with those units, their servers will be lost as well.

Dell, one of the largest makers of bulk computers, has seen as much as 80 percent of their desktop sales go with Linux, rather than windows. That said, if I was buying a laptop today, I would go the Linux route too, just so I dont have to pay for Windows that is. ( Im an MSDN subscriber and end up installing a different install then it shipped with anyways... but post people would prefer to simply pirate Windows and save 100$ ).

And if Microsoft were not scared of it, Balmer would not be jockying for position about how Open Office and Linux and all open source software are violating "copyrights" that Microsoft apparently has(I think they have a patent on Times New Roman font).

Will it become number 1? No, but there is a big possibility for Linux systems to take as much as 10 percent, if not more, by year's end of business computers(Where Microsoft makes a large part of their money mind you).

EDIT: In particular, Microsoft is afraid that Linux and other free and open source options could turn out like Firefox(as much as 30 percent of the market).



WOOO WHOOOO WOOOOOOOO there horsey... or, um Gorilla. You can't shoot numbers like that off without links. First off that Dell comment is pure bullshit. No fucking way 80% of shipped units are Linux, no bloody way. Hell, they just started offering Linux as an option this year. Link please.

As to Linux penatration in Fortune 500 companies, those numbers are often massively inflated. Fortune 500 companies may use linux in some form or another ( my company uses it for DNS for example ), but on the desktop and laptop, no fucking way. It just simply isnt happening.

Frankly, it sounds like you have been reading too much Slashdot and drank their special koolaid.

Yes, linux is gaining ground on Microsoft, Linux is especially popular in 3rd world countries where MS licensing fees simply cant be afforded. ( Although todays announcement of Windows + Office for 3$ might change that... ). That said, Linux is nowhere near the threat Linux geeks want to make it out to be.

[KingGorilla]

Well, go back a few episodes on my show, the second month Dell was offering Linux units, 80 percent of people buying the computers were asking for a Linux install(this is bound to cool down, of course...they were the new hotness). And you can go to PC world or Digg and find a multitude of stories from medium, and very large companies asking for Linux computers, and the dismay of many CEOs that Linux computers are not very compatible with Microsoft servers.

I never said Linux is going to suddenly trounce Microsoft, Linux is not going to suddenly move a billion computers overnight. But the chance of them getting an Apple sized market share or a share similar to Firefox has in browsers, is a large possibility. And the greatest threat to MS, as I said, is open source software like Open Office and those like that.

And with Dell reporting a startling number of requests for Linux boxes, that threat is a reality.

EDIT: and Yes, I have has the Torvalds koolaide. And it tastes good.

[skarironfist]

Eh people, for Microsoft/Xbox to win, they don't have to actually win, they merely have to have Sony fail.

The point is that Microsoft have very deep pockets. I believe someone will correct me if I am wrong. But significantly deeper than Sonys. The PS2 has supported Sony for a while, which is good. The Xbox doesn't support Microsoft.

Maybe just maybe Sony have bet the house on the PS3, for microsoft its just the hut at the bottom of the garden. If it burns down, they will build a better one.

[Serapth]

Eh people, for Microsoft/Xbox to win, they don't have to actually win, they merely have to have Sony fail.

The point is that Microsoft have very deep pockets. I believe someone will correct me if I am wrong. But significantly deeper than Sonys. The PS2 has supported Sony for a while, which is good. The Xbox doesn't support Microsoft.

Maybe just maybe Sony have bet the house on the PS3, for microsoft its just the hut at the bottom of the garden. If it burns down, they will build a better one.



Yet Sony has to face Microsoft not just in videogames but across the entire panoply of home electronics, which Microsoft is determined to control through software. And Sony has to do this with cash reserves of $6 billion – compared to Microsoft's $38 billion hoard – while losing hundreds of dollars in manufacturing costs alone for every PS3 sold. Eventually, Sony's costs will come down. But in the meantime, Goldman Sachs projects, Sony will lose nearly $2 billion on the PS3 by the end of this fiscal year in March.

Sony lovers – and they are legion – have been watching all of this with awe and trepidation. It's not every day that a $64 billion-a-year corporation puts its future on the line. "It's very un-Japanese," observes Rishad Tobaccowala, who tracks the entertainment business as a future-of-media specialist at the global ad giant Publicis. "It's betting the company. If this thing bombs, there is no second coming. Everything else about Sony is a sideshow. This is the show."


From http://www.wired.com/wired/archive/14.09/sony.html



Granted, these numbers are a bit outdated.

[Kweli]

Do they realize how much they are making on Xbox Live accounts alone??
Isnt there like 4 million subscribers?

Lets say its 50 bucks a year (its more)
Its 200,000,000 million every year... Thats not including software, hardware, OR microtransactions

I cant fathom how they are loosing money

[Serapth]

Do they realize how much they are making on Xbox Live accounts alone??
Isnt there like 4 million subscribers?

Lets say its 50 bucks a year (its more)
Its 200,000,000 million every year... Thats not including software, hardware, OR microtransactions

I cant fathom how they are loosing money


I bet you the backend infrastructure of Live costs more then 200M $ a year to operate. MS has been dumping a ton of money in data centers, they are serious about winning the network. Live and IPTV are two big parts of that.

[bean19]

I bet you the backend infrastructure of Live costs more then 200M $ a year to operate. MS has been dumping a ton of money in data centers, they are serious about winning the network. Live and IPTV are two big parts of that.

It's probably costing more right now because they are buying things. However, that builds equity, etc. The cost of bandwidth even for a mega networking service like Live is nowhere near 200M. Youtube has a comparable service and I've read that their operating costs (mostly bandwidth) are around 2-4 million/month (24-48M/year) depending on traffic.

That's a lot of cash left over to buy data-centers. Then if you add in the money they make from ads and purchased downloaded content. . . well, they are making a fuck-ton.

[KingGorilla]

Do they realize how much they are making on Xbox Live accounts alone??
Isnt there like 4 million subscribers?

Lets say its 50 bucks a year (its more)
Its 200,000,000 million every year... Thats not including software, hardware, OR microtransactions

I cant fathom how they are loosing money
Silver subscribers and the bandwith they use for free(demos and XBLA titles). They say that the Halo 3 Trailer cost them 10 million dollars each day.

[bean19]

Silver subscribers and the bandwith they use for free(demos and XBLA titles). They say that the Halo 3 Trailer cost them 10 million dollars each day.

Where did they say that?

[NeoSuplex]

I bet you the backend infrastructure of Live costs more then 200M $ a year to operate. MS has been dumping a ton of money in data centers, they are serious about winning the network. Live and IPTV are two big parts of that.

Please tell me you're serious. I'd love to take your money.

The guy below me too. Like people have said, XBox Revenue doesn't stop when you buy a system.

[trip1eX]

Man alot of bs in this thread.

Suffice to say MS ain't turning a profit on the 360 yet. Analysts will be the first to let us know when that happens. So will MS. Right now the 360 is $5.5 billion in the hole.

The 360's problem will be breaking into the mainstream. IT remains costly. IT's noisy. IT doesn't offer anything new to the casual mainstream gamer. IT's tied too much to hdtv. IT's game lineup has lots of holes in it.

