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Console Pricing Economics
Red Mercury writes "Red Mercury has just released a new installment of Monday Morning CEO. Today's topic: XBox Economics. The article explains some of the myths and realities about game console pricing, how the current price war is playing out, why Sony is winning, and why Microsoft is losing." Interesting piece about all the recent console price cuts.
It's only a matter of time...
Microsoft makes it money from Office and Windows... they can afford to make losses, and big losses at that, on other things (eg Internet Explorer). Their competition usually doesn't have that luxury
An interesting comparison to the Red Mercury article is this one which claims M$ lost $80 per XBox sold at the original price...
Microsoft can afford to lose money on the XBOX. They've got enough extra cash lying around to buy a dozen space shuttles.
The point of the XBOX is to allow Microsoft to break into the home entertainment industry. Whether or not the XBOX makes money, it will be followed up by XBOX II and X-HOME-THEATRE system, or whatever they will be called.
Right now, profit on the XBOX would be nice. But the bottom line isn't necessarily the bottom line.
My only complaint with the article is my disbelief that console manufacturers really expect the markets for consoles to last 6-7 years.
The other side of Moore's Law is that quite a few people are going to be demanding better hardware, more quickly. That's why Sony already has the PS/3 in the pipeline.
Get off my launchpad!
San Jose Mercury had an article on Saturday about the XBox and how it compares to the Game Cube and PS2 and basically panned it. In a nutshell, HALO isn't strong enough and there's no signature game anyone has to have.
Also, this morning there was some blurb on the radio about Microsoft rolling out XBox Live.
A feeling of having made the same mistake before: Deja Foobar
Most of those early adapters bought XBox 'packs' (action pack, all star pack, adrenaline pack, etc...) that had 2-3 games included. With the huge profit margins on games, this probably helped MS sell those packs at close to cost.
Slashdot Economics 1. Set up Port-a-Potty in a public space 2. Hang a magic marker from a string inside the crapper; encourge users to write graffiti 3. Periodically toss advertising flyers through the door as users sit and write 4. Offer an "advertising-free" experience to users for a small charge 5. Nickel-and dime yourself into financial oblivion
reality timed out @ 11:11
As far as I can see, the X-box when used with Linux or other suitable OS is the best way to get computing to the poor. It is a short matter of time that any protection will be cracked (sure it allready has) and the X-box will be the PC for the third world. Every poor fuck can afford a TV, can't they?
the xbox lasts 5 years then it IS actually possible that a large number of owners WILL buy those 20-30 titles. Put simply the XBoxs greatest advantage is the ability to port PC games to it quickly and easily...smaller development teams to do this means a greater ROI for those titles that have done the port. In theory this will mean cheaper titles for the XBox appearing very quickly and a distinct possibility that the number of available titles will outstrip those available for any other console.
Dont write MS off too quickly...
I guess it's time to head on over to Pud's to see if he's got the X-Box listed...
Well, this is usually what we expect from MS but as the article points out, they don't own the chips, there is only so much they can reduce the costs. The console market being what it is, you wonder how long MS is willing to throw good money after bad until they reach the promised land. I'll say this though, their comercials still are cool (at least the ones I saw before I got my Tivo).
Lord, bless my users that they may stop being such fucking idiots!!
It's so good to see Microsoft hurt so bad :P
:)
Regardless, a $199 XBox is great, even if I never plan to buy one, because it is responsible, in part, for a $199 PS2 and a $149 GameCube...
Hmm, and a GBA costs $70 now? Hmmm
GPL Deconstructed
The real killer for X Box is the HDD. Sure HDD capacity keep increasing, but HDD cost never does becuse they are mechanical devices. It take a great deal a labor to make a HDD. And right now MS is getting some sweetheart HDD deals because PC sales are down. Seagate will stick it to them when PC sales start picking-up. The real customers that the HDD companies care about are HPQ, Dell and Gateway. MS jist does not do enough volume even with X to get their attention.
Looks like microsoft may have gotten into a fight with someone a little more cagy than themselves and I am laughing my butt off. Sony is an old hand at dealing with psuedo monopolies and the latest fads. Microsoft is a talented amature at this but it looks like age and cunning are about to teach youth and exuberance a lesson.
CEO of Nintendo " Sonny we were getting sued for anti-competitive behavior while you were still trying to secure your first round of VC funding. Don't try to teach this old hound how to hunt."
Bill Gates " whimper"
Papa Legba come and open the gate
Some seem to think that it doesn't matter if Microsoft loses millions or billions on the XBox, because they will just release the XBox 2, and everybody will buy that, according to some larger Microsoft "strategy" to "own the living room". Game consoles don't work that way, for some reason. If the XBox goes the way of the Dreamcast, nobody... NOBODY is going to be clamoring for the XBox 2 (how many millions of people are eagerly awaiting Dreamcast 2? That's right, zero million.)
Now if only we can get MS to keep throwing money away....
"It is a greater offense to steal men's labor, than their clothes"
Here is a website debunking the notion that console makers have been selling below cost for years.
a pter02. html
Acts of Gord - Legend Vs the myths
http://www.actsofgord.com/Proclamations/ch
What is particularly intersting to me was that as a Hardware manufacturer Sony can effectively write off the chip developement costs as work they were going to have to do anyway, and it is a great way for them to sell CD players too.
at $10 a month for internet gaming on the X-Box.
0 21 1
See the earlier slashdot story
http://slashdot.org/article.pl?sid=02/05/20/051
It's not the razors or the blades; it's the shaving cream!
This is great news for two reasons. First of all, it feels good to know that Microsoft released something that massive amounts of people didn't automatically adopt. Second, let this be a lesson to them: one of the major advantages of a console system is that you can design a radical system with none of the limitations of a general PC design. Don't compensate with inflated clock speeds when you just design better hardware. Dont get me wrong, Nvidia is an amazing processor but its only purpose is to make up for X86's sad lack of multimedia capabilities. AGP is just trying to make up for sad bandwidth. Just look what the PS2 can accomplish with 4MB texture memory, 32MB main memory and almost no cache whatsoever! It's all in the the multiprocessor design, dedicated 128 bit bus between components, and a really kewl logo. However, I must admit that the Xbox does have ONE advantage over GC and PS2... smilebit is a bunch of lazy windows coders so I probably will never see a port of Jet Set Radio Future :(
Remember a billion here, a billion there and you start talking real money.
But remember Microsoft has TONS of money. If their goal is to own the living room, then by god they will own the living room. Just wait till they day they say the hell with it, drop the Xbox, come out with the Y box, sell that for about $10, and wait until everyone owns one and Sony and Nintendo are out of the console business.
At this point they use their monopoly in the console market to force TV manufactures to make TVs that support some sort of "innovation". Then it will daisy chain from there until MS software, and possibly hardware, runs your entire house.
Of course the flaw in this paranoid delusion is for it to work MS has to offer more than a cheap console and a bunch of crappy games. If all they have to offer for the $10 Ybox is Halo2: More shooting then the gamers will still probably flock to the PS3 with GTA4: Killing some more Hos.
No I don't have any three of the consoles yet, but the choice of which to purchase is getting harder and harder...
Eddy.WriteLinux.Com
I wonder if sony is making any money on the ps1 still since it is now priced at $49. I think this move was to keep up with sega who repriced all their dreamcasts at a price of 50 dollars about 8 months ago
won't play 2d fighter games! give that shit a rest.
Verily, it is truly as the Gord hath prophesied. Indeed, in this particular writing, the Gord reached pretty much the same conclusion as this fellow, only quite a bit earlier. Neat to see he is being proved right.
Editor Emeritus and Senior Writer, TeleRead.org
The article disagrees and so do I:
Some seem to think that it doesn't matter if Microsoft loses millions or billions on the XBox, because they will just release the XBox 2, and everybody will buy that, according to some larger Microsoft "strategy" to "own the living room". Game consoles don't work that way, for some reason. If the XBox goes the way of the Dreamcast, nobody... NOBODY is going to be clamoring for the XBox 2 (how many millions of people are eagerly awaiting Dreamcast 2? That's right, zero million.)
If I were in their shoes I wouldn't have dropped the price. Instead I'd have launched a multi-million dollar ad campaign targeting why the XBox is so much better and how the other consoles were slashing prices in fear. Too late.
Look, I love a PS2 and love it. I bought it the day I saw the Xbox. I won't buy an Xbox anytime soon, as long as my favorite games are on the PS2.
Having said that, I disagree with the article. Simply put, XBox is technologically superior to the PS2 (and I'm talking game experience here, not specific specs), and although right now it's not a huge issue (although it is for some people), as time goes on, it'll be more and more important
Pretty soon people will look at PS2 games and then look at Xbox games and PC games and say "why can't my ps2 do that!", and THEN, only then, people will start considering an Xbox again.
