Slashdot Mirror
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.
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!
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.
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...
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!
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
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
That's why Microsoft is seriously looking at VIA for both the processor and graphics for the XBox II (which from what I can tell is just going to be a new form factor for the XBox, not a whole new platoform). The Register has also been following reports that MS is investing heavily in chip design personel. I wouldn't be surprised if they try to do the entire Xbox in house.
Phase 1: use off the shelf shit to get the Box to market quickly
Phase 2: reduce the number of outside suppliers needed (i.e. graphics and processor supplier the same) to help reduce costs.
Phase 3: do it all in house for maximum savings.
Interesting strategy if its true, but unless they start getting some compelling games out there it'll all be moot.
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
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.
...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.
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?
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
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.
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.
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.
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.
Why is it that the audience here is unwilling to get behind an "All American" company and support it,
Presumably Microsoft intend selling their X-Box elsewhere than just the US. Indeed promoting somthing as "All American", especially right now, would probably dissuade many people from buying it.
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]
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 $20 PC game. I mean, a game developer might abandon the Dreamcast's dev platform and GD-ROM hell, but nobody but nobody is going to stop developing for the Intel-and-DirectX world...
Once Windows is the embedded OS in a Microsoft-controlled hardware product, many good things (for Microsoft) happen:
There is no threat from any other OS.
There is no cry of "Unfair middleware bundling!"
There is no issue of different licenses for different hardware makers, or of rogue hardware makers loading a non-M$ 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
Let me get this straight you nimrods.
It's a troll when the only person who thinks that it is makes it so?
that's fucking stupid
hand me a monopoly and i can look pretty savvy as well. especially if the "gubment" doesn't have the balls to shut me down.
ms owes it's existence to a) ibm's stupidity + hubris and b) extremely unethical + underhanded + illegal use of monopolistic power (starting w/ DOS).
what's amazing about all of this is that none of these facts are in contention.
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
> 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'.
That wouldn't be hard for Sony to do with the PS3... "Hi is that Sun? Yeah, we want an office suite like thing to come free with every PS3 keyboard and mouse kit we sell, so that we can give the whack to Microsoft. What? You will let us give away StarOffice 7 free for the PS3 keyboard/mouse combo? Excellent, you guys rock."
You can bet:
1) The PS3 will be able to run Linux without a problem - stick it on a bootable DVD even.
2) The PS3 will be around 10x more powerful that the PS2 at least. The PS2 runs Linux fine.
3) So PS3 OpenOffice is extremely likely, shipped on a bootable Linux PS3 DVD, saving documents to either a built in hard drive or to MemoryStick cards (read your OpenOffice PS3 documents on a Sony Cleo!)
4) I bet someone will do this for the PS2 version of Linux now...
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
Numerous EA games support dts.
> HDTV
Tekken 4 does progressive scan.
> Let you import your own music to your driving game
Odd, if I turn the music down on the game, and the volume up on my hifi, I can get any music I want in game...
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.
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$99 by this time in 2003.
The reason is simple: Sony recently developed a new, lower-cost main circuit board for the PS2 that has much lower chip count and is much less expensive to manufacture. That could mean dramatic drops in PS2 production costs and Sony can afford to drop PS2 price even further without cutting into the revenue stream.
>>Microsoft's strategy here is just to bleed its competitors over the next few years to make them very unprofitable.>So, it may cost Microsoft a few billion dollars in losses to crack this nut... who cares?
Their shareholders.
There is an interesting Wired magazine article which provides some idea as to how much M$ 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.
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
So, you are saying that the XBox will be dead within a year - even though there are over 100 titles currently being written for it.
There were 100 titles being written for the Dreamcast when it was cancelled.
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.
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!
you make it sound like MS is the only one doing this. As the article suggested, they wanted to price it higher, but had to compete with the lower priced PS2
_______________________________
"I'm not Conceited...I'm just a realist..."
When the IBM PC was introduced, there were second sources for almost all of the chips in the machine. Back then, engineers demanded second sources for ICs. Intel didn't stop signing agreements for second sources until years later.
Mea navis aericumbens anguillis abundat
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
"I love my job, but I hate talking to people like you" (Freddie Mercury)
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
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.
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
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
do you know what business cases are or do you have your own head up your ass
do you know what a transitional model looks like or are just wet for the rilly kewl games
stay in your moms basement and keep wanking
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.