[Serapth]

It's probably costing more right now because they are buying things. However, that builds equity, etc. The cost of bandwidth even for a mega networking service like Live is nowhere near 200M. Youtube has a comparable service and I've read that their operating costs (mostly bandwidth) are around 2-4 million/month (24-48M/year) depending on traffic.

That's a lot of cash left over to buy data-centers. Then if you add in the money they make from ads and purchased downloaded content. . . well, they are making a fuck-ton.

You are greatly underestimating the cost of these datacenters. Their recent datacenter in San Antonio was 550 million dollars (http://www.datacenterknowledge.com/archives/2007/Jan/19/microsoft_confirms_huge_san_antonio_center.html). This is just one of many they have broken ground on.

Granted, its not just for Live, but the money MS is dropping on these places ( and google... ) is staggering. Ray Ozzie at last year's TechEd said it was in the tune of billions per year, with no end in sight.

[Serapth]

Man alot of bs in this thread.

Suffice to say MS ain't turning a profit on the 360 yet. Analysts will be the first to let us know when that happens. So will MS. Right now the 360 is $5.5 billion in the hole.

The 360's problem will be breaking into the mainstream. IT remains costly. IT's noisy. IT doesn't offer anything new to the casual mainstream gamer. IT's tied too much to hdtv. IT's game lineup has lots of holes in it.


Actually, the 360 is already turning a profit, they have said so. However, in the same quarter it started turning a profit, they launched the Zune. Somehow they spent multi-millions of dollars marketing the Zune ( where, I dont fucking know!!! ), and that lose comes from the same division as the 360.

Read their last few quarterly reports.

[Serapth]

Please tell me you're serious. I'd love to take your money.

The guy below me too. Like people have said, XBox Revenue doesn't stop when you buy a system.


Right now yes, I gaurantee you it is.

See, Microsoft doesnt exactly go to a local ISP and say knock knock, hey can we please location our online service with you? Fuck that, they build the fuckers, 550 million at a time, all over the world.

They lose money now to make it in the future, and dont you worry, with software as a service, Xbox Live and Live Anywhere, IPTV and various other things, they will make money off this investment damned soon.

For now though, no way MS is making money off that 200M they take in. Even if they did, that 200M is mice nuts in the grand scheme of things.

[arne]

Interesting little tid-bit from all the press Mr. Ehernberg is generating.
Next-gen.biz posted a story today covering. (http://www.next-gen.biz/index.php?option=com_content&task=view&id=5296&Itemid=2) It got debunked, sure... here's the interesting part...

Financial analyst Roger Ehrenberg asks, “When will Microsoft own up to the Xbox 360 bomb?” in a new article (which incidentally was forwarded to Next-Gen by Sony Computer Entertainment America PR).

lol. wonderful /sarcasm.

[NeoSuplex]

Right now yes, I gaurantee you it is.

See, Microsoft doesnt exactly go to a local ISP and say knock knock, hey can we please location our online service with you? Fuck that, they build the fuckers, 550 million at a time, all over the world.

They lose money now to make it in the future, and dont you worry, with software as a service, Xbox Live and Live Anywhere, IPTV and various other things, they will make money off this investment damned soon.

For now though, no way MS is making money off that 200M they take in. Even if they did, that 200M is mice nuts in the grand scheme of things.

Facinating story. But, let's examine that for a moment.

First of all, MS has committed to spending 550 million on the center. That's all well and good, but the center won't be built for a good 2 years. I'm going to go out on a limb and say that Microsoft didn't and won't pay all of that any time soon. It's not like going down to the store and buying a TV.

Second, let's look at what's being used here. Maybe you didn't bother to read your article past the dollar sign, but I did. Little surprise to me, but that data center had fuckall to do with XBox Live. Don't misunderstand, once in operation, it may well contain some data used by Live, but it would have been built with or without the service. Funny story about multi-billion dollar software companies... they deal with a lot of ones and zeros. Maybe you thought it was going to be some sort of facility used solely to store game data, downloadables, or even run games. If that's the case, let me be the first to dash those hopes. Rest assured, most of what that center does won't involve gaming.

So, how much do you owe me?

[Serapth]

Facinating story. But, let's examine that for a moment.

First of all, MS has committed to spending 550 million on the center. That's all well and good, but the center won't be built for a good 2 years. I'm going to go out on a limb and say that Microsoft didn't and won't pay all of that any time soon. It's not like going down to the store and buying a TV.

Second, let's look at what's being used here. Maybe you didn't bother to read your article past the dollar sign, but I did. Little surprise to me, but that data center had fuckall to do with XBox Live. Don't misunderstand, once in operation, it may well contain some data used by Live, but it would have been built with or without the service. Funny story about multi-billion dollar software companies... they deal with a lot of ones and zeros. Maybe you thought it was going to be some sort of facility used solely to store game data, downloadables, or even run games. If that's the case, let me be the first to dash those hopes. Rest assured, most of what that center does won't involve gaming.

So, how much do you owe me?


You are missing the point.

This was me citing a single example of Microsoft developing a data center.

One.

In the US.

How many countries is Live in? How many different data centers in how many different regions have they had to develop?

I am not saying that 550 million $ center was only for Live, I just cited it as an example of what MS is spending per site.

[NeoSuplex]

Sorry, I guess I wasn't clear...

Those data centers are not operating costs for XBox Live. This is because the primary, secondary, or even tertiary purpose for their existence has nothing to do with Live.

An analogy:

The R&D Costs for Sony's Bravia line are not operating costs for PSN.

That better?

[cp#]

Is the PS3 not a bomb too then? Considering only Nintendo is making money... (although I thought the 360 was no longer selling at a loss?)

[bean19]

Is the PS3 not a bomb too then? Considering only Nintendo is making money... (although I thought the 360 was no longer selling at a loss?)

It isn't.

As has been said previously in this thread, the 360 is already profitable as well as being the leader in this console generation. Microsoft's division didn't make a profit last quarter because they just launched the Zune.

[Serapth]

Sorry, I guess I wasn't clear...

Those data centers are not operating costs for XBox Live. This is because the primary, secondary, or even tertiary purpose for their existence has nothing to do with Live.

An analogy:

The R&D Costs for Sony's Bravia line are not operating costs for PSN.

That better?


I guess my response back to you is that you underestimate live.

Lets put it this way. How many online services does Microsoft make money from? This being the company that paid 2billion + $ for hotmail in the first place.

Live as been their first real online success, and now you see them tying it to the PC world. Don't kid yourself about how important XBox live is to Microsoft and how much money they are willing to lose to make ti happen.

I will go one step farther and say... The sucess of Xbox Live is more important to Microsoft thenn the sucess of Xbox in general. If you don't understand the differenence, then frankly, you don't understand why Microsoft got in the business in the first place.

[NeoSuplex]

I guess my response back to you is that you underestimate live.

Lets put it this way. How many online services does Microsoft make money from? This being the company that paid 2billion + $ for hotmail in the first place.

Live as been their first real online success, and now you see them tying it to the PC world. Don't kid yourself about how important XBox live is to Microsoft and how much money they are willing to lose to make ti happen.

I will go one step farther and say... The sucess of Xbox Live is more important to Microsoft thenn the sucess of Xbox in general. If you don't understand the differenence, then frankly, you don't understand why Microsoft got in the business in the first place.

