Microsoft Loses $177m on Xbox in Three Months

Albanach writes "The BBC News are reporting in this story that Microsoft's Home Entertainment Division has filed a submission to the Securities and Exchange Commission reporting a loss of $177 million for the three months to 30 September 2002. The loss comes on revenues of $505m for the division that manufactures the Xbox games console. Microsoft are said to be prepared to spend $2 billion funding Xbox live over the next five years, suggesting it will be some time before the home entertainment division break into the black."

Comments

Only $177m? Who cares?

[turambar386]

That's probably less than billg's annual pizza budget.

Accounting Tactic

[sdjunky]

Of course... This could be an accounting tactic to allow them taxbreaks on their losses.

Re:Accounting Tactic

[GoofyBoy]

I assume you mean "taxbreaks on their profits."

Re:Accounting Tactic

[tmark]

My guess would be that it would be bad strategy to use accounting tactics to cut their earnnigs here. The video game market is defined by market and mind share. To the extent that MS' video game division looks like it's bleeding money, it augers poorly - in Joe Public's mind - as to the XBox's future.

Re:Accounting Tactic

[jasonditz]

Two words: Microsoft Office

Companies may be bitching and moaning about the cost of the new licensing system for it, but not many of them are actually switching to Word Perfect or OpenOffice/StarOffice.

Office productivity suite dominance is still MSFTs cash cow, and until major companies are willing to jump ship they're going to be pretty profitable.

Re:Accounting Tactic

[lazyl]

To the extent that MS' video game division looks like it's bleeding money, it augers poorly - in Joe Public's mind - as to the XBox's future.

Where'd you get that idea? "Market and mind share", as you put it, may be a major part of the video game industry but they're not going to be affected much by accounting details.

'Joe Public Gamer" doesn't give a rat's ass what Microsoft's profits are. He cares about the games. He cares about what kind of reviews the xbox and it's games get on his favorite web sites (gamespot, gamespy, penny-arcade, etc..). When Joe Gamer goes to decide whether or not to buy an xbox or a ps2, the last thing he's going to do is compare Sony and Microsoft's earnings the past quarter.

Microsoft's success depends on them being able to keep the xbox in the spotlight long enough to get companies to make a lot of really good games for it (especially for xbox live). Their profits now don't matter. Public or not.

Re:Accounting Tactic

[F2F]

according to The Register's article here the losses are minimal, when compared with the operating income MS gets from Windows, Office and their Server products. The numbers are (quoting the register):

Windows: $2.48 billion on $2.89 billion revenue
Office: $1.88 billion on $2.38 billion revenue
Servers: $519 million on $1.52 billion revenue

compare that with a loss of $177 (and microsoft lost on many other things, like CE/Mobility) and you'll see that the picture is not as bad as it looks (heh, for them, anyway)...

Slashdot is aiming for the sensationalism value again, but that's nothing new now, is it? :)

Re:Accounting Tactic

[Planesdragon]

Companies may be bitching and moaning about the cost of the new licensing system for it, but not many of them are actually switching to Word Perfect or OpenOffice/StarOffice.

That's beacause, for various reasons, it still doesn't work as well as just staying with what they have.

OO/SO/WP need to be better than Microsoft Office to beat MS--disregarding the low cost or "Freedom" associated with it. "As Good as" and "workable" won't get mass converts.

Re:Accounting Tactic

[F2F]

that would be $177 million, my bad :)

Re:Accounting Tactic

[Master Bait]

The American taxpayers are helping Microsoft monopolize the game console market. That much is true.

Re:Accounting Tactic

[error0x100]

The bottom line is that someone got to pay for the stuff to cover the loss, since the company is definitely not making a loss. So you could, for example, look at this as being that about ten million of the people who bought Windows, were really paying for someone else's XBOX.

Its common knowledge that MS has been losing on the XBOX. I actually thought the figure would be higher.

Re:Accounting Tactic

[error0x100]

You don't understand anything about economics. Its simple: - Microsoft sold XBOX at a loss - Microsoft is not running at a loss - Microsoft is making over $1billion profit a month, AFTER deducting the losses from XBOX I suppose you are also one of those people who think "Internet Explorer is free", because you can download it for free. I don't see MS losing money on it, and yet it does cost them a lot of money to develop it - oh wait, they simply cross-subsidize the development costs from their Windows and Office sales. Oh wait, I see, you consider "Microsoft Entertainment division" as a separate entity to "Microsoft". Thats moronic, its just a part of Microsoft, if MS XBOX went under now, WHO DO YOU THINK WILL HAVE PAID FOR IT? Thats right, Microsoft, i.e. THE MONEY THEY GOT FROM WINDOWS AND OFFICE. Where do you think that money came from? You don't seem to understand economics.

Is this like a movie company's "loss"

[The Evil Couch]

or is there something actually legitimate about this? Granted there's stiff competition in the home console market, but MS was throwing consoles at people in hopes that they'd recoup their losses with the sale of games. to hear that they're losing money with game sales seems odd to me.

Re:Is this like a movie company's "loss"

[tshak]

to hear that they're losing money with game sales seems odd to me.


Well, that's because they aren't losing money on game sales. The problem is that the game sales isn't enough to recoup the loss that the console itself generates. Also, none of this is strange because this was predicted by MS before it launched it's console. Of course, there's strong hopes that Christmas game and accessory sales will help get the XBox division out of the red.

Re:Is this like a movie company's "loss"

[frunch]

Xbox? What's an Xbox? I'm too busy drooling over Metroid Prime and Zelda and Resident Evil 0 and Phantasy Star Online and I hear Animal Crossing's pretty neat and and and....

therein lies the problem. Microsoft needs some really good exclusive titles, and I don't see that happening even around christmastime. Of course that could all change once Rare starts popping out some games for the Xbox, but it might be too little too late.

Re:Is this like a movie company's "loss"

[Gruneun]

Every console maker loses money on the console and assume they'll make it up somewhere else. I'm mildly surprised that they've lost so much money on games, but as more games are created, it will slowly come back. The only significant difference that I see is that, like TiVo, they're hoping the bulk of their money will come from a subscription to an online service.

Re:Is this like a movie company's "loss"

[tshak]

Microsoft has GREAT exclusive titles. You just have to not be blind to them. I've never even heard of Phantasy Star or Animal Crossing... why? Because I have an XBox, not a GameCube.

Don't get me wrong, Nintendo has got a good thing going for them (aside from really cheap controllers IMHO). I plan on getting a GC once the price goes down because of Zelda and Metroid Prime particularly. Most other games on the GC have great counterparts on the XBox though.

Like that hurts them..

[jamesdood]

They have said from the get go that they didn't care about losing money to dominate the market.. And they have taken some market share from Nintendo and a small amount from Sony.. But that number seems pretty small for a company with like 20 billion in cash..

Re:Like that hurts them..

[MtViewGuy]

Given that Microsoft sits on US$40+ billion in liquid assets, losing US$177 million in three months for XBox is a literal drop in the bucket for the company.

That's why Sony and Nintendo have to be wary of Microsoft--MS has way more than enough time and resources to wait it out and watch Sony and/or Nintendo make a major misstep and Microsoft swoops in to grab marketshare in a blink of an eye.

Re:Like that hurts them..

[0x0d0a]

Halo is fun, but the multiplayer competitive mode doesn't even begin to compare to multiplayer on the PC.

By far the best thing about Halo is Bungie's traditional strength -- multiplayer cooperative. Going through the levels with a second man to provide cover fire or snipe or drive is a *ton* of fun.