If by that time the PS3 is not out yet, Microsoft will get enough momentum to either go ahead and release an Xbox3 or do with the Xbox what the PS2 is doing today, at a much lower cost (as the article says, the cost goes down according to Moore's law)
Basically MS will have a small window of oportunity (6-12 months?) in the next, say, 2 years, that they might or might not take advantage of, and that Sony might or might not prevent. Bottom line, it's not decided yet.
There are two kinds of people in the world: Those with good memory.
How old is the PS1, very old, and its still selling if you can be the last man standing in this game then you can start doing things like
Selling it to Car manufacturers to entertain kids (they've done that)
Try and replace the SNES on those lucrative airline contracts.
And many more, PS1 is still selling pretty well out there, and there are still Games, Moore's law says the power increases... not the quality. While the graphics get better, and sometimes the playing gets better but... well Tomb Raider II is still cool to play.
Last man standing in the current war will get to own even more than the PS1 is currently looking at.
An Eye for an Eye will make the whole world blind - Gandhi
If you look at PSone and older Sega Systems you will see that a 6 years lifespan is not uncommon in the console business. Its the old rule: If you have known hardware games can get better even on older hardware. If Sony really has a PS3 in the pipe (wich i doubt) it would at least take 2 or 3 years to develop the chips (they make them theirselves ya know) and therefore the 6 year lifespan would still be realistic for PS2.
Whats more, with PSone still out on the shelfs chances are that some successful consoles even live longer than that...
Console-Biz is NOT PC-Biz. Thats what M$ is learning right now the hard way.
cu,
Lispy
This was a helpful analysis to correct the one concerning Microsoft's battle with Sony from the "Beating Bill" article at Business 2.0 . In that article, the author felt that Microsoft was succeeding against Sony because:
a) they didn't get it wrong right off the bat (as one former Microsoftie opines, "If version one of a product does not suck, it's game over."
b) the Xbox has more power hardware
c) it has an ethernet port intrinsically
d) it has the potential to be a future digital hub
e) a survey that states that 27% of PS2 owners intend to buy an Xbox
This would be a good reply if it wasn't for the fact that all the things the xBox can do are very insignificant to the primary function of he box... PLAYING GAMES. Both Consoles have nice graphics, both are the same price. The PS2 has more signature games and costs less to produce. The fact that you can hack the xBox and do PC like things on it is pretty insignificant.
"All great wisdom is contained in .signature files"
Being conservative, 3*$10=$30. Aditionally:
That means they were losing at least 21$ per unit, with a much bigger loss now that theyve lowered the price. They give a new meaning to "economies of scale".
I dont see how those 30$ are going to make Micro$oft rich.
Enoc
Why is it that the audience here is unwilling to get behind an "All American" company and support it, yet they feel its perfectly ok to promote a product that they are not involved in ?, in fact they are prepared to back a company from a country that 50 years ago they nuked ! how ironic
why cant you support products from your own country instead of from someone elses ?
Microsoft = bad yet Sony who have media and hardware control than M$ can only dream of are somehow good ! hmmmm
Microsoft have done more to promote computing worldwide than _any other company_ yet you kick sand in their faces when you actually have an opportunity to promote this "product of America"
you seriously need to get some values of your own and believe in yourselves instead of aspiring to some other cultures ideals and corporate successes
carry on dimwits and when you feel you have a lump in your throat , dont worry its your nose from where you got your heads so far up your asses
To put the numbers in perspective... there have been 20 million Sony Playstation 2's sold since its launch. This article claims it costs Microsoft $320 to make an Xbox.
Microsoft has $40 billion in cash. That's not capital tied up in equipment, that's money in the bank. This means that, if Microsoft decided to contact every PS2 owner around the world, everyone who has bought a PS2 in the last three years, buy them a free Xbox, and send it to them with free shipping... they would be left with only $34 billion.
Microsoft could then buy a controlling interest in Sony Corporation for $26 billion, and then pay retail for a $50 free game for every child in America (from newborn infants up to the 17-year-olds). After doing all that, Microsoft would still have over four billion dollars in cash reserves.
That's right we're gonna have us a great big roast on the flames of the XBOX funeral pyre? Dance naked round the flames and shit while the XBOXes all go up the fucking chimney. Wanna know why?
1 Millard Fillmore syndrome - we did it that way when he was President and we're not changing now. We know better, even if we don't we'll licence our way to prosperity.
2 The XBOX is not a console - its a computer in a kewl box and no monitor. It's too damn complex no matter how great it works. MS shoulda built a player module for your PC to play the XBOX games on. OR better yet make DirectXBOX-9 or something that shims the games to your high end GAMER PC. Those people will buy a trillion games that you make a few bucks on each copy.
What do "XBox Live Network", "Nintendo Drops GameCube Price to $150" and "Console Pricing Economics" have in common? They're all ways to allow more posts saying "M$ and their suX-box suck!"
I think we all know about MS's plan for XBOX. It wasn't necessarly to get a biggest share of the gaming market yet. It was get a market base for a new series of set-top PC's for the HD TV market. HD TV are practilcaly huge computer monitors waiting for someone to tap into them.
XBOX 1.0 was created to get a feel for how the market works. If it took some market share from Sony or Nintendo so be it.
We know that XBOX 2 will have a bigger hard drive, slightly better graphics, and shortly after release an Office suite targeted to 'college kids'.
Also look for an MSN-like information service to be the default for the broadband service. MSN search, not Google, or Yahoo will come up for all your searches.
Haven't you wondered why MS hasn't shut down all those XBOX hacker sites on the internet? They want people to hack this version of XBOX so they can make a mega system for 2.0 or 3.0.
1.0 is never the market grabber for MS. It's always 2 or 3.0 that sets the market standard.
You say things that offend me and I can deal with it. Can you?
...and one reason only; the name Microsoft is on it. If this were the Sega xbox, it would be kicking the ever loving shit out of the PS2 in sales in the US, Eurpoe and Japan.
as previous posters have stated, it is about playability. it takes time to develop software that takes advantage of any new capabilities to the extent that it is a differentiating factor. and sony is well on its way to ps3, with similar fabrication economics. so ms basically has a miniscule amount of time to develop earth shattering software. uh, the record speaks. hurry, buy a leading edge game developer!
I was never sure about how much a console was but I always expected that Sony and Nintendo were always making a profit, even razor thin ones. Always have and always will. In fact the only time when you can get away with "selling at a loss" is when you *creapy organ music* have a monopoly...
I laughed at the accusations back when N64 and PS2 were scarce on shelves and both Nintendo and Sony where causually accused of shorting supply to create demand and future sales. What idiot in the retail market wants to sell something tomorrow where they might make a profit when they can sell it today and definately make a profit? Back then a PS2 would sell for $300 scarce as it would $300 plentiful. There is no margin to play with in the retail to speculate on so they don't do it. Same thing with what is going on now with XBox's woes. Gambling to turn a profit later in retail products often gets you squashed...
Lets see...other companies that bought into the "sell the hardware cheap, hook them in software" idea.
Off the top of my head, I remember seeing stuff from sources that suggested that SGI was selling Indy workstations and later O2 at a loss. Look where SGI is now unlike Sun and IBM who have stated policies about not giving away hardware just to get people to write software. As mentioned Sega bought into the idea with the Dreamcast and nearly crushed them. Luckily for them someone recognized where most of the money was bleeding from and cut it off.
Selling hardware at a loss just isn't a sound strategy. That is a highly dubious way to invest a company's capitial. So given that Sony invested $1B in actual, real hardware investments over MS just tossing units out the door trying to pay people to buy, which is a sound strategy?
Frankly, Bill Gates is (probably) far more successful in business than either the writer of the article or any poster on this forum.
That being said, who would you believe knows what is a "good way" to do business? Someone who has proven himself (BG) or a writer who obviously hates Microsoft?
A modern day witchhunt.
Alot of compairisions are being made about how the XBox has the better hardware and how PS2 wont be able to keep up in the comming years with XBox and PCs for a gaming market.
The only problem is that as time has proven the best hardware is not always going to win the race.
If that was true (and I can't beleave I am saying this) but Macs would probably have a better market share than they do now.
What is comes down to is the software they make for the system. Microsofts tradition of you will use our system and pay us for everything you want to make for the system just wont work in this market. They need to make deals with Game Developers to get GOOD games that actually use the system to it's full power. Then maybe it would be worth it. Until then I will be playing GTA3 so please dont interupt my tank rampage unless there is truely something important on the xbox
Who were those Indrema people kidding?