We're talking about Data Centers, not servers. Data Centers don't have anything to do with online services; most larger companies have them.

[Micasa]

Man alot of bs in this thread.

Suffice to say MS ain't turning a profit on the 360 yet. Analysts will be the first to let us know when that happens. So will MS. Right now the 360 is $5.5 billion in the hole.

The 360's problem will be breaking into the mainstream. IT remains costly. IT's noisy. IT doesn't offer anything new to the casual mainstream gamer. IT's tied too much to hdtv. IT's game lineup has lots of holes in it.

You're taking "turning a profit" to mean they've paid off every bit of R&D associated with the console, while everyone else is taking it to mean "makes money off the hardware sale" - but I'm pretty sure you realize that and are just trying to stir things up.

No company worries too much about paying off their R&D costs immediately. I don't think the PS1 paid off its development costs until the PS2 had been out for some time. It's just the way the business works.

If you really think the 360 is in trouble because it's costly, tied to HDTV, doesn't offer anything new and has a poor games lineup - then the PS3 is utterly doomed.

[WileE.Coyte]

Microsoft has taken the first steps for console digital distribution eliminating the middle man. What if next gen Microsoft controls all of the distribution methods of all the games that are sold on the Xbox "720"? Or even half of it. I don't see them losing money in the long run.

[NightRain]

What many people forget the Xbox loss/profits as a single unit are unknown. The numbers listed are for Microsoft's "Home Entertainment" division, the Xbox is only a part of that.

When the Xbox first came out Microsoft were loosing money in that department, those loses included reasearch and developement of the Xbox but also contained the WebTV stuff which was losing money hand over fist too.

Also the Zune is in there and that has been a money sucker for sure, especially since anyone who bought a iTunes song and then bought a Zune would get the song for free from Microsoft. Microsoft are still required to pay for those songs though, so that is money out the windows. I'd have to think that if you just looked at the Xbox 360 and just looked at the last 12 month that Microsoft would have to be breaking even and maybe making a profit.

Remember it isn't just the Xbox in that division so other things are contributing to the loss of money.

[DangerousDaze]

Let's put this into perspective. Microsoft's losses on their H&E division is the same as the market value of Sun Microsystems ($21B), way bigger than the market values of either Ford Motor Co ($14.67) or General Motors ($17.92B).

[Wonka]

I think that the Xbox was a 4 year experiment to see if any marketshare could be gained in the console space by MS. The answer to that is clearly YES, and profit was never part of that experiment.

For the 360 MS is playing a different game. This is why the HDD is optional, why the BC is emulated and why they own the IP for the hardware.

If Nintendo had not just demonstrated that you can sell essentially last gen equipment (by bundling a hi-tech controller with it) at near to next gen prices ($250 vs. $300 for the gimpy version of the 360) to the masses, then MS would have had a very sound strategy. The prices of the components in their hardware will drop quickly, and they will be losing a lot less money as they move forward.

As for their other losses, the software and infrastructure for LIVE! is all just investment in what is (even with the Nintendo Wii selling like hotcakes) a rapidly growing business for them. They may lose money now, but if they set their competition back, then they will gain the upper hand in the long term. MS is definitely thinking long term for this, and they have the capital to do so. The Wii is clearly the hottest console right now. Its novelty presently more than makes up for its low-tech. But will it still be the hottest console in a year or two? I think this is highly debatable.

Clearly, their marketshare gains are far more important to the MS division than immediate profit/losses numbers. And more importantly, it's VERY sound to claim that the amount of marketshare MS already has will guarantee that they will not be neglected by publishers this generation.

As for their near-complete failure in Japan its not really that important to the big picture. Since the Japanese market is essentially saturated with games and gamers, the north American and European markets are probably more important since they represent growth areas (not to mention that they represent more customers separately AND together). Japan *WAS* truly key to console dominance back when only the Japanese bought substantial numbers of games. But that era ended a while back when more games started to be sold in North America than are sold in Japan. This trend will not reverse because there are simply more PEOPLE in North America (and Europe) to sell games to. Today Japan is important more for the historical role that it had in incubating our little pastime than for being the only place where games are sold. It's still a big market, but its dwarfed by the new emerging markets in North America and Europe.

Also I think that the H&E division is likely losing A LOT of money trying to sell Zunes which is not a reflection on the 360.

[Wolvie]

You have to love it when people who have NO ACCESS to Microsoft's internal financial reports try to talk about how much money has been spent and/or profit made on any individual product.

As someone who has seen a lot of information over the years that people outside of Microsoft don't usually get to see I can honestly say that I don't think anyone at Microsoft is worried about the Xbox 360 or the Xbox brand.

One mistake that these people often make is that they look at the totality of the money spent on the Xbox brand - instead of looking at what the hardware itself or the software itself is bringing in and with the 360 now you have a whole new product to figure into the mix - the Xbox Live Marketplace and we all know that the prices on the Marketplace are outrageous and people are still snapping up everything they release.

Do you honestly think that this dumbass even knows that the Marketplace exists? I tend to doubt it.

Good point, and besides, MS said back when the Xbox launched that they weren't committed to the next few years, they were committed to being the console leader TEN years from then, and beyond. Bill Gates himself said that the Xbox was going to lose money at first and was ok with that. And yeah, XBL marketplace and games like Guitar Hero II are goldmines. So no, MS aint going anywhere. And neither is sony, so stop wishing that either will people.

[theguido]

Well, I think that, despite some dubious claims and sources what he's saying makes sense, especially because of the ground that they have to make up. Now, if the Xbox 360 was by far the dominant console in this generation, I could easily see them continuing to position themselves to make back the money little by little, but even if they stay ahead the entire generation, there's no way that they'll be able to win by a big enough margin to make a lot of that money back.

And the point about Japan is not to be taken lightly---the point is that by performing so poorly in that territory they are essentially ceding marketshare to their competitors by doing so, and if they expect to be the alpha dog they cannot continue to do so. It's fine if, like the GameCube, it doesn't do great elsewhere, but the PS2 did great in all territories, and the Wii appears to be doing the same, which could spell trouble for the big M.

And look, this deficit isn't going to end soon--if they have a plan for getting in the black it has to be for a ways down the road, because even Nintendo, with the amazing year they've had, is predicted to have made just around 1 billion dollars. Keep in mind that not only does Nintendo sell four different consoles right now (all at a profit), but they sell a huge chunk of the games for those systems as well. This is not the case for either Sony or Microsoft, who, though they have some good games in-house, are highly reliant upon third-party support.

So, in otherwords, just in order to break even in H & E, they have to have 5 amazing years like the one Nintendo just had. Unless something drastic changes, I don't see that happening for a long, long time.

[DangerousDaze]

You have to love it when people who have NO ACCESS to Microsoft's internal financial reports try to talk about how much money has been spent and/or profit made on any individual product.
With respect, MSFT's internal financial statements are of no relevance whatsoever. MSFT is a public company and as such is obliged to maximise shareholder value. Investors are looking to SEC filings such as their most recent (FY2006) 10-K to see how the company is maximising return on their investment and in that 10-K they see bad news.

This isn't a gaming discussion, it's financial, and financially the H&E (and now Entertainment and Devices) division is not providing a good ROI. Their FY2007 10-K should be interesting indeed.