"Lost"

[Xerithane]

We really need to redefine business loss. Microsoft didn't lose money. They knew ahead of time that they were going to be in the red on the Xbox. Not that I'm saying Microsoft is bad for following this practice, it's common practice in many markets.

I just don't think that purposefully loses should count like a standard lost. They know that this $177m they drop now, it's an expense. Not a loss. They will get it back, they are just taking credit out on their budget and getting the government to pay the interest.

Re:"Lost"

[Ieshan]

Not to mention redefine "Monopoly".

It's absurd that a company can consider a 200 million dollar loss "acceptable" and continue operating (under the same management) with plans for expansion.

This reeks of the ability to undercut the console market.

Re:"Lost"

[GoofyBoy]

"They know that this $177m they drop now, it's an expense. Not a loss. "

And eventually expenses are considered as a loss.

Re:"Lost"

[manyoso]

" ... redefine business loss. ... it's an expense. Not a loss. They will get it back ..."

No, they need to report this as a loss. Look, the Xbox division is a gamble by the larger company to enter into the home entertainment market. As with any gamble it contains a significant amount of risk. This loss quanitifies exactly how large a risk and let's the shareholders and prospective investors have some insight into how the gamble is going. Perhaps, this whole experiment will bomb ... who knows what can happen in five years ... So, you see, it is in the best interest of everyone for losses like this to continue to be reported for exactly what they are: immediate losses on a long term gamble with no guarantee on seeing the money again.

Re:"Lost"

[kevlar]

Redefining a loss as a one time business expense is what companies like Enron, Lucent et al were doing to cover their debt. We shouldn't change a thing.

Re:"Lost"

[binaryDigit]

What's so absurd? Did you expect them to show a profit right off the bat? If so, then a lot more players would want a piece of that action. The fact is that they're trying to play in a new sandbox and the price for playing is high. However, the long term benefits from being the king of the sandbox can also be very high. By you're definition, no one should ever attempt to battle Sony/Nintendo because this is the type of financial situation any company would find itself in.

Re:"Lost"

[Anonvmous Coward]

"This reeks of the ability to undercut the console market."

You're right. The DoJ should fine them 177 million dollars.

Re:"Lost"

[matrim99]

Not to mention redefine "Monopoly".

It's absurd that a company can consider a 200 million dollar loss "acceptable" and continue operating (under the same management) with plans for expansion.

Having lots of cash != Monopoly.

Microsoft does not have anything even closely resembling a monopoly in the console gaming market. They're a distant third in that market.

Their loss is considered an investment in a new industry, aimed to gain a presence in households at a cost of losing some $ per each console sold. The payoff is seen as a long-term investment once people decide to upgrade their once "uber-cheap" X-box console platform... "Hmm, do I buy a new next-generation console that is incompatible with my current one, or do I buy a next-generation one that is compatible with all of the games I've already invested in"? It's a risky investment, from MS's point of view, but it's a reasonable one, given the Billions of $ spent on computer games every year.

Re:"Lost"

[aWalrus]

This reeks of the ability to undercut the console market.

Yeah, and with such underdogs as Nintendo and Sony in there, we should worry about the increased competition they'll have to face. God forbid they should be forced to lower prices and be competitive!

This is standard practice. To get into the console market, you have to build an installed consumer base. Nintendo did more devious things to take control of the industry when they entered the US market (although they did revitalize it after Atari went bust -- I'd highly recommend this book if you want to know more).

The console market is tough. Only well funded, resourceful companies stand a chance of making it, and currently the ones in the game are not to be pitied. They ALL can take multimillion dollar losses if necessary. This reflects on lower prices for the consumer and higher standards for games, which is how they will remain competitive.
--

Re:"Lost"

[timothy_m_smith]

They are reporting it as a loss...in that division. They even reported to the SEC that way(which is where the numbers came from). Lots of companies work that way. And...Microsoft in the past did not have to break out their revenues this way...they made the change on their own. Probably to push those loss making divisions to get profitable now that they are exposed.

Re:"Lost"

[geekoid]

what about a loss of ten dolars? is that acceptable?

What if that 10 dollar loss is on a lemonade stand with a revunue of 20 dollars? is that still acceptable?

200million is not a big percentage of the total MS revenue.

Re:"Lost"

[IamTheRealMike]

I just don't think that purposefully loses should count like a standard lost. They know that this $177m they drop now, it's an expense. Not a loss. They will get it back.....

Correction, they think they will get it back. By this definition, no dotcom ever made a loss, because they all expected they were going to get it back.

Re:"Lost"

[5KVGhost]

First off, MS is not operating at a loss. It's an expense. A cost of doing business in a new market that has entrenched competitors. If they were selling the X-Box for $19.95 then, yeah, that would be kinda fishy. But they're not lowball pricing their product at all, just trying to keep up with the rapidly dropping market pricing set by the other dominant companies that are already there. (Pricing which is only possible because those companies already have a sizable investment of their own to protect and leverage.)

Besides, what would you suggest they do? Give up, fire that division's employees, and abandon the market? How would that benefit anyone at all, other than Nintendo and Sony?

Ooze on over to infest the next marketplace

[Rader]

This is of course, how Microsoft takes over a marketplace. They are eternally funded, and can oulast anyone.

They'll chip away at Sony and Nintendo's profits until even these successful companies can't make a profit.

I wonder why they're trying to pull out of the DVR market. They say that there's no money in it. Maybe. I thinks that maybe it conflicts with their DRM agenda.

Re:Ooze on over to infest the next marketplace

[peterpi]

(Disclaimer; yeah, check my profile, I'm biased!)

Yeah, I bet you must feel really sorry for poor little Sony. Big bad Microsoft has soooo much more money then Sony. Sony are just the little guy trying to make an honest buck.

Jeez, open your eyes people, Sony has much more of a monopoly over Joe Public's possesions than MS do. Sony can piss money away on a loss leader just as well as Microsoft can.

Re:Ooze on over to infest the next marketplace

[dildatron]

You are correct, Sony is not a poor little guy - they do enough things to piss me off. However, does Sony have sole control over a single market in anything?

Microsoft's management just seems to know when to "Bet the farm" and when not o, and so far they have been right.

Re:Ooze on over to infest the next marketplace

[tshak]

Like Sony is not a megacorporation that can't keep up with MS. Also, a $177million loss is not rediculous considering the poor economy and the nature of the console business (difficult market penetration for the "new kid ont he block"). Sony took huge losses on the PS1, and that was during a better economy and a less heated console war.

Re:Ooze on over to infest the next marketplace

[Kintanon]

It is HIGHLY unlikely that Microsoft will ever stop Sony from making a profit unless they actually produce a BETTER console than the PS2 or PS3. Sony is a HUGE company. They have more diversified assets and generally are in a better position in multiple markets than Microsoft is. Sony also makes a profit on ALL of their consoles. They DO NOT sell consoles for a loss. Right now, they could cut the PS2 price down to cost of production and still be fine. They could probably sell it for 99$ right now and still make money. All of their design costs have been recouped, they are on their 4th or 5th production run and have refined the techniques. They have even rolled a BUNCH of money up into the ps3 development already. Sony isn't in ANY danger of being dethroned by Microsoft as King of the Consoles.

Kintanon

Re:Ooze on over to infest the next marketplace

[Anonvmous Coward]

"This is of course, how Microsoft takes over a marketplace. They are eternally funded, and can oulast anyone.
They'll chip away at Sony and Nintendo's profits until even these successful companies can't make a profit."

Have you forgotten that Sony has billions in the bank as well? Not only that, but they're also rather entrenched and have more to lose in the Game Market. If MS wins the war, it won't be by 'outlasting' them. It'lll be by *drumroll* ... giving gamers what they want!