The article explains some of the myths and realities about game console pricing, how the current price war is playing out, why Sony is winning, and why Microsoft is losing.
.coms "won" too.
It's a strange world where loosing money faster than your competitors is decribed as "winning". Seems to me that, not too long ago, that's how many
(Not that I expect to see Sony or Microsoft appearing on the pages of www.fuckedcompany.com any time soon - they both have very deep pockets - but it's an interesting parallel. And yes, I know it's all about market share and the razors/razor blades business model...)
"Accept that some days you are the pigeon, and some days you are the statue." - David Brent, Wernham Hogg
Microsoft doesn't have a chance. Sony is dominating.
that the PS One is now a portable console, and may be Sony's way of gradually easing into the handheld market. With an LCD screen, a PS One sells for about $150 (still a little pricey). Sony may get another 6-7 years out of the PS One.
The last time I looked Nintendo does not own IBM or ATI who make The CPU and the Graphics chip.
How is this any differnt from MS?
and this is the important part. Microsoft's strategy here is just to bleed its competitors over the next few years to make them very unprofitable. As XBox gains marketshare, the other two vendors will give way. This will then increase the box price for the other two vendors (less volume) and the software available for newer units will probably be less, as vendors will make stuff for the Xbox first. And then the network effect kicks in...
So, it may cost Microsoft a few billion dollars in losses to crack this nut... who cares? In the end Microsoft will control the game market and it will become a monopoly; where each game manufacturer supports XBox, but none of the others. This is one half, and we haven't talked about how Microsoft's Venture Capital fund is sure to help out start-up game manufacturers who promise _never_ _ever_ to make a Sony or Nintendo game cartrige.
Besides, straight from Zdnet: "However, the software giant's profits are expected to fall about 9 percent from a year earlier even though revenues have risen, due to sales of more lower-margin products and heavy marketing expenses on new products like the Xbox video game console, analysts said."
-- Dyslexics of the world untie!
Enoc
Yes, if XBox goes the way of the Dreamcast (cancelled with no successor in sight) then nobody will be screaming for the XBox2--because there won't be one. On the other hand, if Sega had had deep enough pockets to keep the Dreamcast alive, instead of cancelling it when its online games were just beginning to take off, then we might indeed be clamoring for Dreamcast2.
When did Microsoft stop giving stuff away for free to crush the competition???? (ala Internet Exploder vs. Nutscrape)
Did they get scared of the legal wranglings? I want my "free" Xbox so I can convert it into a Linux console. Can we sue Microsoft for not giving stuff away for free????
2slice
From excellent karma to terible karma with a single +5 funny post...
I bet the top Bungie folks are buying Maalox by the caseload these days. They've bet heavily on the success of the XBox.
Ah, well. Maybe once the XBox goes tits up, the key Bungie people will bail and form a new game company.
I thought this article brought up two very interesting points which oddly enough I was discussing this AM with my wife after we learned of the GC pricedrop (we have a PS2 and "classic" PSX):
:).
.
* Production control
* Platform Longevity
When talking about hardware, it's all about controlling production and cutting costs whenever possbile. Since Sony controls the production, any increased efficiencies they realize in their PS2 chip fabs directly impact their profit margins. However, on XBOX, if Intel/NVidia become more efficient in creating XBOX components, they pocket the $$$.
In addition, and in the spirit of MS' campaign for "innovation", Sony is taking it to the poor XBOX team, which obviously isn't in this for the long run. Nothing against Blackley and crew, but Sony plays consumer electronics for keeps, has teams dedicated to multiple PS product generation, and are showing it with how they control manufacturing process where, for Sony, a penny saved on costs is a penny Sony keeps (don't think Sony is selling the PSOne for a loss @$49USD
In addition to controlling its own production, Sony obviously employs a number of highly-talented hardware engineers (and yes, some of the Emotion Engine peeps belong to Toshiba) dedicated to creating mind-expanding and truly innovative hardware for the consumer market which will age gracefully and provide high-performance for years to come (For those who insist on comparing XBOX/PS2 from a MHz/RAM standpoint, see the ArsTechnica article on the Emotion Engine). PS2 has lots of room to grow.
Sony knows consoles aren't like PCs: the majority of buyers keep the consoles much longer than a PC and periodically purchase additional software titles. When the next round of the Console Wars commences, you know Sony will be selling the PS2 around $99 . . . and it will still be making a profit on each unit. Will Intel still be making the P3? What about NVidia . .
It points the reader into thinking MS is losing their shirt. And as they may this will not cause their downfall or the failure of the Xbox. PS1, first variant, lost billions for 4 years before turning a profit and Sony is still in the console business with PS2.
The article mentions Moore's law and how Sony's investments in its own plants and R&D help, it doesnt mention that Moore's law is not prejudice it works for MS too, Xbox uses Nvidia and Intel true but a Geforce 2 goes up in price over time as the Geforce 4 is out? No it drops just as quickly as new R&D pushes GF2 down, if anyone Sony should be afraid since MS doesnt have to do any R&D. And Nintedo's Gamecube uses ATI, so its in the same boat as Xbox not Sony. Only thing is Nintendo is the MS of consoles they develop their own software and dont share with 3rd parties, only recently have they decided to change their tune because of the new Xbox competition.
I personally own PS2 and Gamecube. I dont love Xbox but I hate when dumbass reporters misinform their readers.
How much do we really know about the software of the XBox? I was just thinking, if the Xbox runs a version of windows 2000 embedded, why would it not be possible for future games to increase the visual quality simply by including the latest version of DirectX. Isn't the Nvidia GPU at least mostly compliant with DX9? Why couldn't the latest game just include DX9 and get all that programmable vertex shader etc. visual goodness? And before we start worrying about those compatability issues with older titles...consider this. What if the DirectX components are already on the cd instead of in the firmware? How do we know if DirectX 8 for the Xbox is not the first thing on the halo disk? Why coulnd't Halo2 just have a DX9 loader at the first of the disk and run that?
It seems to me that the way the Xbox is designed, like a PC, it is infinitely scalable up to the limits of the hardware. If there is any horesepower left in there, future games might enhance their visual appeal just by having updated software on the disk.
I estimated the costs associated with the XBOX, and it doesn't seem like they'd be taking such a loss, using today's computer parts prices:
(I'm using a 10% discount off of Pricewatch's lowest prices-- assuming no middlemen & huge quantities.. frankly it's probably lower.)
Celeron 733 - $45
(adjusted to intel's p3 estimated manu. cost of $35 + $10)
20 GB 5400HD- $50
64 MB DDR - $12
CAV DVD-ROM - $28
(now the guesswork)
Motherboard Manufacture - $30
(it's real simple & cheap)
NVidia Chip - $35
(rumored $50 at launch of xBOX)
Case/PS/Controller/Packaging - $30
This all equals $230. Which means they could have at least been breaking even before this price cut-- and will very soon be breaking even once again. Of course, none of this includes marketing or development costs-- but we know MS is in this for the long haul anyway.
In any case, I wouldn't be running out to the store, just to "cost" MS some $$$. Who knows, with cuthroat deals, they may already be breaking even at $199.
I agree that MS makes $5-10 per game (non-MS Title)
I bet they make much, much, more than that when it comes to their games (Project Gotham, Halo, etc..) I bet they get $30.
Another thing to note is the Online Subscription. The Online DVD is $30 and at $15 per month per X-box, that some profit.
They already had the network infrastructure to support the online gaming, so adding a few servers didn't cost them much. You get a gamer to but a few games and a online DVD, and subscribe for 6 months (auto biling to CC) and they are now in the black.
They also make $$$ on other hardware. I personally purchased 6 additional controllers for my 2 boxes, I bet they make $30 on those.
They also make $$ on licensing, X-box magazine, apparel, and all the other stuff. It add's up.
MY guess is that between the controllers and the games MS breaks even. Online is where the profits come in.
Brian
It doesn't matter how much money Microsoft loses with the XBox. They will give away the XBox if they have to to conquer the territory they want. This is the sort of thing they have horded so much cash for. So they don't have to compete. Once they have the territory they want, the consumer is then screwed like with Windows. They intend to integrate home entertainment with everything else Microsoft controls and further eliminate choice. The only way Microsoft will be stopped is by the law, by consumers making moral purchases, or with a bullet in the right place.
So, this guy takes current events from any major news site, puts his own political spin, adds the obligatory poke against Microsoft, and wham, you have yet another piece of garbage article that makes it to the highlight of Slashdot's front page.
The article was interesting, and made some interesting assertions. However, it did so without any supporting facts.