[bean19]

Well, I think that, despite some dubious claims and sources what he's saying makes sense, especially because of the ground that they have to make up. Now, if the Xbox 360 was by far the dominant console in this generation, I could easily see them continuing to position themselves to make back the money little by little, but even if they stay ahead the entire generation, there's no way that they'll be able to win by a big enough margin to make a lot of that money back.

So even if Microsoft remains the leader this entire console generation, they are going to lose money? That's really the position you want to take?

Do you mean because of the Zune? I guarantee you that the Zune isn't costing Microsoft anywhere near what the Blu-Ray albatross is costing Sony.

[sprankton]

Well it takes money to make money. Microsoft already has the computer industry now they have to dominate a very very important part of a persons life and thats the living room.

For how much Microsoft has done in so far is well worth the money. Because dont forget, even if Sony sells 20 million more consoles this generation microsoft is still up, because they managed to hang in and cause the gap to close by 80% from the PS2 domination.

[Loganrapp]

XBOX - Money Loser, gets foot in the door.

360 - Relatively Par, solidifies MS as a gaming provider.

720 - Profit Builder.

It's all a process. It's not like the days of the NES where if you throw out a system and recoup your manufacturing costs you're golden. They're muscling into an already competitive market. Five years is a very short time. Try again in ten.

[trip1eX]

You're taking "turning a profit" to mean they've paid off every bit of R&D associated with the console, while everyone else is taking it to mean "makes money off the hardware sale" - but I'm pretty sure you realize that and are just trying to stir things up.

Nah I mean they don't make money off the hardware sale. They still lose dough. Even if, even if the components are priced lower than $399 they still arne't making off it. They have to pay for advertising. They have to pay retailers. They have to pay folks to put it together. They have to ship them. etc. Notice I'm not even to the R&D part.



No company worries too much about paying off their R&D costs immediately. I don't think the PS1 paid off its development costs until the PS2 had been out for some time. It's just the way the business works.


More bs. You have no idea when the PS1 started paying off its R&D.


If you really think the 360 is in trouble because it's costly, tied to HDTV, doesn't offer anything new and has a poor games lineup - then the PS3 is utterly doomed.

Yeah I think the 360 will have a hard time breaking into the mainstream. That's what I said. The reason for that is some of the above.

The PS3 actually is positioned better for the mainstream. BR is a much more mainstream feature than Xbox Live. Sony also has alot more franchises outside of shooters than the 360 does. And they have things like Eyetoy and the PLaystation brand is more mainstream positioned than the Xbox 360 brand.

At the same time the 360 (and PS3) are hurt by the Wii on the low end. I think the Wii is going to win the console war. I don't think the 360 can finish in first. I give the PS3 an outside chance of finishing first if the BR x-factor kicks in within 2 years.

Overall though I think the Wii is priced to move. IT's aimed at sdtvs which are 75% of the market at least (right now.) By the time the 360 and PS3 hit those low priceponts their potential consumers will be Wii owners.

Not to say they won't sell at all. But it will be a PSP vs DS comparison. Software is selling well on the 360. IT just remains to be seen if MS can make money overall if still have an Xbox-like (a bit more) share of the marketplace.

[Trazzlo the Magnificant]

Yeah I think the 360 will have a hard time breaking into the mainstream. That's what I said. The reason for that is some of the above.

The PS3 actually is positioned better for the mainstream. BR is a much more mainstream feature than Xbox Live.
It is? Then why is the mainstream avoiding it like the plague?

I think MS is better suited simply because they don't have a blue elephant as the centerpiece of their design requirements. MS could toss out the DVD drive and replace it with 16GB of flash storage, and have a 360Lite that only offers download content such as single player and multiplayer games, rental or purchase of movies (standard or highdef), access to Netflix downloads to television, podcasts, music downloads ... pretty much anything.

And, they could get the 360Lite to under $200 faster than Sony, probably not too far off from their manufacturing costs by the time they bring it to market. Thing is, they could do that fairly quickly. Plus they make money on all the downloads, and position 360 as the delivery hub for all electronic entertainment in the living room.

"Mainstream" is when they are competing with a set-top cable box for price, but offer content rentals and purchases, IPTV, and on-demand from your cable company. That's mainstream to me.

[Johan]

MS could toss out the DVD drive and replace it with 16GB of flash storage, and have a 360Lite that only offers download content such as single player and multiplayer games, rental or purchase of movies (standard or highdef), access to Netflix downloads to television, podcasts, music downloads ... pretty much anything.

That's a really very intriguing idea! I hadn't considered that, but I'm sure MS has been considering lots of options and configurations.

It seems this generation we will have many different console configurations. We're already on our third for the 360, and an announced third for the PS3 (with one killed off in all but Japan, where the 20 gig model is still sold).

Interesting! :)

[NeoSuplex]

Then, if they wanted to play games, it's only 200$ to get the HD-DVD Drive! Brilliant!

[Limech]

It's very simple guys. Console gaming is doomed. The 360 is simply an expensive computer sold for much less than that put inside a very small factor case. Nobody can afford to give such things away so it's simple, they will have to stop.

This will leave you to choose between an expensive console or an expensive computer tailor selected by you and probably more up to date than the console.

PC gaming ftw.

[bKangy]

On the counter-argument, PC gaming is deader than a Dodo. I recently moved to a laptop. None of my friends have desktops anymore. This is essentially the end to "cutting edge" PC gaming for me and my entire group. Nobody I know can afford an expensive CPU, memory and graphics upgrade at the rate things are moving, especially at the rate that nVidia updates it's line. PC gaming is becoming marginalised at the cutting edge, restricted to a very slim market.

Console gaming is someone everyone I know can afford about 2 Christmas' into the generation. By then there's a big enough library to float it, and games that look close enough to PC game quality to pass the whole "wow" thing. Both MS and Sony have enough cash to last this and the next generation, and to fight a tooth & nail war. Nintendo with their new model I can see going for miles.

Nobody will give a fuck about PC gaming soon other than for casual gaming. Luckily, that's where a lot of money is. I hope you like Sudoku.

[robotfighter]

Microsoft has tons of money, sure, but they have to answer to investors. And if you keep throwing good money after bad, pretty soon, profits go down, and so do dividends..which is what the shareholders like to keep high. It's not about who's console is best, it's not about "Microsoft has more money than God", it's about the people who own the stock - and if you haven't noticed, most stockholders aren't terribly patient people, and to hear billions have been lost on a product, and those billions could've gone into paying dividens. Well guess who's going to win when the stockholders go to their yearly meetings with MGS.

I don't see MGS getting out of the console biz any time soon, but my money's on them doing all sorts of funky things to cut costs. It started out with them really thinning down their lineup of 1st party titles, now they've introduced a new version of the 360 that should be far cheaper than it is, but in what *appears* to be desparation to make money, they made the price just plain stupidly more expensive than it needs to be.

[Johan]

Then, if they wanted to play games, it's only 200$ to get the HD-DVD Drive! Brilliant!

Not everyone cares about retail disk-based games. Digital casual gaming is growing all the time. A 360 lite could be a terrific market opportunity.