Damn you guys all act like MS'll just throw money at every market until they own it. You seem to forget that MS puts incredible effort into making their products viable. Which system besides the XBOX has an ethernet port built it? Which system besides the XBOX has a hard drive built in? Have you guys seen MS's marketing propoganda for XBOX Live? If you haven't, I'll tell you this: It's a more thought-out end-user experience then you'd expect. MS knows (from the PC market) that gamers would rather play against each other than play against AI. They're betting that the internet can be made to into a massive console gamer commnity. Is Nintendo doing this? Nope. Is Sony doing this? Nah. MS is the one taking the big risk here. Their success will mean Nintendo's success and Sony's success when they follow MS's direction.

If MS dominates, it's because the consumers voted with their money. Don't like it because you don't like MS? Tough beans. That's the way the economy works.

Re:Ooze on over to infest the next marketplace

[GregWebb]

How much power do Sony have to force things down our throats, though?

If a new Sony TV comes with a feature that means it will only work with Sony DVD players, I just wouldn't buy it. If Sony's films require me to buy special 3D glasses to see the projection in an effort to stop people taking camcorders into cinemas, I probably wouldn't see them. If Sony's albums don't play on my computer I won't buy them.

If MS decide they want to do pretty much anything with Windows, I probably don't have a choice but to take it and live with it.

Sony may well have more money and influence in more areas - but they're an awful lot easier to replace than Microsoft. If Sony went under people would notice - if MS went under (yes, both are extremely fanciful) then we'd have serious economic problems.

Re:Ooze on over to infest the next marketplace

[gamgee5273]

It is how M$ operates, but I think they're in for a real fight this time. I mean, let's be honest: if your console can't sell well in Japan (the Bandai WonderSwan outsells the Xbox in Japan!) it's not going to survive when Japanese developers end up bailing.

Sony isn't going away, and the PS3 will take Xbox marketshare (not to say Xbox 2 won't take PS3 share, though). Nintendo has a built-in market that perpetuates itself because it rules the best-known franchises in the business. M$? M$ just buys Bungie and Rare and thinks that it has a lock - except for the fact that those two houses have developed their share of dogs, and they are consistently late on delivering the goods.

All M$ has is money (a lot of it, granted, but it takes more than cash). But if the gamers become impatient with M$, money won't matter and M$ will get a well-deserved spanking for trying to get into your living room through covert means...

Yes, the Xbox has strong hardware and a nice budget. But so did the Dreamcast, the NeoGeo, the 3DO, the Pippin, etc. Where are those now?

Admittedly, I will buy an Xbox if Shaq-Fu 2 ever comes out for it...but I'm not holding my breath!

Re:Ooze on over to infest the next marketplace

[Raptor CK]

They can't chip away forever when Sony makes money on raw hardware sales.

Remember, Sony drops money into hardware R&D anyway. The PS2 can essentially be written off as a happy coincidence, as the funds going to that development were as good as spent. Now, add in the fact that this is a custom piece of barebones gear, and you've got a console that costs less than $200 to assemble, package, and distribute. Sony put in a fixed cost for development, and then pay a per unit cost for manufacturing (well, per 1000s of units, more accurately) of the system unit. That total per-system cost was under $300 at launch, and is only going down as they sell more units.

Now, Sony expects to sell a minimum of 2 games per console, but will most likely sell four or more over time. Not to mention, those old PSX classics also run, so they can make profits from those games without selling the original console.

Accessories? Also pure profit.

If Microsoft is losing $177 million in three months within that division, and Sony is *turning a profit,* then how are they going to chip away at anything? MS can't legally start dumping consoles at $75 a piece since they'd be selling at a loss. In a few years, Sony can do exactly that, and get away with it, too. Then MS will be forced to follow that lead in order to keep up.

Sony isn't exactly the kind of company that you try these practices on, as they're well prepared to deal with the consequences. The real problem is that MS spent too much time hyping the box and not enough time figuring out how to make it *cheap.* The Xbox needed to be a dirt cheap system, and MS simply lacked the infrastructure to pull that off. Does that mean it will fail? Maybe. It wouldn't be the first time that Microsoft made a mistake, but you can be sure that they'll learn from it.

In the end, though, the Xbox will have had a semi-decent run, and MS will just use the information to make a better Xbox 2.

Re:Ooze on over to infest the next marketplace

[madprof]

MS puts considerable efforts into making their products viable does it?
Well they've just put considerable effort into making the X Box come a very distant second while losing lots of money on it.
Odd that you conveniently forget Nintendo's and Sony's plans for online gaming to make MS sound visionary.

Re:Ooze on over to infest the next marketplace

[spectecjr]

If MS decide they want to do pretty much anything with Windows, I probably don't have a choice but to take it and live with it.

New here, aren't you?

You're on slashdot. This place is FULL of these things we call "Linux Users". Ask them about your non-Microsoft options -- although frankly, I'm surprised you haven't noticed these Linux Users yet, as they're everywhere here.

Simon

Re:Ooze on over to infest the next marketplace

[Anonvmous Coward]

"Odd that you conveniently forget Nintendo's and Sony's plans for online gaming to make MS sound visionary."

Conveniently forget? What makes you think I 'conveniently forgot'? Wasn't I clear enough when I mentioned the XBOX was BUILT with on-line in mind, and the GameCube and PS2 wasn't? Heh. At best, whatever Sony or Nintendo provides is 'me too'. They left back doors in their systems to make it possible to connect the machines to the web, but they were never real serious about providing online services. You can argue with me if you want, just don't bitch about the price of broadband adapters when their 'services' are finally rolled out.

Re:Ooze on over to infest the next marketplace

[madprof]

What flimsy evidence for claiming a market lead. Not everyone will want to play online so building an adaptor into a box is a bit pointless if it is not going to be used. Microsoft will find it a challenge to get 1 million subscribers within the first year. And how many consoles will be sold by then?
Sony are not rolling out on-line gaming themselves in the same way Microsoft are. They are leaving it to developers of games to do this and they are not specifying that you must have broadband either so the market is potentially much larger.

I do find it funny that you think Sony and Nintendo are taking their lead from MS. Perhaps you expect the PS3 to come out with commodity hardware in a box the size of a car?

Re:Ooze on over to infest the next marketplace

[Anonvmous Coward]

"Sony are not rolling out on-line gaming themselves in the same way Microsoft are. They are leaving it to developers of games to do this and they are not specifying that you must have broadband either so the market is potentially much larger."

How can you say that their market will be potentially larger? They'll have to buy a piece of hardware no matter what way they go. I have news for you: Historically, peripherals do not sell well. The PS2's online capability will, at best, be a niche product. Whereas the XBOX already has the capability, and people are already using it TODAY. Broadband is the standard, lots of people with XBOXes already have it.

"I do find it funny that you think Sony and Nintendo are taking their lead from MS. Perhaps you expect the PS3 to come out with commodity hardware in a box the size of a car?"

Sorry, didn't understand that comment at all.

Re:Ooze on over to infest the next marketplace

[Raptor CK]

They're doing so in response to their competitors.

When Sony dropped the PS2 to $200 per unit, it was in response to the lower price of the Gamecube (a less expensive system to manufacture and distribute,) but they were also capable of sustaining profit at the lowered cost by that time.

If Microsoft were to have lowered their prices first, it would be considered dumping since they would be selling at a loss *to attempt to outlast their competitors.*

They're not lowering the Xbox prices to hurt Sony, they're lowering it to keep up with them.

Now, admittedly, that would get fuzzy if Sony were actually capable of selling $75 PS2's and still turning a profit, but at that point, Sony would be absolutely permitted to sell their PS2 at that cost, because they're not selling at a loss to hurt their competition as much as they're selling at reduced profit to match the lowering demand.