Many claims were made, the most important being:
- Microsft lost money on each XBOX sold
- Sony and Nintendo broke even, or even made money, on the hardware.
The author might be correct, but I wouldn't know, since, as written, these are just assertions, unsupported opinions. the rest of the article is the same -- hypothesize price drops, manufacturing costs, etc, without any hard facts.
Hopefully, the author will provide the appropriate documentation shortly.
ShoutingMan.com
But, you're assuming that MSFT can buy out Sony. With the consent decrees and the hanging antitrust decree in Europe, it is highly unlikely that the FTC, SEC, or the EEC would permit any such monopolistic buyout to take place, especially during an attempt by MSFT to dump xBox on foreign markets is ongoing.
Fact is - until the price cuts, only MSFT was selling boxes below cost. Sony was at slight margin above breakeven, Nintendo was at a nice profit - and then add in the $50 USD game carts for gravy.
What we need is a price war on game prices, not game consoles. Why do they cost $50 USD - why not $30 USD?
-
--- Will in Seattle - What are you doing to fight the War?
Microsoft is not trying to make money on video games...well they are but they have a much grander vision ahead for which each X-Box is an investment in. This is MicroSofts way into each and every living room of America. They own you at work, now they are going to own you at home. This is their line straight into the entertainment dollar. Anybody read about how they will offer voice-over-ip? I thought one thing, brilliant! Now even grandma's going to get one so she can talk to Johny while he's playing a kick-someones-ass-with-porstar-looking-character games.
[news for me, stuff that doesn't matter]
condemning the Xbox. E3 starts tommorrow!
According to the article Microsoft will run out of money about 5 years AFTER THE EARTH HAS CRASHED INTO THE SUN.
Sega had to pull the plug on the Dreamcast because (as Gord pointed out) it was the only one of the 3 major consoles that subscribed to the razors-and-blades business plan. However, the implied comparison to MS is not valid.
Sega was a one-trick pony. If the Dreamcast failed, Sega had no other game system to fall back on. In the end, the only strategy for survival was the one that Sega eventually adopted: sell software, not hardware. If Gord could figure this out (and he's just a games dealer), don't you think EA figured this out LONG before that? So game developers were afraid to support it, so Sega lost more money, so eventually everybody knew that Sega would have to get out of the hardware business, long before they publicly announced it.
Microsoft, on the other hand, isn't about to go out of business; so, even if XBox software sales are miserable, developers will continue to target the XBox. After all, if a title flops on the XBox, they can always repackage it as a $20 PC game. I mean, a game developer might abandon the Dreamcast's dev platform and GD-ROM hell, but nobody but nobody is going to stop developing for the Intel-and-DirectX world...
Gee, isn't that what IBM did with the PC? Taking off-the-shelf will get you to market quickly, but then you are pretty much stuck with the vendors who make the components.
The dogcow says "Moof!"
Again, I will say that Microsoft can afford to lose almost any amount of money on the XBox hardware. We have talked about it before.
MS bet that the price and performance of commodity processors and ancilliary chips would drop rapidly enough to keep them in the game. It appears that either they came to late to this round of the game (Sony's headstart), that CPU performance (which is increasing for commodity processors) doesn't have an effect until the next generation, or that the price of components hasn't fallen as quickly for these "commodity" parts.
As for MS doing custom chips - can anyone imagine Intel handing over the crown jewels to MS, after having their knuckles rapped for moving into the software area? Even if they could gen up a set of customs, they'd still have to be competitive on price. Sony has a lot of experience in this area from it's consumer electronics business.
Envy my 5 digit Slashdot User ID!
Once Windows is the embedded OS in a Microsoft-controlled hardware product, many good things (for Microsoft) happen:
There is no threat from any other OS.
There is no cry of "Unfair middleware bundling!"
There is no issue of different licenses for different hardware makers, or of rogue hardware makers loading a non-M$ approved desktop.
Everyone who writes software for the box has to pay Microsoft a royalty -- guess what this does to the Free Software folks?
Microsoft can provide ever-greater improvements just by re-flashing the ROM via your (required) Internet connection (don't have one? sign here for MSN for just $5/month more than you're paying now).
Oh, did I mention manditory software subscriptions?
Want more storage space? We'll rent you more for a slightly higher subscription (no hardware upgrade needed)
This this is all a pipe dream? Think nobody will buy this? Think again.
If all this should have a reason, we would be the last to know.
This is one of those articles that takes present strategy (as viewed from the outside looking in) and runs it into the future.
The whole article assumes that MS will never fab it's own chips into an Xbox... that might not be entirely true.
BOSTON SUCKS!
true, but where the heck are they? where's half-life? where's black and white? where's sim golf? where's the sims? where's ut 2003? where's flightsim and train sim?
you make a good point, but we're 7 months into this thing, and there really are very few pc ports to speak of. if this is genuinely a strength to be exploited to ms's advantage, one is being nice to say that they haven't done a very good job at convincing developers and publishers to get on board.
i think a valid question raised by this failure is whether we need to start talking again about whether there's not a qualitative difference between console games (and gamers) and pc gamers. if so, there's no reason to believe that the supposedly-simple porting of pc games to xbox has very much value at all.
god is just pretend.
I think we are approaching a price level where the average game players will be able to afford 2, or even all 3 of the current consoles.
A price cut that makes a console affordable as a 2nd or 3rd machine will not guarantee the same level of games purchases the manufacturers are counting on... for example if the Xbox fell to half it's current price (as some are suggesting, I would buy it as a third machine, but I would probably only buy 1 Xbox game for every 3 or 4 that I bought for the PS2 and GC.
A pizza of radius z and thickness a has a volume of pi z z a
people are forgetting that as a publicly traded company MS's obligation is ultimately to maximise shareholder profits. they can only lose money for so long before their shareholders say, enough. BG's net worth would drop quite a bit if investors start bailing on MS stock and i doubt he'd be happy. the xBox is not like internet explorer where MS can just give it away for free and subsequently highjack/destroy an entire industry (yes, there was a browser industry before MS decided the internet might be something important). this is an arena where they have to prove themselves and so far in the home entertainment/appliance business they haven't exactly been doing to well. why? because they have no OS or installed userbase to leverage and therein lies their entire business model. their modus operandi is: protect and expand the monopoly at ALL costs which imho does not carry over to a marketplace where the consumer actually has a choice. also, imho what makes or breaks a console is the games, not the console's technology. how many beautiful games have we seen which almost immediatly die because they just plain suck? How many games does the xbox currently have? compared to the PS2? my prediction is that the xbox will be dead within a year and if not will be when the PS3 is released.
The author took some liberties of presuming that the rate of progress in the realm of the "proprietary" consoles, and the mainstream technology engined XBox, are comparable : On the one side you have chips that are used in absolutely nothing except for the game consoles, and on the other you have chips that are subsidized by a several hundred billion dollar a year computer industry (i.e. the R&D of the P3 733 has long since been paid off by Joe Average buying some desktops for his business). Nvidia uses the same R&D and technology first to sell their nForce motherboards (nForce 2 is coming out shortly), as well as using the graphics technology in its video cards (which have now eclipsed the technology in the xbox). DDR RAM of course has been well proven and is now bargain basement. I think the author makes some pretty grand assumptions in presuming the xbox isn't benefitting from the PC's progress forward: nvidia and Intel have been incorporating much more efficient processes, and I'm sure at this point that Intel can punch out P3 733s at about $2/chip. Perhaps Microsoft is currently losing money, but for all we know they might be losing $2.00, not the hundreds that the author seems to presume. I've actually been considering getting a console for more social entertainment when people are over, etc. (PCs don't work well for that), and it is clear that hardware wise, the PS2 is absolutely no competition for the xbox, however the remaining failure with the xbox is one of games: I can get dozens of great games on the ps2, but you can count on one hand the great games for the xbox. I wonder if this will change anything soon (are there any killer games in the pipeline for the xbox?).
As a sidenote: The xbox strategically holds several grounds, and one is that it gets a lot of shops programming in DirectX on the Wintel platform, meaning that it's a very short journey to releasing PC games where, surprize surprize, there is the Microsoft tax. Microsoft is in such a position that virtually anything they do can be to their strategic advantage somewhere or other.
Nice article. But some of it's flat-out wrong. The PS-2 was launched in Feb/March of 2000 (not in 1999 as in the article) in Japan. I was in Tokio to pick one up.
EOM
BTW, don't the prices of these Xbox components drop every month? What does a 10 GB hard drive and a 2 year old graphics chip go for wholesale, today and 6 months from now?