[bKangy]

If MS Xbox division is making money as everyone says, and stockholders get bitchy about the Entertainment Division, I imagine they'll drop Zune and other non-profitable stuff. They've invested too much at this stage to drop MGS, especially considering where consoles are supposed to go over the next 10 years as media centres.

[Johan]

I think we would all agree that the original Xbox was a financial bomb (four billion lost).

How can the 360 be called a bomb before it has left the stage? Are we able to read the future and tell what kind of successes or failures await the 360 in the next several years?

The whole question is moot. Until the 360 is nearer to the end of its lifecycle, it will be quite difficult to guage whether it is "a bomb" or "da bomb."

[NeoSuplex]

Not everyone cares about retail disk-based games. Digital casual gaming is growing all the time. A 360 lite could be a terrific market opportunity.

The fact remains that a DVD drive costs about 20 bucks and you're expecting people to buy a 360 that can't play retail games. A Supercheap 360 would be great. But taking out the disk drive is not.

[DangerousDaze]

Halo 3 is going to be critical to its success, at least in the FY that it's released. The one bright spot in the division's financial statements was 2005 when their losses were vastly reduced by sales of "Halo 2". Software sales are fantastic revenue because they're almost all margin (in the range of 90%) and that really showed back then in 05.

[NightRain]

The fact remains that a DVD drive costs about 20 bucks and you're expecting people to buy a 360 that can't play retail games. A Supercheap 360 would be great. But taking out the disk drive is not.

I read somewhere (can't recall where) that Microsoft was suppose to be partnering with a cable company (I assume comcast) to bring a setup box out that will be a digital HDTV PVR and support IPTV, it was also expect that it would be able to connect to the Xbox Live Arcade (or similar service) and download arcade games and store them on the internal HDD. Sounded like a good idea to me, as long as it is in line with current PVR prices from cable/satellite providers and you don't have to pay an annual service fee (Xbox Live Silver) and the games aren't too expensive. Oh they also figured it would use a standard Xbox 360 wireless controller.

[bean19]

Nobody will give a fuck about PC gaming soon other than for casual gaming. Luckily, that's where a lot of money is. I hope you like Sudoku.

You're wrong. MMOs continue to expand the PC gaming market year after year despite the high cost of PC-gaming.

A big part of this is how accessible MMOs are designed to be. For example, the upcoming Gods & Heroes looks amazing even on PCs that are three years old.

[bKangy]

It was meant to be a complete counter-argument, but I think MMOs go under casual for a lot of the userbase. Also, the fact they play on older PCs means they're marketable to laptops. I'm talking about games like Doom 3 and stuff that were really aimed at top end users.

[im.thatoneguy]

The day when the comcast installer pulls an Xbox elite out of his truck and hooks it up as your new free cable box is the day Microsoft wins.

IPTV is where it's at. An HD Cable box already costs about $300-$350 retail there is no reason someone would choose a Motorolla or what have you digital cable receiver when you could get a free Xbox.

I got a free HDTV receiver with my Dish Network Package. Usually comcast has a free HD receiver deal going.

As soon as said Xbox is installed in the living room Microsoft starts selling your Mom Backgammon. You're purchasing TV shows from marketplace. You're watching TV, playing halo and instant messaging over MSN.

With advanced windows integration you can also stream all of your music and movies from your home windows server.

It's game over. They've taken over your TV. Sony is trying to sell PS3s to get an Blu-Ray Player in every living room. Microsoft is hoping to give away Xboxes to sell games and movies to every TV. That's the beauty. They're not selling consoles they've figured out a way to GIVE THEM AWAY FOR FREE! That's when you dominate the market. That's when you have a strangle hold on the Next Gen race.

You can't argue with free.

Edit: haha just saw someone else had already jumped on the Cablebox bandwaggon. It's the future people. Consoles are going to be like Cell-phones in a few years. People would laugh at the notion of actually *paying* for one.

[Shadowstorm]

This article is bullshit.

[im.thatoneguy]

Just did a little digging to confirm my theories:

Xbox Elite $479:
120GB HDD
HDMI Output
Multiple IPTV Streams

Echostar ViP 622 HDTV DVR $699msrp (but really closer to $450 retail)
250GB HDD.
HDMI output.
Multiple Sattelite streams.

If Xbox Premiums really only cost $323 to manufacture, I'm sure in 6 months when microsoft starts offering IPTV they'll be able to offer the Xbox for that much to Comcast. The marketing on Comcast's end is brain dead easy: Buy 12 months of comcast, get a free Xbox 360.

[NeoSuplex]

I read somewhere (can't recall where) that Microsoft was suppose to be partnering with a cable company (I assume comcast) to bring a setup box out that will be a digital HDTV PVR and support IPTV, it was also expect that it would be able to connect to the Xbox Live Arcade (or similar service) and download arcade games and store them on the internal HDD. Sounded like a good idea to me, as long as it is in line with current PVR prices from cable/satellite providers and you don't have to pay an annual service fee (Xbox Live Silver) and the games aren't too expensive. Oh they also figured it would use a standard Xbox 360 wireless controller.

Again, if it can play arcade games, why would they leave out the DVD Drive? Keep in mind that XBLA games are still designed with the standard 360 Hardware in mind; it won't be any less powerful or expensive just because it can only play Arcade games (unless you count the 20$).

[mkelehan]

I could see a special "cable box edition" 360. It'd have an LCD display on the front, for displaying time and channel, and would come with a remote, but no included controller. If turned on with the remote, it would hop right to the IPTV interface.

It would, however, still certainly have a disc drive. Not only does a DVD player add a little bit of value, but drives are dirt cheap, and MS can jsut eat that cost and make it back when they sell you ONE game. And believe you me, these new cable box 360s would account for, on average, more than one additional game each.

Yeah, if they did this, they'd just win, hands-down. Sony is trying to sneak a Blu-ray player into your home, but MS could actually sneak their game console into your home. And if they tried this in Japan, where broadband is everywhere, it could be just the thing to turn this around.

[Johan]

A Supercheap 360 would be great. But taking out the disk drive is not.

I'd be happy if they just take out the parts that break.

ba dum psh! :D

[theguido]

So even if Microsoft remains the leader this entire console generation, they are going to lose money? That's really the position you want to take?

Do you mean because of the Zune? I guarantee you that the Zune isn't costing Microsoft anywhere near what the Blu-Ray albatross is costing Sony.

My point is that it's going to take it a long time to recoup their losses even should they be the market leader, which is not a foregone conclusion at all. Even if they make money like Nintendo made money last year (not an easy feat), it's still going to take 5 more years just to break even with it.

And, even if they should establish that kind of market leadership and break even, being the leader in the video game market does not assure future leadership like it did for them in say, I don't know, the OS market. Just ask Sony or Nintendo about how easy it is to fall from the proverbial throne.

So, essentially, from a financial standpoint you're looking at a long, long, long road back just in order to break even, with no assurance that once you get there that your investment will be worth the time or money spent. In that way, I can see why this particular financial advisor would consider Microsoft's foray into the world of gaming as one that is generally not good for investors.

[bean19]

My point is that it's going to take it a long time to recoup their losses even should they be the market leader, which is not a foregone conclusion at all. Even if they make money like Nintendo made money last year (not an easy feat), it's still going to take 5 more years just to break even with it.