There's a fine line between price wars and dumping, and Sony is presently in control of that line.

Re:Ooze on over to infest the next marketplace

[madprof]

Broadband is the standard? There is no standard broadband package, so "standard" of what?
Lots of people with XBoxes already have broadband...attached to their PC. You think they will all start setting up home networks?

As forthe PS3 comment I was merely commenting on the XBox being a jumped up PC in a big case. Where Sony can unify the CPU and graphics processors onto one chip Intel and Nvidia (who are still awaiting full royalties payment from Microsoft) are not going to play dice. No similar drop in manufacturing costs. Still losing lots and lots of money per console that is never going to be made back up by games sales because...they're subsidised too!

No doubt about it - XBox is a platform that will be around in the future. And no doubt about it it will not dominate like Windows has done.

Re:Ooze on over to infest the next marketplace

[GregWebb]

UID 5k below you, at or around the kap since its introduction and well aware of Linux.

It's not up to the job for most people and part of that is that there's an awful lot of software that people need that can't just be moved across to Linux and doesn't have a direct equivalent.

Be honest, it can't just replace Windows across the board.

Re:Ooze on over to infest the next marketplace

[Anonvmous Coward]

"Broadband is the standard? There is no standard broadband package, so "standard" of what?"

Ethernet's not a standard? WTF?

"No doubt about it - XBox is a platform that will be around in the future. And no doubt about it it will not dominate like Windows has done."

It can't unless people buy them. If people buy them, then MS did something right. MS can't force people to buy anything, they have to want it.

Don't mistake MS's leverage in the OS market to mean they can do the same with game consoles. That'd be kind of like saying "We can turn sand into glass, therefore we can turn lead into gold."

Re:Ooze on over to infest the next marketplace

[Babbster]

Lots of people with XBoxes already have broadband...attached to their PC. You think they will all start setting up home networks?

Actually, while it's true that setting up a home network is the best way to handle hooking up the Xbox to an existing broadband connection, it isn't the only [or simplest] way. Many are actually just unplugging the Ethernet cable from their PC and plugging it into their Xbox when they want to use Xbox Live. The most these people have to do is buy a long Ethernet cable if there's no way to connect to broadband where the Xbox is (there, of course, almost always is a way - phone jacks and cable jacks are usually right there in the room with the Xbox and moving a cable modem or DSL router is a trivial exercise).

While YOU (to be honest, me too, along with most other nerds) might see the only alternative as setting up a home network, nobody has to do so in order to get hooked up to Xbox Live.

Re:Ooze on over to infest the next marketplace

[Babbster]

If the implication of your post is that there is no reason for a gamer to buy an Xbox, then you're either uneducated or just an anti-MS (get over the dollar sign) zealot. There are plenty of excellent games available for the Xbox.

I would also note that your examples of dead consoles all failed for different reasons. For example, the Dreamcast was not lacking in the amount of games available - it was killed by the specs of the PS2 (DVD being the main draw) and the promise of PS backward compatibility. NeoGeo died because most people did not want to pay $200 or more for each puzzle game or 2D fighter/shooter. 3DO hardware was too expensive and didn't have compelling software.

The Xbox, on the other hand, suffers from none of these drawbacks. As specifications go, it has the edge on both the PS2 and Gamecube performance-wise. It offers the same price for hardware as the PS2, and the same price for software as both PS2 and Gamecube. Finally - especially in just the last week and the next month - it has plenty of excellent games available (including several interesting exclusives).

I can understand people who don't want an Xbox, and many of the reasons for that. Preference for Sony or Gamecube exclusives combined with money for only one or two consoles, philosophical problems with giving Microsoft money for anything, etc. But implying that Xbox has no games, or will have no games in the future, despite evidence to the contrary, is just plain stupid.

Oh yes, and I would mention finally that there is no evidence of Japanese developers jumping off the Xbox bandwagon. To the contrary, Sega, Tecmo, Capcom and others are developing for the Xbox and announcements of new games by those companies for the Xbox don't show any sign of slowing.

Re:Ooze on over to infest the next marketplace

[gamgee5273]

Man, you really didn't try to read my post did you? That's just plain stupid, son.

I'm implying that Xbox has about three good games: Halo, DOA 3 and...well...I'm sure someone can come up with one other...but, the industry pundits are saying the Japanese developers will start bailing by the end of 2003 if the Xbox doesn't start selling. Interestingly enough, Capcom just announced five new games (well, four new ones and Resident Evil 4), and they are all GameCube exclusives.

I will admit, I am very disappointed in M$ and Sega for not making the Xbox version of Shenmue II better than the Dreamcast one. That game, had it been a true advance over the DC, would have convinced me to buy an Xbox (though I'm still jonesing for Shaq-Fu 2).

As a gamer, an old school gamer who has six consoles (ranging from a 2600 to a GameCube) still hooked up and regularly played, I don't see anything that will make the Xbox survive other than cash - and that can't carry a console forever (the Dreamcast would have survived had that been the case).

Just think about it: The 2600 continues to live on - will the Xbox be as admired and loved 25 years from now?

'Nuff said.

Re:Ooze on over to infest the next marketplace

[Babbster]

Does being retarded run in your family, or are you the only one who suffers from the malady. Once again, I will state that there are many good games for the Xbox.

I read your post, and I didn't even have to look for any subtest. With this latest post, you've expanded your dismissive (and uneducated) tone by saying that there are "about" three good games of the Xbox and you continue to flog that ridiculous "M$" affectation, thus confirming your bias.

You're right. Cash can't carry a console forever (though, again, your comparison with Dreamcast is ridiculous because Sega was actually running out of cash while Microsoft has no such problem). Fortunately, there is more to the Xbox than cash. It hsa the best graphic and audio capabilities, it has good games and it has a good online service (Gamecube, for example, has ONE game on their release list this year with online capability and their plans for next year are nebulous at best) that is going to help attract customers.

Oh yes, and whilst your "old school" credentials SEEM to be in order, I can hardly be impressed by anyone who claims to be a gamer and yet is so blindly dismissive of so many good games (namely, Xbox games).

Will the Xbox be "loved" 25 years from now? Probably not. But it will certainly be more than a footnote in video game history. I don't necessarily expect to be playing games on an Xbox6 at that point, but I wouldn't be surprised if I had an "Xbox3" sitting alongside a "PS4" in the attic.

Re:Ooze on over to infest the next marketplace

[madprof]

As regards the "standard" I have ethernet running all around my house. This is nothing to do with broadband. I was referring to upstream service.

People aren't buying enough XBoxes for MS. They didn't do something right enough.
In fact for a company that as moaned about the "freedom to innovate" what they did wrong was not innovate at all. Sticking a network adaptor in a machine is about as innovative as giving it a hand controller.
The Dreamcast had an integrated modem and that...well let's not go there.

MS must be wondering what the receptionfor XBox 2 will be now. When one console fails to grab the big share of the market it is harder for the next one along to do so.

Re:Ooze on over to infest the next marketplace

[gamgee5273]

My,my, my...if I didn't know better I would think you were some relative of Billy G.'s. You keep stating "there are many good games for the Xbox." Well, damn! There goes my arguments. Care to actually educate me, oh enlightened swami-boy, as to what those good games are? Or are you just going to continue badmouthing me because you can't come up with a credible argument against what I'm saying?

Your arguments are old, homes, and they're the same ones M$'s propaganda machine keeps rolling out every time there's news about how poorly the Xbox is actually doing. What is your favorite flavor of Kool-Aid, by the way?