Any analysis of the XBox manufacturing story is incomplete without looking at how Flextronics (the XBox manufacturer) recently told us they will be pulling XBox manufacturing out of Mexico and Hungary (the two current locations of XBox factories) and going into China. Flextronics is taking a serious financial hit. They made a financial gamble on the XBox and they are losing it bigtime. The low margin at which they are manufacturing the XBox only made business sense if the XBox moved in volume and it isn't. Console prices go down and profits goes up when the volume of the pieces goes up. That isn't happening with XBox. It has flopped in Japan and flopped in Europe.
So the behind the scenes story of the XBox is rather simple: the Flextronics gamble failed so at this point Flextronics is cutting their loses. Flextronics is losing big money on this deal and they are scared shitless at losing more.
Microsoft has also stated that they are looking at other manufacturing partners for the XBox. The only question here is can they find another sucker like Flextronics who will be willing to take the same plunge. Its highly doubtful. Who wants to work with Microsoft at this point when all they have to do is look at the Microsoft/NVidia mix up which basically amounts to Microsoft refusing to pay what they said they would.
Microsoft is poisoning the well and destroying all chances they have in the future of securing hardware partnerships for the XBox2. They are a fish out of water. They are accustomed to abusing their business parters and getting away with it because they are the monopoly.
And the entire fiasco from another perspective: no one cares about the human beings who lost their jobs (in Mexico and Hungary) because the international manufacturing juggernaut (Flextronics) decided to axe their livelihoods in order to "serve their customers better".
Links:
Hungary XBox plant shutdown
XBox software sales in Europe
THe problem with Xbox is it doesn't have good titles. It relies too much on flashy effects rather than good games. XBOX needs a marvel vs capcom 2 for example
great read, thank for posting.
Where's the dreamcast now? It was better then the PS1 but where goes it now?
VHS vs betamax.. Who won? Who was technically better?
Microsoft has the money but i wonder how much it is willing to bleed.
You are so wrong! Look at the overwhelming success of the CueCat!
There is a lot of talk on how Microsoft is losing a ton of cash on the XBox due to it's high production cost and pricing.
Of the 3 companies, Microsoft seems to be poised to be able to withstand the loss the best. I am not saying that Sony or Nintendo is currently losing money on hardware sales, I am just saying that if the three were losing mone equally, MS would eventually bleed the other two dry.
It will be interesting in a few years, when the PS3 ships, whether or not Sony can play the price war again. I would not be suprised to see Microsoft enter into a price war 6 mo. into the PS3-XBox2 battle.
We could see Sony lose the console war to Microsoft by 2006, simply because MS is has a lot more financial reserves.
I am Slad.
The last company to buy into the "sell the blades" philosophy was 3DO, which was cool, but failed miserably. And the people who started 3DO were experienced game people, as opposed to MSFT, who apparently have no clue. It is interesting to see that some companies are willing to flog business models that are proven failures. Makes you wonder what value an MBA really is.
A well-crafted lie appears unquestionable - Dama Mahaleo
People with XBoxes are selling them second hand already, so they can get PS2's, like their friends have, so that they can have good multiplayer fun - i.Linked up gaming, etc.
Microsoft look like they will take a few billion dollars in losses, and end up with 15% of the market. They have an all-in-one unit that costs a lot. They are selling the razor and the shaving cream, shaving oil, facecloth, etc, all at the same time for a large loss. Sony are selling the razor, then consumers can buy the shaving cream (hard drive), shaving oil (broadband kit), facecloth (blah) later if they want them. Lower upfront costs rule. Microsoft should have sold a smaller, sexier box without a harddrive to start off with, and allow a harddrive add-on later on (and make money on it!).
Sony and Nintendo are not worrying at all, believe me.
I am not a gamer but have recently been considering a PS2 - I really like my son's. I can't say that I am fully qualified to discuss the finer points of game systems. But that makes me like a whole lot of the people considering them doesn't it?
.netish functions into a single easy to use with on-screen menus box.
My thinking is that M$ is looking forward to a time where the box in the living room is more than a game machine and more like a home entertainment machine that integrates cable & broadcast tuner, DVD, gaming, and some
They don't want the hardware, nor even really the software (although that may be a piece of the pie). They want to integrate their product into the living room just like they did the office & home PC.
This way they can make money in every direction. They will know what you watch, what you play, how long you play it. They will become your content provider. Note that I said content provider, not service provider - too much cash tied up in cable.
That little box that makes it into your home today is just a foot in the door. Sony is thinking the same thing, Nintendo is too.
I hope Sony wins, for some reason, I trust them a bit more.
In this Microsoft press release, Microsoft and Flextronics announce that they are opening an Xbox manufacturing and assembly plant to Doumen, China, replacing the one in Hungary. According to the release, price savings will come from the fact that a number of the components of the Xbox also come from Doumen, China.
It's nearly impossible to have any gauge at all of how much (if any) MS is losing on hardware sales, and here's why:
MS is not naieve, they are a software company before anything else so they contracted the hardware out. The X-Box is being manufactured for MS by a company called Selectronics at facilities in Guadalajara. MS has already "bought in" to have a certain number of units manufactured at (what is likely to be) a ridiculously low price by garunteeing Selectronics a certain amount of business. MS doesn't need to worry about the price of the parts, labor, or anything else really - they're all Selectronics' concerns.
If the X-Box is going to fail, it'll be in a year or two when MS has to renegotiate its contract with Selectronics (whom I suspect are eating alot of this cost). Of course, by then Moore's Law really SHOULD have kicked in and (MS and Selectronics should hope) demand will be higher for the hardware.
i think the above is an interesting take on motivating factors. makes sense. i think they see many advantages to getting into this market.
i wonder how much of the motivation of it is also to get em while they are young. you figure most kids who have parents that use computers at work are running M$ products. *most* people seem to think M$ products are good (yeah i know, stay with me). with Xbox, they get young kids hooked on M$ in general, and parents probably figure "i bought that damn Sega Saturn and they went belly up, M$ isn't going anywhere".
there is also the stories about the next generation of Xbox incorportaing the functionalities of webTV. both Xbox and Playstation will have web access, keyboards bla. if nothing else they will be needed to get on game servers. if the device has a USB port and ethernet jacks, why not make it do a little web browsing and whatever else. game servers, tips, cheats etc are going to be powerful motivation for little kids to learn how to use this computer. BAM! M$ just scores a generation of young kids that learned to use a computer running some version of windows. now if only Sony gets that linux kit out there.... what a great way to get a zillion vocal young kids to mess with Linux and learn how it really doesnt suck.
If Microsoft's bottom line is hurt with every purchase, at what point does some cash rich competitor start taking competing boxes off the market by buying them and landfilling them (after a nice drill bit chews through the console)?
At some point there actually would be an economic case for such behavior.
I used to wonder what was so holy about a silent night, now I have a child.
Are you serious in trying to play Sony/Nintendo as the poor underdogs against big mean Microsoft? The browser comment was particularly telling: Netscape functionally was effectively a free browser (did you pay for it in the Netscape 3 days? I'll bet you didn't, as did about 99.999% of the population. This was pre-IE), and in being so it killed the commercial browser market.
Selectronics = Flextronics
There are other issues as well: The strong lack of buzz surrounding the current Xbox offerings, the paucity of interesting new games coming down the pike, the bad PR in Japan and Europe.
I think that M$ will fight with every last dime in their Money Bin for the game console market because whoever owns the console market will eventually own the internet and business desktop markets as well.
This is because game consoles are looking more and more like PCs every day. People will buy their consoles and use them to connect to the net to play online games, browse the internet, and do every task that the average Joe would use a computer for. Soon it will not make sense to buy a console and a PC because console makers will have added all the functionality unique to PCs to their consoles. Consoles will BE the PC's of the future. Maybe they'll be connected to the lights and the thermostat and we'll name them HAL too.
Once the game console/PC is ubiquitous what is to stop them from running something other than Windows? Can't the PS2 run Linux? Of course it is well within the abilities of a Sony to provide their own closed source general purpose OS if they wanted to. If every day Joes are already familiar with their Console OS why should busineses use Windows PCs on their desktops? A console would suffice as a client for any Intranet App I've seen.
M$ knows that it's OS monopoly is the core of it's profitablity. They will do anything to guarantee that they control the hardware and the software that most people run at home.
Eat at Joe's.
Not a bad article, and good to see one from an economist's viewpoint, but not from the viewpoint of someone closely versed in the game industry.
Schnapple
Gord's 10 XBOX hurdles were good food for thought, as was his analysis of what XBOX has going for it.
Online service is coming along nicely for the XBox. I'll be happy to pay $10/month to access all XBox games online instead of having to pay $5/month per game on a PS2's.