1. What makes you think that they will stop being the market leader?

2. On what are you basing your opinion that they would need to remain the market leader for 5 years to recoup their losses?

3. Are you playing pretend?

[Exodus]

It was meant to be a complete counter-argument, but I think MMOs go under casual for a lot of the userbase. Also, the fact they play on older PCs means they're marketable to laptops. I'm talking about games like Doom 3 and stuff that were really aimed at top end users.

MMOs go under casual?

Since when exactly?

[WastedCells]

Microsoft better step up their game division before the PS3 starts pumping out their big games and lots of them or they will lose the lead and have another profit loss this round. Bill needs to do a EA and buy some talent. One game just can not carry them into profit, they need more.

[WastedCells]

Ohh and Nintendo makes money on every console sold from day one. Thats why their next gen is last gen.

[Frogleg Special]

Nobody will give a fuck about PC gaming soon other than for casual gaming. Luckily, that's where a lot of money is. I hope you like Sudoku.

PC gaming is still big outside the US.

I guess by 2015 all the best IT guys come from Germany, France, China, India, Russia, etc. The US are just consumers since most of their youngs are allergic to Computers.

[KingGorilla]

Yup PC gaming am doomed. EALA did not sell a single copy of C and C 3, WoW is not approaching 10million subscribers, and Halflife 2 is not one of the most successful FPS titles of all time. Like I said on EvAv Radio, NPD is a crock of shit, ask any PC game maker or player or Amazon.com or GoGamer. Guild Wars moves 4 million units and it is not a blip on the radar last year.

[Achilles]

Yup PC gaming am doomed. EALA did not sell a single copy of C and C 3, WoW is not approaching 10million subscribers, and Halflife 2 is not one of the most successful FPS titles of all time. Like I said on EvAv Radio, NPD is a crock of shit, ask any PC game maker or player or Amazon.com or GoGamer. Guild Wars moves 4 million units and it is not a blip on the radar last year.Guild Wars moved 4 million copies at retail last year? Is there a press release for that or something, because I really don't think that's accurate. Nightfall did come out last year but it didn't sell anywhere near 4 mil at retail. It didn't even sell 1 mil.

These NPD numbers are only for console games anyway, so it would make sense that things like C&C wouldn't appear on these no matter how successful it was. They have different numbers for PC games.

[KingGorilla]

They moved 4 million accross all three. Much of the expansions were purchased digitally through the ArenaNet client, however. But of all the games and expansions NC reported 4 million as of December.

[Achilles]

They moved 4 million accross all three. Much of the expansions were purchased digitally through the ArenaNet client, however. But of all the games and expansions NC reported 4 million as of December.Okay, that sounds about right, but why would the 4 million register last year? Wasn't that the sales over the last 3 years? I guess I just don't understand your attack on the NPD for not reporting the 4 million for Guild Wars last year in their console sales numbers, which is what I got out of your post. Granted it was a blend of sarcasm and seriousness so maybe I missed something. Just because people don't post the PC numbers on Evil Avatar doesn't mean they aren't kept track of.

Some PC games do well, C&C3 will do well, WoW does well, HL2, Sims, and Guild Wars are examples. But if you're trying to compare sales to the console market you just have to look at the 360's ~12 1 million+ selling titles last year. There's a few PC titles that can sell well, but the majority sell very badly. It's a very stagnent market as well, people aren't trying to make a lot of big games exclusive to PC.

[Planetbuster]

Back to my original point.......The consoles still feel dumbed down....I want a machine I can "Interface" more with and my rig is it. All the sweet games I am playing right now are NOT on the consoles, the console is just a diversion.

Not to say I have not really enjoyed some stuff on my 360 like Chromehounds and I really liked Crackdown..to bad it wasn't more like the GTAs were on the PC (yes PC) with some kinda character interaction with a story.....

So back to my point......I still think the consoles have a ways to come before I can find it more entertaining than my PC. And right now its Microsoft thats going there faster than Sony imo.

Isnt that what its all about?

[KingGorilla]

Okay, that sounds about right, but why would the 4 million register last year? Wasn't that the sales over the last 3 years? I guess I just don't understand your attack on the NPD for not reporting the 4 million for Guild Wars last year in their console sales numbers, which is what I got out of your post.

Well, my stronger point was Half-Life. It never cracked the NPD at all. But it sold 4-5 million the year it launched. And GW still sells a million or so a year, handily cracking the top 20.
And people who look at the "demise" of PC gaming seem to neglect that it has operated outside of mainstream distribution channels for a very long time. And if NPD tracked as well as the European Union tracked sales, you would see more PC titles at the top of sales(I mean in Europe last month C and C 3 was the top title).

[Trazzlo the Magnificant]

The day when the comcast installer pulls an Xbox elite out of his truck and hooks it up as your new free cable box is the day Microsoft wins.

IPTV is where it's at. An HD Cable box already costs about $300-$350 retail there is no reason someone would choose a Motorolla or what have you digital cable receiver when you could get a free Xbox.

I got a free HDTV receiver with my Dish Network Package. Usually comcast has a free HD receiver deal going.

As soon as said Xbox is installed in the living room Microsoft starts selling your Mom Backgammon. You're purchasing TV shows from marketplace. You're watching TV, playing halo and instant messaging over MSN.

With advanced windows integration you can also stream all of your music and movies from your home windows server.

It's game over. They've taken over your TV. Sony is trying to sell PS3s to get an Blu-Ray Player in every living room. Microsoft is hoping to give away Xboxes to sell games and movies to every TV. That's the beauty. They're not selling consoles they've figured out a way to GIVE THEM AWAY FOR FREE! That's when you dominate the market. That's when you have a strangle hold on the Next Gen race.

You can't argue with free.

Edit: haha just saw someone else had already jumped on the Cablebox bandwaggon. It's the future people. Consoles are going to be like Cell-phones in a few years. People would laugh at the notion of actually *paying* for one.
heh, you and I speak exactly the same language! Ooo this all would cook.

People on gaming boards often think its about playing the best games, highest res. But, that isn't mainstream. What mainstream in our house would look like is this:
1) 360 in the living room connected to a 42" HD TV
2) 360 for gaming (both my wife and I play a lot, but not always the same games, or one of us watching a movie while the other plays).
3) Possibly a 360 Lite (cheapest Core possible) for the bedroom TV.

All of those plugged into our Comcast, plus Podcasts/games etc from Live.

Now finances. How about Comcast rent us all that stuff as part of the cable bill? Or let us buy it as we see fit? Rental is nice if they cover costs of failures.

PS3: The issue with PS3 is Sony demands we buy a bluray for everyone console we would want in the house. That tosses the costs into the realm of stupid, since we could probably do two premiums at $350 assuming a reasonable price drop or bulk purchase price, plus one ultra cheap 360 lite for $199. Total is $900, compared to PS3 of $1,800.

MS can start to populate the "optional" outlets in your house faster than Sony can, especially if they have a very feature minimalist console. The Lite is targeted for those TVs where "Retail" gaming (ie bought on DVD) is not used, but all other content is (HD TV shows, podcasts, arcade games, movie rental, on-demand etc).