I've borrowed a co-worker's Xbox, I've played Halo and DOA 3. It is a pretty graphics engine - no doubt about that. It is powerful hardware - never said it wasn't. But there is something that the Xbox games are missing: fun.

Halo's single player levels are fun for about the first three levels, then we're just right back to the same old FPS scenarios we've always seen. DOA 3 is very nice...but not too huge a difference from DOA 2. And that's it. Blinx is rather dull. Oddworld is overridden by commerical product placcement...and?

I look for games to be fun because, in the end, they're games, not necessarily a showcase of the graphic-rendering capabilities of a console. So, to me, it doesn't matter if I'm playing Pac-Man, Mario Bros., Sonic, Soul Calibur or Pikmin - I'm looking to have fun and enjoy the game. If there aren't games that I deem enjoyable on a platform, I don't care what its processing abilities may be, I'm not buying the console.

Xbox is that console for me right now. Maybe in two years it may not be, but I see nothing, either now or on the horizon, that makes me want an Xbox.

Arguably, the vast majority of gamers throughout the world subscribe to a similar philosophy as mine since Xbox just isn't doing as well as an M$ product should...

Re:Ooze on over to infest the next marketplace

[Anonvmous Coward]

"Sticking a network adaptor in a machine is about as innovative as giving it a hand controller."

And not putting an ethernet port on a machine is more innovative? Forcing somebody to buy what will most definitely be a network adapter later is better for the consumer?

Heh. Broken logic alert.

Re:Ooze on over to infest the next marketplace

[sql*kitten]

They'll chip away at Sony and Nintendo's profits until even these successful companies can't make a profit.

The thing you must understand about Sony is that, in corporate terms, they are badasses. Seriously. They have elevated the integration of strategy, technology, operations and marketing to a level that few organizations can match - and Microsoft isn't one of them. On Sony's home turf, like consumer electronics, Microsoft are not only heavily outnumbered, they're facing an organization at least as intelligent, agile and ruthless as themselves. And Microsoft have little experience in facing a competitor like that.

The question is, are consumer electronics becoming like PCs, or are PCs becoming like consumer electronics? It's looking more and more like the latter, and that suits Sony just fine.

Re:Ooze on over to infest the next marketplace

[madprof]

You must have better things to do than invent arguments in your head.
I haven't claimed any innovation for the consoles that do not include a network adapter.
You claim that they follow the lead of the XBox, which I say is total rubbish.
Nintendo aren't even looking towards the same market as Microsoft. They have generally tended to focus on young players whereas Microsoft are asking you to have a credit card to play on XBox Live.

Register has the numbers, too

[Rupert]

Here.

As El Reg points out: "it's also clear that Microsoft is the dominant force in the PC market, and only the PC market. It can afford to shoulder big losses in the areas where it wishes to be the dominant force for a very long time. Which is fortunate, because in several cases these look suspiciously like ventures normal businesses would be forced to put a bullet into. Now."

Reminds me of a line form Citizen Kane

[foistboinder]

You're right, I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars *next* year. You know, Mr. Thatcher, at the rate of a million dollars a year, I'll have to close this place in... 60 years.
-- Charles Foster Kane

Re:Reminds me of a line form Citizen Kane

[dpilot]

So pretend $1.77e8/quarter is a continuing loss rate. (I know it most likely isn't.)

With their $4e10 war chest they can subsidize the X box at this rate for about 56 1/2 years. I wonder if the copyright on Steamboat Willie will have expired by then.

Re:Reminds me of a line form Citizen Kane

[Daetrin]

You're only half right. Their dream is to get into your living room and stay there. They want everything in your house to be centerd around their products. The XBox is a step in that direction. If they think they have a snowballs chance in hell of establishing themselves in the majority of the living rooms out there, they'll keep throwing money down the tube for as long as necessary.

Re:Reminds me of a line form Citizen Kane

[0x0d0a]

Maybe, but another console doesn't produce competition among video game producers -- just console manufacturers. It actually wastes a tremendous amount of development resources, because of all the time and effort porting and designing around portability.

How is this news?

[bay43270]

Who here thinks games consoles are profitable?!? The money is made from the games.

Re:How is this news?

[FatherOfONe]

Wow thats kinda the attitude that Sega took. Both Sony and Nintendo MAKE money on their consoles.

Re:How is this news?

[FatRatBastard]

Well, you're sorta right, but it does matter. Lose a little on a console, it takes fewer games sold to recoup the loss / start making a profit. Lose a lot per console and you have to sell more games. You still want to make your box as cheaply as possible in order to a) undercut your competition or b) shrink the breakeven point. Losing shedloads of money with a respectable, but still hugely smaller (now there's a contradiction of terms) base than the PS2 doesn't bode well. They're going to have to push the cost of the box down a lot more to even hope to do better (games that are must haves would be good too). Notice how MS and nVIDEA are having a nice spat about the price of nVIDEA's chipsets? Notice how VIA wants to get into the action with the XBoxII (by offering the CPU / Video / Bridge chipset as a package)? MS are making a concerted effort to lower prices.

OT: But isn't it interesting how MS really isn't doing well in anything other than Windows and Office? The /. crowd seem to have this "gloom and doom / inevitablitiy of MS taking over every segment of the industry" attitude. Yes they have lots of money to throw around, yes they can afford to try three times before they get something remotely right, but lets face facts: they suck with their online experience (and its bleeding red ink), they suck at "Big Iron" (and its bleeding red ink), they suck at Phones (and their biggest cheerleader gave them the boot after thier flagship product was on the market for a whole two weeks), they're still mildly stinky at PDAs (although less stinky than they were), they're lackluster in the games market (where, for the first time in their history they're on the hook for the hardware, and bleeding red ink), .net looks insteresing but in the business sense is no different than what's going on now (buy .net server software, buy a client to run .net programs), and the *new, improved* greatest things since sliced bread: The Tablet PC and "networked stuff" (see the upcoming Comdex), are (IMHO) going to be middling at best, i.e. a huge let down from the hype. The tablet is nice but unneeded outside of niche industries, and the Windows based toaster is going to do about as well as it has already -- i.e. Not. MS still doesn't get the embedded space.

Don't get me wrong, they're still printing money with Windows and Office, and they will for the forseeable future. But MS have been pretty much losers at trying to break out from those two (incredibly large and profitable) niches. All things come to and end though (see Wang, IBM, et al) and one wonders just what's going to happen to those guys when the industry takes its next big shift.

Re:How is this news?

[ivan256]

But the games industry rarely has a 'printer/ink' relation with console and software.

There is never this "razors/blades", or "printer/ink" relationship that people keep talking about. Think about it. With your printer, you RUN OUT of ink. With your razor, the blade wears out. The same doesn't happen with your Xbox. If only one good game ever comes out, you won't be selling that game over and over, because the people who already have it don't need to buy it again.

It's a broken analogy.

Also, it was the Saturn that Sega started loosing money on, not the Dreamcast.

Re:How is this news?

[drinkypoo]

One thing I can't help but think helped kill dreamcast is that you can defeat their copy protection in software. You don't even need a modchip! No soldering, no plugging, no ordering... Just download games, and burn them to CD. It'll read any old crappy CD unlike the sega saturn (security through obsoleteness) which only works on older CD-Rs, like the old blue stuff. Might work on silver/gold and gold/gold etc, haven't tried that yet.

I mean, I only own two DC games. That's got to hurt the bottom line.

Re:How is this news?

[ivan256]

And with the Xbox being released as a package with TWO games, could be construed as being packaged with 'ink' or with 'blade'.