Also how about the XBox communicator? I'll be able to voice chat with my friends while gaming. It's just like Roger Wilco on PC. No console has ever done that.
Don't forget that over 200 games are in development for the XBox.
Anyway, they can say whatever they want. I'm more than extremely happy with my console.
I think Sony has already planned for the day that they can sell the PlayStation 2 as low as US$99 by this time in 2003.
The reason is simple: Sony recently developed a new, lower-cost main circuit board for the PS2 that has much lower chip count and is much less expensive to manufacture. That could mean dramatic drops in PS2 production costs and Sony can afford to drop PS2 price even further without cutting into the revenue stream.
Shareholders. If the X-Box fails, first off, M$ stock will be falling down. Second off, its gonna be mega hard to convince shareholders that its worth the money to re-invest in the same market. In short, if the XBox fails, there will be no more from M$.
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Open Source Sysadmin
The DC sold well, but Sega has no clue when it comes to marketing. I remember but *one* DC commercial. I can't swing a dead MSCE around without hitting a PS2 commercial.
They yanked support for the DC, and obviously, it died. They did the same with the Saturn. The 32x. The Sega CD.
What we need to do is get Microsoft to act like Sega, and start dropping support for absolutely no reason. Which may be hard - Sega had this strange idea that if they didn't outsell Nintendo/Sony, they were a failure and should kill the system immediately.
Microsoft? They give things away for free because they have the ultimate clue - take a loss now, and control the world tomorrow.
My understanding from Macroeconomics is that product dumping laws are only applied to imported goods, ie foreign vendors dumping product in your country. During the steel problem, this was the Japanese Steel Mills selling steel for far less than most people believe they possibly could. In other cases, it involved Central American made underwear, if I recall. This is why Atari leveraged product dumping charges at Sony(in addition to Sony being a HUGE mark). You'll never get a government to prosecute a domestic company dumping goods to compete with a foreign vendor. It goes against the neo-mercantilism theology of governments.
I Browse at +4 Flamebait
Open Source Sysadmin
Apparently not enough people were fooled by the "optional" DVD playback. I already have optional DVD playback in my TV without an X-box - all I have to do is go out and buy one item, a DVD player, now priced as low as ~$65 (US) if I shop around. Why in the world would I want to pay an outrageous price for a DVD "option" for an X-box, get poorer DVD quality, be locked into the X-box for DVD playback (maybe even have to buy the option again if I went to X-box2), and put more money in Bill's war-chest against me? You do people a disservice pointing out the theoritical DVD playback without pointing out that it's not a realistic option.
After the Saturn?
After the 32x?
After the Sega CD?
After the terrible hack known as Yuji Naka, who brought eternal death upon the worlds of Algo?
Yeah. Wake up. Sega's lost a ridiculously huge chunk out of their fanbase. I hate to say it, but Final Fantasy fans now outnumber the remaining Sega fanbase.
Last time I checked, Square was still in bed with Sony.
Oh, and here, have a second clue. They're small, and free. Guess what? The average gamer doesn't give a damn about the word 'Microsoft'. They never have, and they never will.
Microsoft could easily destroy all competition.
;)
All they need to do is drop a few billion to Squaresoft to get them to sleep around a bit more.
Square took a nasty hit from the failure of the FF movie, but they still have fanboys and girls pouring from every oriface.
Think of what would happen if every one of them purchased an X-Box.
I guess you havent't been following the Pocket PC thing, have you? They've spent LOTS of money to get an ever-dwindling market share against PalmOS systems...
>>Microsoft's strategy here is just to bleed its competitors over the next few years to make them very unprofitable.>So, it may cost Microsoft a few billion dollars in losses to crack this nut... who cares?
Their shareholders.
From the moment I first heard the announcement of the XBoX, my mind couldn't get off the though, "Is this WebTV grown up?".
It still can't and the economics reflect it. There are only 3 ways into the livingroom, 1 Build it into the TV, 2 Through the VHS or DVD Player, or 3 through a Game Console. MS having proven that a stand alone appliance can't do it with a $49 WebTV. Web TV also had the big plus of convincing Sony, and Philips to waste valuable development time while Moore's law worked in MS's favor.
Now we've got an NT/2000 machine in the livingroom that we are told 'can only play games'. Right - a multi Gig hard drive machine that reads optical media, that can only play games.
I don't buy the story. Define a Game vs. any other program. Entertainment. Entertainment is not a codec or hardware spec. This thing is intended to invade your home and hook you to a proprietary network, it's going to be the Interactive Cable box, and your restricted portal to the adbreviated successor to the Internet.
Smart? Time will tell, but MS can wait out all opponents and Gig anyone who slips through the transgate.
There is an interesting Wired magazine article which provides some idea as to how much M$ is losing on it's XBox. The problem is that according to the article the goal was to bring production cost down to $100 per box. Since this article was published in September 2001 it would seem reasonable that most of the loss could have been the result of retooling the manufacturing plant to produce the Xbox instead of joysticks, and that in fact Microsoft's losses have been greatly reduced since then. It would be hard to believe that any company, even Microsoft would continue absorbing huge losses without pulling the plug.
The sum of our knowledge today becomes the reference point of our ignorance tomorrow.
as soon as the xnet thingy is on, they will create a critical update that will take up most of your harddisk space, and radically change your dashboard into red colours instead of green and it will change all logos to read "XPbox" and all users will have to sign up to ms passport to play any game so they can be charged for the hour of non-online games as well to subsidize the development of future office products.
The original Playstation lasted 5 years and had countless must-buy games in all genres. According to this article, each console owner will purchase only 7 games for the console over its life. 7 games over 5 years?! You've got to be kidding me! Try at LEAST double or triple that!
I'm not a console guy anymore because I don't think any of the current lineup have anything interesting to offer me, but I buy about 1 game per month for my PC.
The article is good, but miss someting, they say xBox2 will not sale, thats is not the case in my opinion, because the xBox is simple a superior hardware platform, and Ms is protectec by economy of scale. The I build my silicon is also the week point of the Nintendo/Sony types. This reads I invest in Dep/Dis/Build if MS contract the cicle of new consoles they will be unable to folow. MS strategy:
1. Keep the hardware adventage
2. Reduce the time frame for hardware release
3. You got it become monopoly and rise margins
One of the first thing an MBA student learns is that all costs are costs and have to be evenly devided over all units. If Sony spent 1 billion to build a factory for the chip Microsoft can loose $100 on 1 million units an come out even.
When you buy the hardware, somebody else developed it and they will make you pay. In this case Intel and Nvidia.
Somebody doesn't know simple accounting here.
you take the x-box hardware in an x-box housing and you have an x-box. You take the x-box hardware in a tivo housing and you have the "msdvr". I mean lets face it, most consumers are stupid. Go look up sales of prunes. You can not seel a box that in large letters say "prunes" and small letters under it "dried plums", put "dried plums" in large letters and "prunes" in small ones and you can't keep them in stock. Not only that but you can charge more for "dried plums" and the lemmings will happily pay it. Many consumers would be willing to pay 300-400 dollars for a DVR, but not a console. MS would only need to spend developement costs once, saving money.
------- Sorry about the spelling, I suffer from two problems. Dyslexia makes it difficult to spell well, lazy makes it
The tactic of "buying" a share of the console market is probably illegal as dumping and/or predatory business practice, and if it were working, and the PS2 wasn't kicking the crap out of the XBox, then Sony would probably press the issue in some court. Since they could choose to pursue a case in Japan, the US, or somewhere in Europe, I think they would have a good chance of winning something eventually. However, if you are winning in the marketplace, there is no point in going to the courts. Besides, the courts act so slowley, that any action they take is far too late to stop the illegal business practice. That is why you usually only see companies resorting to suits when they are desparate and have nothing else to lose. Look at Veribest vs. Intel if you want a good example. I think Veribest finally won, and will get some money, but Intel has already pushed them out of hardware and moved 3 processor generations past. The courts can't undo that.
I know nobody will read my post all the way down here, but what the hell.
There are TWO reasons that Sony is winning the console war thus far. The reasons most people are listing (great games, etc) are just effects of their selling so many units. The cause of their success with the PS2 boils down to two points:
1) It's named "Playstation 2".
2) Big head start.
I defy anyone to refute that.
[PowerPoint] is a tool for capitalist presentation
Funny you mention it, locking one's hardware, as M$ has done, is oft cited as the reason Apple never got a larger marketshare....against M$ amongst others...
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Yeah, Sony has absolutely no revenue stream other than the playstation. Comparing MS, Sony, and Nintendo is like comparing apples and oranges and mangoes.