[Trazzlo the Magnificant]

The fact remains that a DVD drive costs about 20 bucks and you're expecting people to buy a 360 that can't play retail games. A Supercheap 360 would be great. But taking out the disk drive is not.
The fact remains that not all consoles need the DVD. For some uses replacing the DVD with cheap permanent storage (Flash drive, whatever) fits the needs better. Many people already have a DVD for their TV or the TV includes one built in.

I suggested this sort of idea only to say that MS could have a very light weight version of the 360 to meet the needs of people who might never buy a retail game on DVD. They might not even game at all, but want all of the other content; if MS and Netflix work together, I can see many Netflix users getting a 360Lite just to watch downloaded movies directly on their TV (while downloading another movie at the same time, possibly?), plus movie purchases through Live, or IPTV offerings. The price becomes the barrier to entry, not the features.

Plus, if someone decides they would use the DVD, they are free to purchase the Core or Premium or Elite. It's not like they don't have the choice. But, you aren't forcing people to buy another DVD when all they want is content downloads and arcade games from Live.

The best part is that the 360 would start to sell in larger number, and the manufacturing costs of all the models drops more rapidly. A bonus to everyone, since the core features of 360 are common.

Then, think of what might happen to the cost of the HD DVD add-on, that any of those 360 versions can support. I bet the price comes down fast, and suddenly HD DVD is $100-$150 as an add on. Plus, I only need to buy one for the 360 at my large TV, where pretty much all of my HD content would be seen. The other 360's in the house can remain free of HD DVD.

Populating the living room is good, but people have family rooms too and bedrooms; each with a TV. Mainstream is when they all have a console.

[bean19]

The fact remains that not all consoles need the DVD. For some uses replacing the DVD with cheap permanent storage (Flash drive, whatever) fits the needs better. Many people already have a DVD for their TV or the TV includes one built in.

DVDs are cheap and add more value than they cost. They won't go away even on the cable box model unless someone is very stupid.

[Trazzlo the Magnificant]

DVDs are cheap and add more value than they cost. They won't go away even on the cable box model unless someone is very stupid.
Except MS ones are the ones giving warranty problems and scratched disk issues, and many people already have a DVD. It's $20 better spent elsewhere, for a cheap console intended for downloading. If you are doing downloading of movies, you need some permanent storage while you download (at least until streaming speeds let you have HD streaming faster than you watch).

A DVD drive is more of a point of failure than a flash drive, isn't it? So failure rates and warranty costs might drop.

I can see a console doing well if it is targeted only at downloads, and let the existing DVD player play DVDs. That's just for the people who are happy with downloaded games, movies etc; a replacement for the cable set top box but also delivers other content, and lets you buy movies online.

[NightRain]

DVDs are cheap and add more value than they cost. They won't go away even on the cable box model unless someone is very stupid.

Unless the plan to eliminate piracy on the cable box model. If these things were free from the cable provider and all people had to do was mod the dvd drive and never buy 360 games it would be bad. Most cable/satellite box solutions from these companies are very closed system with little to no custom options. From that stand-point it would make sense not to include the DVD drive, plus cable companies like highly reliable boxes, removing the DVD drive reduces chances of failure since moving parts always break first.

It could/would actually be SMART to remove the DVD drive, not stupid.

[bean19]

It could/would actually be SMART to remove the DVD drive, not stupid.

Pirates are willing to pay for expensive modifications and will just buy the already existent 360s with DVD drives.

They've already made it so inconvenient and difficult through forced updates with different titles that only diehard pirates steal 360 games.

This would lower the value of the 360 too much for mainstream consumers. Without DVDs then there is no preowned market, and a lot of people would disdain the service because the competing market would still be there - for those who had DVD drives. Plus, there is a limit to any hard drive - even the elites. How many 4-9GB games fit into 120 GB? Quite a few, but many people will want to hold on to those HD movies they downloaded and their music, etc. etc. DVD drives alleviate the biggest call on disc storage: large games.

[bean19]

(at least until streaming speeds let you have HD streaming faster than you watch).

That's the plan with the IPTV stuff. They're doing a huge bump-up in speed for users that get the new plan. There was a real big article on this a while back but that's the whole idea. . . internet that is fast enough that you can stream HD-quality video - both television and movie.

As far as the DVD stuff, I listed more reasons why it is necessary in my previous reply. A DVD simply adds too much value to a system. Not adding one would be almost as anti-consumer as Sony's Blu-Ray albatross.

[Trazzlo the Magnificant]

I wonder about download content, and what else it could offer. The PS2 is still selling great guns; it has a good price advantage and a massive library. They want to migrate people to the PS3, but to do that costs people $600 ... just to upgrade.

What locks people in to the PlayStation namebrand (TM Sony ... blah blah blah) is that massive library and not much else since everything else is different. Could the 360 remove that advantage by getting the most PS2 developers to modify their code to run on 360, possible from Live? It provides another breath of life into older IP, while finding a new market and has low delivery costs.

Microsoft wouldn't necessarily even have to offer them money, but just a deal like "the first 100,000 downloads are 100% for the developer, after that we get our normal percentage". The delivery costs are cheap enough, there isn't a huge investment in manufacturing/shipping of goods.

It might really start to dilute the entire concept of exclusive content, and only first-party games remain truly exclusive to a console.

[NightRain]

Pirates are willing to pay for expensive modifications and will just buy the already existent 360s with DVD drives.

They've already made it so inconvenient and difficult through forced updates with different titles that only diehard pirates steal 360 games.

This would lower the value of the 360 too much for mainstream consumers. Without DVDs then there is no preowned market, and a lot of people would disdain the service because the competing market would still be there - for those who had DVD drives. Plus, there is a limit to any hard drive - even the elites. How many 4-9GB games fit into 120 GB? Quite a few, but many people will want to hold on to those HD movies they downloaded and their music, etc. etc. DVD drives alleviate the biggest call on disc storage: large games.

The point I'm trying to make is that it actually wouldn't be an Xbox 360. It would be a cable/satellite with HD PVR functions like most cable/satellite companies have now. Microsoft are working to provide them with IPTV functions and it is rumored they will support Xbox Live arcade games, much like the Windows Live Arcade games service they are introducing. If it provides any gaming features it will not be for mainstream gamers, it will be for people who currently play bejeweled, and other similar games on their PC who would like to experience them on their HDTV. The gaming part will be a small part of the overall feature list and IPTV will be the real selling point.

This would mean in the future it may be possible to play games like Uno where 4 different platforms are being used. Xbox 360 obviously and the soon to be released PC version, as well as a Set Top Box version and maybe even a Windows Mobile or Cell Phone version. Don't forget MS have talked about Live Mobile a lot recently. I'm sure you wouldn't expect them to build a DVD drive into a mobile phone or PDA.

[bean19]

The point I'm trying to make is that it actually wouldn't be an Xbox 360. It would be a cable/satellite with HD PVR functions like most cable/satellite companies have now. . . The gaming part will be a small part of the overall feature list and IPTV will be the real selling point.

Why would Microsoft not put in a $20 device that would allow them the ability to sell proper games to these people? What possible reason could they have for this? They'd make up the "loss" on the DVD drive with the first two games purchased or with the first controller purchased.