Except the game will continue to work forever, and if it's the only game you want for the console, you're not going to buy more. (Same is true if you only buy 5 games. MS still didn't break even, and you're games still work so you're not compelled to buy another like you would another ink cartridge). Sure, they can hope you'll get bored with what you've got and go get another one, but with the Printer or the razor if you don't buy more ink/blades your printer/razor is UNUSEABLE. That's a serious advantage over the XBox + games business model.

Now, how many games do you need to buy before you won't buy anymore. Most calculations seem to show that MS needs to sell ~10 games before they break even on the console. Since you're not going to be purchasing games forever (like you will with the ink/blades) when do you stop? 8 games? 12 games? There's going to be an upper limit.

I don't care how fun JetSetRadioFuture or SegaGT2002 is, they're going to become incredibly boring. you will either become sick of the Xbox's game selection, or try to buy new games.

Or rent them. Yet another hole in the analogy. You don't need to buy any games EVER. You can just pop down to Blockbuster and rent the new one for a while. There's also the previously played market. There's tons of reasons that XBox + Games doesn't parallel Printer + Ink. XBox + Games is a lesser business model.

I'm not surprised

[Evil Adrian]

I'm not surprised; they lose money selling the systems, and since they didn't make a huge splash when it debuted, they're not catching up with the software sales. I mean, hey, the library is pitifully small compared to the Playstation 2 (it's about the same as Gamecube, but the Gamecube is cheaper and the games just look more fun.)

I played an Xbox a couple times... I don't know. I just don't have the same fun that I do on a PS2 or Gamecube. Xbox has all this horsepower and no track to race it on.

I knew I should've got another!

[teamhasnoi]

I was trying for 200 mill, by pouring Pepsi in the boxes at Walmart. Now I'll never get my 'Corporate Killer Anarchist' badge.

Billy Henderson always wins, 'cause his dad's the scout leader.

Re:I knew I should've got another!

[afxgrin]

Geez, what kind of Circle-A scout are you? No wonder you didn't get the 'Corporate Killer Anarchist' badge, you should've attacked the authority determining who hands them out. Like Billy Henderson's dad.

Then you'll get the 'Direct Action' badge, the 'Corporate Killer Anarchist' badge, and whatever other stupid badges Billy Henderson's dad posessed.

Like every good anarchist knows, "Direct Action gets the goods!"

Re:Selling one's soul

[Xerithane]

Gabe still owns you. Sorry buddy.

Re:Sigh....

[melonman]

Which is exactly what France Télécom did to introduce the Minitel. They gave away the terminals and charged for the services. The Internet in France still hasn't managed to do better in terms of market penetration.

Standard Oil

[Bonker]

One of the tactics Standard Oil would employ was to sell oil and petroleum products well below cost, absorbing the loss for the sake of driving competitors to the point of ruin, and then buying their ruined competitors' assets.

Sony is a strong, powerful company. Nintendo is slightly less so. I think, however, that if you were to do a direct comparison, Microsoft has the ability to lose more money and stay solvent for longer than either Sony or Nintendo.

This tactic was found to be in violation of the Sherman act when applied to Standard oil. It's amazing to me that MS is able to get away with the same thing without its competitors screaming more loudly at the US government.

Re:Standard Oil

[bigmouth_strikes]

> It's amazing to me that MS is able to get away with the same thing without its competitors screaming more loudly at the US government.

What exactly are they getting away with ? Losing money isn't a crime.

There isn't one single corporation not trying to gain market shares by playing with prices, in order to increase demand for their products. Most companies also accept losses to parts of their operations in hope that the profits of others will more than make up for it. Selling X-Box at a net loss isn't a big deal if you can make up for it with the games, subscription fees etc. Gillette is practically giving away the razors, but the price on the blades borders to extortion.

I think your concern would be valid if in fact what Microsoft is doing is the de facto standard for the gaming console market; you start of selling the consoles at a huge "loss" (i.e. you write off the development costs the first years) and then you practically break even on them. Sony isn't selling PS1 at a loss now, I assure you. But the main income is the games. Microsoft gets royalties for each and every title, without them having to lift a finger. Of course they can afford to get rid of the consoles at a loss.

Re:Standard Oil

[tshak]

It's amazing to me that MS is able to get away with the same thing without its competitors screaming more loudly at the US government.


It's probably because MS's competitors understand the Sherman act better then you do. Microsoft has the money to easily sell the XBox at $99, and games at $29 for hit titles. However, this is underselling in a market. MS is competing at market price (note how Sony is the one who started the price war by lowering to $199) and is actually _MORE_ expensive then the other two consoles in some markets. Taking a loss is considered an investment decision where your product can lead towards future revenue. There really is no correlation between the console business and the oil business.

Re:Standard Oil

[Kintanon]

Sony NEVER EVER sold their consoles at a loss. This is WRONG. Each individual console sold by Sony since they began selling consoles was sold for more than the cost of production on the console. Usually quite a bit more than cost of production.
If you factor in Development cost divided amongst all of the consoles sold then yes, you appear to be selling at a loss. But that's deceptive. Sony makes money on each console. That money is at first used to recoup development costs. But they are still making a profit over the cost of production on each console. Otherwise they would never be able to recoup their expenses.

Kintanon

Re:Standard Oil

[FatherOfONe]

I don't believe that this is correct. I believe this amount is only what their manufacturing cost are. So yes, they are selling it at a loss. Guess they need to strong arm Intel and Nvidia for a price break. Also they will have to start whipping the Mexicans who are building these things.

Re:Standard Oil

[Gaijin42]

The dynamic you are talking about is NOT due to MS being a monopoly. It is because MS has more than one product line.

If Pepsi has a bad year, they still get to rely on taco bell, pizza hut, and doritos to make it through the year. Thats not a crime, its called diversification.

Sony does the same thing, they have TVs.

Re:Standard Oil

[doc_traig]

If what MS is doing with Xbox is in fact illegal, they won't be going to court over it until the competitors (in this case, Sony and Nintendo) make enough of an issue out of it to force action by the government.

From what I've been reading, Sony and Nintendo both seem to be doing just fine and I imagine have plenty of other fish (note: not "bigger") to fry.

- DDT

Re:Standard Oil

[error0x100]

The dynamic you are talking about is NOT due to MS being a monopoly. It is because MS has more than one product line.

You've missed the point - Microsofts significant line, desktop operating systems, IS a monopoly. They are funding the XBOX losses from their desktop monopoly. A "normal" company that has competition (e.g. Pepsi) is allowed to do this, but (in the US at least) it IS illegal for a monopoly to do this.

Re:Standard Oil

[error0x100]

Sony does not have a monopoly in the other products they make. Microsoft does. So unfortunately for your childish little outburst/argument, this DOES make it different. Under US law, at any rate. Under the Sherman act, monopolies DO have additional limitations placed on the way they may conduct business, that other companies don't have.

Having a monopoly is not a crime, but abusing it is. The courts have already ruled that Microsoft has a monopoly. That means that all the Sherman regulations apply to them.

Re:Standard Oil

[bigmouth_strikes]

Yes you are right in that Sony is much better at running a more profitable mfg plant and that they are recouping their investment both with the platform and the software, not to mention the assescories. But regardless, the price of the console is just a measure of the competition on the market, and MS had to face the fact that they're competing against well-established console companies and take their medicine.

Still, it doesn't make it wrong to market your product at a price in level or slightly below the competition just in order to get the products out to the consumers.

Re:Standard Oil

[fferreres]

Microsoft has the ability to lose more money and stay solvent for longer than either Sony or Nintendo

Well, I it was Keynes (or somebody) that stated: "Markets can remain irrational for longer that you can remain solvent". This is certainly also true for specific industries. If the the irrationality (selling at a loss) comes not from a shift in consumer preference of severe economic shock (radically new techology, war, etc.) then the company doing the sell at a loss is doing something very bad for the consumer and the economy.