It really pisses me off when people replace "logic density ..." with "computing power", or "reduction in cost".
Developing a game for the xbox is nearly identical to developing a game for the pc. That means the development cost isn't anything like developing a game for the PS2, you just make a computer game and then make a few changes, but 80% of the work is relevant to both platforms.
Nintendo has silently been reaping a huge profit with the Gamecube, even though it is supposed to harbor inferior hardware and does have a limited software library. This fact alone (Nintendo's profit margin) is proof enough that Microsoft's business model is not working out in the console gaming market, while the clever veterans (Sony, Nintendo) continue to slip in the jabs and wear their opponent out.
It seems that many here are also ignoring history. I continue to see many people sing the praises of the Xbox's superior hardware. When it comes to console gaming, that little bit of "superiority" that a developer gets with the Xbox means very little to nothing. Do you not remember the SNES and the Genesis? The SNES was vastly superior, yet the Genesis consistently outsold the SNES in software and hardware, and routinely had much better games. The Gamecube looks to follow this model, it is as if Nintendo learned it's lesson. The Gamecube is very easy to develop for, and they keep their standards rather open (as does Sony). But let us not downplay the Gamecube's design: it's OS was designed by market behemoth and mega-veteran IBM afterall. And as for it's fabled low graphical limit, just look at the Resident Evil remake. I am currently playing through this game and can say, it is the best graphics I have ever seen.
Much like Microsoft pushed MSN by giving out $400 gift cards at stores for a 3 year agreement, Microsoft could do the same and require a 2 year agreement to stay with whatever online gaming platform they are currently using, and give you the Xbox for 'free.'
I'm surprised they aren't using this srategy, because it would be the end of Nintendo and PS2 unless they did the same.
One thing most /.ers are missing is that the XBox|PS|PS2|Sega are aimed at a different target audience than Nintendo.
XBox|PS|PS2|Sega are aimed at Boys aged 12-30. The game selection proves it. Most are shooting/Sports games.
Nintendo is aimed at KIDS aged 6-12. That's kids, as in Boys AND girls. As long as they have Pokemon and Mario, they will always have sales. My daughter (for instance) isn't interested in shooting games, but she does like Pokemon. And, she'll even play Super Smash brothers with her older brother, since the violence is not as bloody or gross as the PS2 games (etc.)
I would suppose that many parents, when looking for a console for their kids, take a look at what games are available, and base their decision on that. If they have young kids, they want non-violent (or at least, non-bloody) games. Those games are predominately for the Nintendo. So I don't think Nintendo is going to be dying anytime soon.
LongTail SSH Brute Force analysis tool is here!
Everytime I read coments like this on MS products (XBox or others) people waste time bickering whether or not the MS product in question is good or bad or bad but set to get better. Who cares? Whichever it is we should NOT be supporting them in any case! I'll readily admit that Windows XP is an improvement over ME or that XBox has more power and better gfx/sound than the Gamecube but I'm never going to buy either of them out of principle!
It's no secret that MS just wants control and once it has it it exploits it no end. Like someone posted above the XBox is nothing more than a Trojan horse to get into peoples' living-rooms. MS doesn't really are about gamers and we of all people should know that! A brief look at the computer industry shows what a mess it could be if MS has their way and how hard it would be to get back out of their grip. I don't think any sane person would want that.
The solution? Boycott them 'till it hurts and support anything else (even if it is inferior now - because once MS is cut down to size there will be fair competition and products will improve far beyond what they would if only MS was controlling the development)! Governments (especially the current US one) will not stop companies like MS only customers can!
I don't understand why so many (presumably) Americans are so gleeful at Microsoft's failure in this market. For years Japan has run massive trade surpluses with the USA due to unfair trade practices. One reason the X-Box has failed in Japan is due to their negative opinion of American products, and their inherent nationalism. If it had been even marginally successful there a lot of the pressure would be off of MS right now. I personally would rather see Microsoft have a monopoly on consoles than Sony, as it would benefit American workers as well as shareholders and pension funds.
It's simple: Microsoft has a history of slipping deadlines. By _years_, not just by months. (Anybody remember the MicrosoftTV settop box that _never_ shipped because it was so far behind that every contract got cancelled?) Sony has a history of executing on time, and doing it right the first time. They also have the traditional Japanese manufacturer's strengths in taking advantage of ecomomies of scale. Sony is a consumer electronics company (some would say Sony is _the_ consumer electronics company.) Microsoft is a shrinkwrap software company that sells hardware it has bought or stolen from others. That Microsoft ever thought it could compete with Sony in the first place is a monument to the misplaced arrogance of M$!
Since when does Microsoft have to turn a profit on something? If it helps them get into other areas where they can eventually dominate due to their vast cash reserves, ruthless and sometimes illegal business tactics, and single-minded pursuit of ultimate control, they don't need to profit within any reasonable time-frame. They can keep wearing the market down like waves against a cliff.
It's not enough to bash in heads, you've got to bash in minds. - Captain Hammer
An interesting scenario would be if Nintendo and Sony decided to lower software prices [ps2.ign.com] as sort of an eye-gouge to Microsoft's plans...
Any chance we could restrict console game stories to their own Topic? So I could filter them out? I like games, PC games. I do not now, nor am I ever likely to own a gaming console.
I'm probably not the first guy to ask.
"I like to play with things a while... before annihilation!" Ming the Merciless
"I love my job, but I hate talking to people like you" (Freddie Mercury)
I have a friend who was in on the final testing of the XBox. He was able to look at its guts and basically told me that the box is "un-crackable."
Surprise, the xbox has already been cracked. For weeks, there has been footage circulating online showing games booting up from dvd-r's. In fact, you can order your xbox modchip here.
You can check out the xbox linux project here.
An XBox sale is a sale Sony or Nintendo won't make
Possibly. More likely is that most XBox sales are to someone who also owns a PS2 (and/or a Gamecube), and sees something on the XBox that makes the system worth buying.
--Jeremy
Jesus was a liberal
Microsoft is going to buy Cuba, not Sony.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
I can spend the $200 bucks on hardware at a local computer store and get better hardware than is in either platform. Xbox is a relatively slow pentium 3 with some modifications to the OS, and an nVidia card. The rest of it can be had for cheap commodity prices.
What we really need is someone to break their NDA with Micro$oft to let people play their games on the PC as well. People with dev-kits have done this with the other platforms. It was reported not too long ago on /. where someone published how to do this, but they were contacted by Microsoft WITHIN HOURS of putting it up on the web.
MS won't let this happen because their goal is not to provide entertainment software, but to extend to a new market.
//TODO: Think of witty sig statement
Sony and Nintendo currently have much lower costs to build their consoles than Microsoft does. If Microsoft drops their price down to $99, thus pouring money down the well with a larger bucket, of course Sony and Nintendo will also drop their price to $99. They were better off at $299, as Sony was holding that price too.
Don't moderate flamebait as Troll. Know the difference or you will be Meta-moderated.
I see quite a few people making the following two points about the XBox and Microsoft's huge cash mountain: Microsoft can afford to lose money for years and still win the market in the end.
What I think is that this, while true, ignores some other possibilities. Some of us here remember the EA saying "NO" to Microsoft a few days ago, which raises the very real possibility that other game developers might follow EA's lead and desert the XBox. That would kill the XBox faster than anything. Another point is that the whole Enron/Andersen dubious accounting deal might spill over into other sectors of the US economy and the general media might start asking *public* questions about MIcrosoft not paying Tax or Dividends (I am *very* surprised that the States' lawyers didn't bring this one up everytime Microsoft claimed that the settlement would hurt the economy). I'm not saying that Microsoft is paying kickbacks but a spotlight on their cash mountain might cause it to evaporate very quickly.
Another point is that sooner or later, if the XBox keeps on losing money, Microsoft will probably cancel it on their own. They've canceled other projects for smaller reasons.
And just in case anyone wondered. No, I'm not a fan of Sony either. There business practices are not much better than Microsoft's, but their public image is.
The funny thing about what you listed, is that it's almost exactly opposite a list of items that make a sucessful console! NIC, 5.1 surround, and hard drive (bear with me, I'll explain) are not items going to be used by the majority oof the console public - the two items people might really want like DVD playback and memory cards (keep bearing with me) are optional!
On the HD/Memory card - it's nice that you can use the HD to save games and not have to buy expensive memory cards. But then if you want to go to a friends house to play games, you have to have a memory card anyway for transport... I'd claim that the HD is most useful as a cache but then it's basically invisible to consumers and just results in improved access times.