Plus, these are exactly the type of people that Microsoft wants to graduate into buying big-boy games. Get them started on the gaming pot (Uno and the like), but get them hooked on the crack (Gears of War, Bioshock, Blue Dragon, etc.) later on.

I don't understand why you think that Microsoft would be stupid enough to miss this opportunity to broaden the market and make tons of cash?

Plus, a DVD drive plays DVDs. That would be value added to a lot of people who don't own a gaming device. A lot of people would like to be able to simplify their entertainment center set-up, and since we are talking about non-gamers here, this could mean the ability to get rid of a DVD player. It is also lets you play music and is useful for transferring data to the 360. Plus, what about when the cable is out? Without a DVD player the entertainment center would suddenly become an innate and utterly useless, but extremely expensive, piece of crap.

Microsoft has really smart people working for them. I can't imagine they would do something this silly. If they did, you can bet that someone would get fired when the entire gaming media crucified the device for the lack. . . keep in mind that this would also be a conspicuous lowering of the 360 "feature set". . . even if it was being marketed as "not a 360".

[NeoSuplex]

The point I'm trying to make is that it actually wouldn't be an Xbox 360. It would be a cable/satellite with HD PVR functions like most cable/satellite companies have now. Microsoft are working to provide them with IPTV functions and it is rumored they will support Xbox Live arcade games, much like the Windows Live Arcade games service they are introducing. If it provides any gaming features it will not be for mainstream gamers, it will be for people who currently play bejeweled, and other similar games on their PC who would like to experience them on their HDTV. The gaming part will be a small part of the overall feature list and IPTV will be the real selling point.

This would mean in the future it may be possible to play games like Uno where 4 different platforms are being used. Xbox 360 obviously and the soon to be released PC version, as well as a Set Top Box version and maybe even a Windows Mobile or Cell Phone version. Don't forget MS have talked about Live Mobile a lot recently. I'm sure you wouldn't expect them to build a DVD drive into a mobile phone or PDA.

An intriguing idea, actually. If you're talking about basically leaving set top boxes as they are, but giving them the ability to access Live and download specialized games. The only problems I can see are that, unless MS manufactures it, it'll be limited to wired controllers and you'll lose a vast majority of the (already small) XBLA Library.

[NightRain]

Why would Microsoft not put in a $20 device that would allow them the ability to sell proper games to these people? What possible reason could they have for this? They'd make up the "loss" on the DVD drive with the first two games purchased or with the first controller purchased.

Plus, these are exactly the type of people that Microsoft wants to graduate into buying big-boy games. Get them started on the gaming pot (Uno and the like), but get them hooked on the crack (Gears of War, Bioshock, Blue Dragon, etc.) later on.

I don't understand why you think that Microsoft would be stupid enough to miss this opportunity to broaden the market and make tons of cash?

Plus, a DVD drive plays DVDs. That would be value added to a lot of people who don't own a gaming device. A lot of people would like to be able to simplify their entertainment center set-up, and since we are talking about non-gamers here, this could mean the ability to get rid of a DVD player. It is also lets you play music and is useful for transferring data to the 360. Plus, what about when the cable is out? Without a DVD player the entertainment center would suddenly become an innate and utterly useless, but extremely expensive, piece of crap.

Microsoft has really smart people working for them. I can't imagine they would do something this silly. If they did, you can bet that someone would get fired when the entire gaming media crucified the device for the lack. . . keep in mind that this would also be a conspicuous lowering of the 360 "feature set". . . even if it was being marketed as "not a 360".


Its not that MS wouldn't want it, the cable/satellitte companies don't want it.

Motorola looked into adding DVD-R support to their PVR systems and cable comapnies didn't want it because moving parts (optical drives in this cause) introduces higher failure rates.

This box will essentially be just like your standard dual-tunder HDTV PVR that you get from cable/satellite companies now but will have a larger HDD, network interface for IPTV and MAYBE Xbox live. All we really know now is Microsoft is working with cable companies to intergrate IPTV into existing boxes. The best way to do this is to use the same network as Xbox Live which is where the rumor of Xbox Live support came in, Microsoft wants this market bad and will do whatever it takes to get their IPTV system in your living room. If the cable providers don't want optical drives then Microsoft won't include them, it is that simple. However, if they include full Xbox Live support then people can still take advangate of online games from the Live Arcade and introduce additional income for MS without using a optical drive since most cable companies don't want a drive.

Remember most cable companies rent you the box and will replace it if it breaks, no matter how old it is. if MS gives them a 1 year warranty (like motorola does) every time they have to replace it after that 1 year the cable company has to pay for it. So if the DVD drive breaks then the cable company will loose more money. In the end you have to remember Microsoft has to meet the demands of its customers, in this case the customer is the cable/satellite providers not me or you. We would be a customer of the cable company and cable companies have never been about giving the customer a ton of extra features and bells and whistles they don't really need.

The only way you will even see Xbox Live Arcade on these boxes is if Xbox Live is required to use their IPTV solution.

[NightRain]

An intriguing idea, actually. If you're talking about basically leaving set top boxes as they are, but giving them the ability to access Live and download specialized games. The only problems I can see are that, unless MS manufactures it, it'll be limited to wired controllers and you'll lose a vast majority of the (already small) XBLA Library.

Yes that is exactly what I'm talking about. Microsoft are looking into creating a set top box that will be just like all current set top HD PVR boxes just with MS IPTV included, which may include live. What I expect is they will include support for the wireless controller because people don't like wires.

From what I understand if they do IPTV through Live there is no reason not to include XBLA, and it should play just like XBLA on a 360.

[bean19]

Its not that MS wouldn't want it, the cable/satellitte companies don't want it.

Then they need to come up with a better deal with the IPTV provider. Not having a DVD would be a HUGE mistake (for the reasons I've already given).

[Trazzlo the Magnificant]

Then they need to come up with a better deal with the IPTV provider. Not having a DVD would be a HUGE mistake (for the reasons I've already given).
But it offers nothing at all, except more expense. It isn't a required component for IPTV delivery, nor Live content, and most people already have one. If someone thinks it is an important feature, then hopefully there is an IPTV 360 version of the Premium or Elite (this is what I would be interested in myself).

The concept of downloaded content becoming the norm isn't unreasonable, and having a very low price entry level box is a good thing. Not to mention that having a cheap 360 for non-living room televisions (the second or third console) can be good.

[bean19]

But it offers nothing at all, except more expense. It isn't a required component for IPTV delivery, nor Live content, and most people already have one. If someone thinks it is an important feature, then hopefully there is an IPTV 360 version of the Premium or Elite (this is what I would be interested in myself).

The concept of downloaded content becoming the norm isn't unreasonable, and having a very low price entry level box is a good thing. Not to mention that having a cheap 360 for non-living room televisions (the second or third console) can be good.

I've already told you why it would be monstrously foolish to not have a DVD in there. You can reread my arguments and argue against those points if you like, but I won't repeat myself simply because you do.

If you are a MS marketing shill with inside information or something, you should get them to reconsider this deal. Not having a DVD and thus not being able to play X360 games will piss gamers off and will work against Microsoft's goals of broadening the market. I can't think of anything more stupid than this.

[Trazzlo the Magnificant]

I am expressing an opinion that is just as valid as your own.

[bean19]

Sorry, as has been pointed out, I can be a bit of a douche.