Selling a loss a known product (not an innovative one that has to create it's own market) for longer than your competitors can remain solvent is a crime and the worst kind of "competition".

Re:Standard Oil

[Kintanon]

You're factoring in research cost spread across the console production amounts. The individual machines did NOT cost more to produce (without the research and development cost) than sony sold them for.

Kintanon

Re:Sigh....

[GoofyBoy]

"Kinda like the IE approach."

When did they start charging for IE?

When they started charging for my soul!!!!

Isn't this the exact definition of

[beldraen]

an abusive monopoly. No other company can just throw this kind of money away in this market. The only reason why people are not saying something is because Sony is actually beating Microsoft's stupidity.

Re:Isn't this the exact definition of

[Glonk]

an abusive monopoly. No other company can just throw this kind of money away in this market. The only reason why people are not saying something is because Sony is actually beating Microsoft's stupidity.

It's incredibly common in the console industry to sell the hardware below cost and make up for it eventually in game sales and when the hardware drops in production cost.

The PS2 started out being sold at a big-ish loss also.

Re:Isn't this the exact definition of

[donutello]

Bzzzzt. Wrong.

There is no correlation between the console market and the PC industry. Therefore using profits made in one area to invest in another is not abuse. It would be abuse if your PC came with an XBOX-only connector or something but merely using the money is perfectly legal.

No other company can just throw this kind of money away in this market.

Take a look at the financials of some other companies. $177 million is a small amount of money to lose - especially in the investment phase.

Re:Isn't this the exact definition of

[5KVGhost]

Er, how do you think Sony got where they are today? It's not like Joe Sony took out a loan at the Tokyo bank and started soldering Playstations together in his garage. They leveraged the huge profits they made from their other divisions to make a foray into the highly competitive and always risky home gaming console market. Hell, Atari and Nintendo did pretty much the same thing in their day, too.

Re:Isn't this the exact definition of

[n3rd]

an abusive monopoly. No other company can just throw this kind of money away in this market. The only reason why people are not saying something is because Sony is actually beating Microsoft's stupidity.

This is the most karma whoring uneducated statment I have ever seen, and I've seen some good ones.

First, this has absolutly nothing to do with Microsoft's monopoly. They are entering a new market that has several very entrenched competitors (Sony and Nintendo). How does a company entering a new market make them a monopoly in that market?

Second, why can, and I quote: "No other company...throw this kind of money away". Sun has 5 billion in the bank, they could. IBM has substatial revenues, they could as well. Why couldn't Warren Buffet's Berkshire Hathaway?

This has NOTHING, and let me repeat, NOTHING to do with Microsoft and their power as an OS monopoly. This has EVERYTHING to do with money, plain and simple. Not how they got the money, but just the fact that they have it.

I'm very upset this comment got rated as high as it has (if you can't tell) and I'll sum it up one last time: This has nothing to do with Microsoft's OS monopoly. Any company with significant revenue and/or cash reserves could do this.

The "Microsoft is a monopoly" argument is in this situation is completely absurd.

Re:500lbs Gorilla ...

[Rader]

Yea, I'm waiting for them to go into fast food. Give McDonald's a run for their money.

Just think, a free 2-day Serial Key to MS-Office with every BillyBurger sold!

This is why MS does so well

[91degrees]

Ignore short term losses. Few companies do, by MS can afford to. The company as a whole is making a profit, so the shareholders will allow it to carry on.

In the long run, the plan is to eliminate console competition, just as Sony tried to do beforehand. They'll give X-boxes away if they have to.

Re:This is why MS does so well

[dildatron]

Don't think Sony is just sitting there with their thumbs up there asses saying "What do we do now?"... Sony is also a 500lb gorilla, and also has a ton of resources and is more divirsified than Microsoft is. Sony was there before Microsoft, and they will likely be there after MS's decline.

Rest assured that Sony will also compete in the console market, and likely win. They have the upper hand, and they are no slackers as far as advertising or console advocacy goes.

Re:This is why MS does so well

[MtViewGuy]

While Sony has one of the world's most recognizable brand names, they have to be wary of Microsoft because MS has far more than enough liquid assets on hand to wait out the competition. Sony doesn't does have that luxury and one wrong calculation by the Playstation group could result in Microsoft swooping in and take the console gaming marketshare before Sony knew what happened.

Microsoft Good at Business?

[shiflett]

You know, I always hear the argument that, although Microsoft's products are arguably poor, their superior business practices (whether legal or otherwise) keep them financially on top.

One interesting thing in the article is that several of their divisions (mobile divices, xbox, msn) are consistently losing money.

So, is Microsoft as a company really good at business strategies? It seems to me that the "$3.5 billion profits from its operating system and software divisions in the quarter" are what keeps it afloat. I doubt any other business could fail quite as much as Microsoft and still survive.

Re:Microsoft Good at Business?

[vidarh]

They are pouring money into several divisions because of long term strategies, not for immediate profit. Their goal is to build dominance in these new (for MS) areas, regardless of whether they make money on it now or not, by spending extreme amounts on marketing etc.. In other words, the losses in those divisions are so big because MS can easily afford it, and they think it will be a worthwhile investment in the end.

And overall...

[HaloZero]

XBox: Down.
Windows OS sales: Up.
Office Package: Up.
Pre-packaged units with retail machines: Up.
MSN Subscriptions: Up.
Mouse sales: Up.

Boo hoo hoo? Psh.

Ridiculous

[matusa]

It always bothers me when we (the linux community, technically the underdog) make some snide reference to the failures of our competitor, especially when in the big picture the direct issue is rather silly.

• Consider:
• We _know_ that they have lots of cash. Granted a loss is not cool, and they will try to remedy it, also consider
  
• How widely popular the xbox is. Even people that planned on hating it drool over it
  
• The upheaval in the console market
  

This is similar to how we report linux and windows vulnerabilities. When a windows vuln is mentioned, we bitch about the OS and its quality etc. etc.; when a linux vuln is mentioned, we downplay the potential risks, and then compliment the speed of patch/update/fix release.

Don't get me wrong--I love linux, use nothing else, and haven't for many years; this ridiculous attitude of most zealots is annoying, however.

Re:Ridiculous

[0x0d0a]

Okay, your first point is valid. $200M lost is definitely something to consider, but they can afford to do it for a long time. If they think gaming is a vital strategic win, they might even lose money net on the thing and be happy.

On the other hand:

Your point about the popularity of the X-Box...I don't buy it. The X-Box is more popular than many people predicting its complete nonacceptance had thought, but it's still third of the three systems out there.

As for upheaval in the console market...doesn't happen. The console market is actually pretty stable, except when a new generation of consoles come out. MS is in third place, and they're going to stay in third place for this generation. Maybe next generation things will be different (I think Sony is being a little ballsy with thinking about distributed computing in the PS III, but I suppose they know best).

Was this part of the plan?

[standards]

OK, I expected kind of big losses foir the XBox - new product, tough marketplace, lots of competition... and I'm not sure how much Sony and Nintendo are losing on their consoles.

But I'd think that Microsoft had a huge advantage - after all, they own MS-Windows and can leverage that technology within the internals of the X-Box. Furthermore, the X-Box should be a great game box, because there are so many software vendors that already produce software for Windows.

So where did Microsoft go wrong? Is the X-Box just grossly mismanaged, with a seemingly unlimited budget? Or is this something that is "expected", and therefore was part of the grand plan, and therefore will ultimately result in the glowing profits and new markets for Microsoft?