The NIC card sadly is before its time I think, I don't know if a majority of people will be able to use a straight NIC hookup for a few years at least. Sony having a seperate unit is better off - at first they were going too build a HD/NIC unit but I believe they have altered planes to include a modem as well. Plus they could release an 802.11x access easier than the XBox.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
So, one guy from the XBox team decides to start his own company (something which was known about waaaay before the XBox was launched) and all of the suddon the XBox team isn't in it for the long run?
There is no longer anything that can be done with computers that is nontrivial and clearly legal. -- Paul Phillips
And besides, if you are Sony and you are beating the snot out of Microsoft in the marketplace, why bother with the courts.
Don't moderate flamebait as Troll. Know the difference or you will be Meta-moderated.
The Linux kit is a fucking developer kit. It isn't a goddamn game system. There's no reason for some snot nosed kid to get a Linux kit for his or her PS2. What in the hell are you smoking?
I'm a loner Dottie, a Rebel.
Could you point to something that backs up your assertion that Sony lost billions of dollars selling PSX hardware? I have not been able to find any evidence of that, and have found lore to the contrary.
Insightfull indeed.
One of the things that the article hinges on is the idea that there will only be $5 to $10 made from software-sales kickbacks. Have we forgotten that Microsoft is actually a software company? Why wouldn't MS write a significant portion of the games itself? They do have that business model worked out pretty well after all. The words "vertical market" come to mind and that definitely changes the economic picture presented by the article.
Nonperiodic Central Trajectory
Sony now has a "greatest hits" series for the PS2. Games that sold for $50 when first released now sell for $20. It would be nice if all games were this cheap, but it's not gonna happen.
The source cited in that article refers to this as a possibility for the Xbox 2. By the time Microsoft can get its own chips into production, the fate of the original Xbox will already be set. If they tried to rush their own implementation of the original Xbox into market, the development expenses would lead to losses even worse than they are now.
Besides, the point of the article isn't so much directed at the Xbox per se as at the design strategy behind it. For Microsoft to change its strategy would support this article, not disprove it.
Don't forget the GameBoy lasted several centuries (seemingly). Even though it's a portable, and outside of the typical console wars, I think it's long run is amazing. (Plus, the 'color' thing they did at the end must have made them a ton of money -- for a small increase in production cost, they got people to buy a whole new system - I bet they were raking it in)
Also, the system quickest to die must be the Virtual Boy... granted, it was terrible, but I enjoy just mentioning it.
*laughter*
.sig last updated Jan. 14, 2000
They had better read this article quick, before they run out of money.....
Unless of course.... you don't suppose... they might know what they're doing? Naw......
I'm sure they'd just throw a billion dollars in advertising at something they never bothered to think through.
Gimme a break, MS may have more money than brains, but to get to the position they're in they've still got to have a lot of brains. They know what they're doing. Right now, as you read this, they have very smart overly paid people sitting around thinking about crap like this.
It is official; Red-Mercury confirms: XBOX is dying
One more crippling bombshell hit the already beleaguered XBOX community when Red-mercury confirmed that XBOX market share has dropped yet again, now down to less than a fraction of 1 percent of all game consoles. Coming on the heels of a recent survey which plainly states that XBOX has lost more market share, this news serves to reinforce what we've known all along. XBOX is collapsing in complete disarray.
You don't need to be a Kreskin to predict XBOX's future. The hand writing is on the wall: XBOX faces a bleak future. In fact there won't be any future at all for XBOX because XBOX is dying. Things are looking very bad for XBOX. As many of us are already aware, XBOX continues to lose market share. Red ink flows like a river of blood
Let's keep to the facts and look at the numbers.
As the red-mercury states " The XBox hardware has been estimated to cost Microsoft $320 to $400 to build in 2001. They have been selling the box for $299, and this month they have dropped the price to $199 to keep up with Nintendo and Sony. Even after six months of cost reduction, they may still be losing $100 on each XBox sale. Nobody knows how much Microsoft is really losing, but they have confirmed that they are selling the hardware at a loss. Will they really be able to make up all of these losses with software sales?
"Microsoft is the only one that has bought in to this 'lose money on the hardware' idea."
All major surveys show that XBOX has steadily declined in market share. XBOX is very sick and its long term survival prospects are very dim. If XBOX is to survive at all it will be among OS dilettante dabblers. XBOX continues to decay. Nothing short of a miracle could save it at this point in time. For all practical purposes, XBOX is dead.
Fact: XBOX is dying
(The contents of this post are released under the BSD license, feel free to copy, improve, and repost-it. v0.0.0.2).
ms is finding out very quickly that the gaming industry relis on quality, not quantity. le4t them go down in flames
Daily Shenanigans
come on, give me a break, we all know Sony doesn't pay its workers top dollars either.
And nintendo, i won't even comment
"So, it may cost Microsoft a few billion dollars in losses to crack this nut... who cares? In the end Microsoft will control the game market and it will become a monopoly; where each game manufacturer supports XBox, but none of the others. This is one half, and we haven't talked about how Microsoft's Venture Capital fund is sure to help out start-up game manufacturers who promise _never_ _ever_ to make a Sony or Nintendo game cartrige."
It will become a monopoly.. and what crystal ball are you looking into? Have you looked into sony's business practices or is it just because they're across the pond you don't care to notice how they don't respect "innovation" and "small business" as much as microsoft does?
oh wait, i forgot.. Sony is cool because they're not eveil.. oh yeah, go ps2 go.. i'd hate to see all these companies that microsoft could fund go bust because Sony keeps its monopoly on the gaming market.. god forbid another company can compete.
Microsoft wouldn't mind to do it. But it could be easily proved in court that the price was very well below cost, thus leading to uncompetitive pricing (and it really dangerous to do that).
They will grow over a period of time, and the installed base of X-Boxs will reach an important mass. It's just getting the foot on the market.
They are aiming at a home computer, not only a console. They have a different vision. They will make it work if the other players think they are winning.
(just an opinion though)
unfinished: (adj.)
Is a resurrection of Timna (Celeron + Northbridge), with integrated nForce graphics. The thing is that they'd have to do it themselves, and they'd still be paying out the ass to nVidia, so even if they could get their own x86 chip fab up and running (which I wouldn't count on them being able to pull off in the next five years) they'd be screwed.
But it ain't gonna happen...
/Brian
So the author of the article, Red Mercury writes that Microsoft makes $5-$10 per 3rd party title sold. The average person buys 7 games, so that's $35 to Microsoft.
Well, say that Microsoft makes $40 on every 1st party title sold (Halo, Project Gotham Racing, Amped, Fusion Frenzy, Munch's Oddysee, NFL Fever, NBA Drive, Rallisport Challenge, Bloodwake, Azurik, Nightcaster, and I think I forgot one or two others...)
So if you buy 7 Microsoft 1st party games, then that's $280. Many of the games people are buying with the XBox are Microsoft games, and Microsoft is making games feverishly. Regardless of all the 3rd party development, Microsoft intends to win this war by making great games. Microsoft is a software company. Hardware is given away because it allows MS to sell console software at 100%.
Chew on this for a while. The XBox is just a lever to allow MS to make money on Software in another market without paying another company a hardware tax.
When this gets into your heads, and you stop making stupid slashdot anti-microsoft comments, you might be enlightened to know that Microsoft doesn't intend to produce shitty games, nor is it in this business to lose money, or give away hardware to run Linux on. For $300, you can buy yourself a real computer.
Is it just me, or has the number of people who think they know everything increased today...
i wonder how much of the motivation of it is also to get em while they are young. you figure most kids who have parents that use computers at work are running M$ products. *most* people seem to think M$ products are good (yeah i know, stay with me). with Xbox, they get young kids hooked on M$ in general, and parents probably figure "i bought that damn Sega Saturn and they went belly up, M$ isn't going anywhere".
Yeah, and then mom/dad comes home and tells the kid they'll buy him an XBox. The kid says "but I wanted a PS 2, the games are better!" The parents realize that the PS2 is made by Sony, who isn't going anywhere, costs the same, and that "We have people at work who are always fixing the computers, but our Sony TV never breaks, Sony must be better at this."
And even if they do buy the XBox, MS just lost money on the sale, and the average console buyer won't buy enough games for them to make it up. MS was selling the XBox at a loss *before* the recent price cut, now they're losing their shirt on each sale.
about the parent post
Moderation Totals: Flamebait=1, Redundant=1, Interesting=2, Informative=1, Total=5.
Flamebait? WTF! No fair
Redundant, not really the timestamp shows i posted just before the other poster who mentions the wise words of Gord.
Posting anonymously to complain the unfair moderation, hoping that Metamoderation will sort it out.
YANKEES SUCK!