The only other thing I know is that I bought a PS2. I thought of going with the X-Box - heck, it is a sweet game console. But I stuck it out with the PS2 because of game availability - after all, the PS2 has already been proven. Not sure if I made the right choice, but I don't think I made a bad choice.

Re:Was this part of the plan?

[tshak]

Well, I had a PS2, and now I have an XBox. The games currently available and the games coming up for this Christmas season are great. Any new console needs a good 12-18months to develop a game library. I knew that XBox's potential outdid PS2's last year, and now I'm seeing that happen. The same goes for the GC. The PS2 is getting less and less attention and game developers are getting more excited about the potentials that the GC and XBox offer. This doesn't mean that buying the PS2 was a bad console choice - some games like FF will never be on the other two. It just depends on what's important to you.

Is the X-Box just grossly mismanaged

Not at all - it's doing very well all things considering. XBox Live is a BLAST (I've been Beta testing it), the current game library is great, and the games coming out this month and next look incredible. I'm not saying that the XBox is the _BEST_ console, I'm just saying that it was done right, and I like it a lot.

XBOX #3 in this console iteration

[smd4985]

i'm a (not so proud ;) ) xbox owner, and while i'm excited about various applications (sega's games, xbox live), the xbox is already #3 in this console war and will stay that way. the main reason is their DISAPPOINTING presence in japan (which is virtually non-existent). you simply can't win a console war without support from nihongo developers and users.

that said, i don't this MS really cares. for a first iteration console they've done well, and you can kind of think of xbox as a testbed for future MS consoles (especially xbox live). also, they only have some 50 billion left in the bank (oh, the convenience a desktop OS provides!).

my bet is that xbox2 will come out BEFORE ps3 simply because first-mover momentum in the industry has become more important. the ps2 is hard to develop for, but the installed base is NUTS so developers flock to the ps2. MS realizes this so i wouldn't be surprised xbox2 comes out by 2004ish.

Re:XBOX #3 in this console iteration

[Blimey85]

because first-mover momentum in the industry has become more important

I'm not so sure about this. I think for a lot of users, it's all about past performance. When Sega came out with the Dreamcast, there was no way that I, or any of my friends were going to buy one simply because we knew that Sega never seems to meet expectations. We discussed the matter at length and we all felt that Sega didn't stand much of a chance in the market that was then dominated by Sony and Nintendo. Looking back on it, I am very glad that we decided not to buy since Sega eventually gave up on hardware and those that bought Dreamcast systems are now left out in the cold.

Sony on the other hand has a lot of connections with software developers and has been able to leverage that consistently. While you won't see all of the coolest titles on PS2, you will see a large number of great games that sell very well. Sony proved themselves when they released the first Playstation. A lot of people said they couldn't compete with Nintendo due to lack of experience. That turned out to be false. People said that they wouldn't have as many games as Nintendo. Count them. Sony dominates. Why do they dominate? I think it boils down to two things. First, they are in Japan and they know how to cater to Japanese gamers. That is a huge market and they have been very successful in it. Second, they don't tailor to younger kids. They have games suited to different age groups and I think the GameCube is lacking in games for adults. Sure they have some but from what I've seen, a lot of their games (while very good) are for younger people. Nothing at all wrong with that, and it does seem to be working for them, but they won't be able to garner the market share Sony has with that strategy.

I was excited when I first heard that MS was getting into the console market because I think they make great hardware, I like a lot of their software, and they have had some great games over the years. Motocross Madness and Age of Empires II were awesome. But one of the main reasons that I bought a PS2 was because I already had PS1 games. And guess what folks? The PS3 will be backwards compatible. How is MS going to compete with that?

I think there will be a slight advantage to MS if they get the XBox 2 out the door before the PS3 but in the long run, I don't think it will make a bit of difference. I know that when the PS3 comes out, I will buy one. I have a lot of PS1 games, a lot of PS2 games and I want to be able to play all of them on the same console. Sony knows that I'm not the only one that feels this way and unless something drastic happens (which isn't very likely), they will continue to dominate the market for years to come.

I think one thing a lot of people are forgetting is that it's not just MS vs Sony vs Nintendo in this. There are a lot of other companies involved in this. Some companies only develop for a single platform and they have a lot at stake in whether or not the platform succeeds or not. Also, Sony is no little kid on the playground that MS can bully around. They have some pretty deep pockets as well, although I don't think they need them in this case. Does anyone have any numbers as to how Sony is doing with the PS2? Everyone I know has one and has bought a lot of games so they must be making a pretty nice profit.

Re:XBOX #3 in this console iteration

[Babbster]

If I had mod points right now, I would have given them to anonymous cowards here. If you're glad you passed on the Dreamcast because after two years Dreamcast owners were "left out in the cold," then you're just not very bright since you missed out on a lot of great games. Soulcaliber alone provided me with a good hundred hours of play time (I'm probably being conservative) and Crazy Taxi did the same. The latter is now available on other consoles, but the former isn't. These two together justified purchase of a Dreamcast, and I played many more a great deal as well (Tennis 2k2, NFL 2k and 2k1, NBA 2k, Sonic Adventure, Jet Set Radio, etc.).

Then again, maybe I'm the fool. I wouldn't buy a console today thinking "What am I going to play in 2004?" I buy a console for what I want to play TODAY. The fact that great games will come out for my PS2, Gamecube and Xbox next year and the year after that is just gravy.

Market Share

[Omkar]

MS is trying to gain market share by selling hardware below cost. The trouble is that that strategy won't work against a dominant force like Sony. So while MS takes a $177mill loss on the XBox, but touts its US market share, Nintendo is laughing all the way to the bank with strong software sales for the GCN and dominance of the handheld market with the GBA (even MS produces games for it).

Please go away.

[DAldredge]

What are you a former AA employee? Did you work on the Enron account?

If expenses > revenue = LOSS
If expenses < revenue = PROFIT

It is that simple. This playing stupid accounting tricks is one of the reason the stockmarket went down so much. The investorers could not trust the numbers the companies where giving out.

Re:Please go away.

[dildatron]

I thought profit was step 3?

How to make the Xbox a success

[b.foster]

As an avid gamer and self-proclaimed "gadget freak," I can tell you that Microsoft has spent the last two years shooting itself in the foot with regard to their Xbox strategy. I have seen Xbox Live, and to be frank, the extra voice features and other refinements are nothing to write home about. I have a few suggestions as to how Microsoft can turn the trend around and avoid a massive failure like Microsoft Bob or UltimateTV:

• Keep it open, stupid. The barrier to entry is very high for Xbox development - the very opposite of the strategy that have made Linux and Windows very successful amongst amateur programmers such as the founder of this site. "Developer" Xboxes which will run all signed and unsigned software should be plentiful and cheap - not subsidized, but rather sold slightly above cost. This has the benefit of making Microsoft's economy of scale pay off for thousands of potential game developers (read: licensees) as well as hardware hackers who are looking for a cheap PC.
• Buck the content industry. Manufacturing Xboxes that defeat region encoding and macrovision with small modifications would cause sales to skyrocket. Likewise, since Sony has their own gaming arm and no other RIAA/MPAA company is involved in game production, the support of the content industry is meaningless.
• Focus on getting better games. Why does nobody develop good games for the Xbox? For starters, Microsoft has failed to push Xboxes in the game capital of the world, Japan. Microsoft needs to revamp their entire strategy with regard to this country, starting with the release of hentai games and ending with the successful ports of many PS2 games over to the Xbox platform. The Xbox will go nowhere if there is no good software to run on it.
• Keep manufacturing costs down. Microsoft needs to switch to AMD or Transmeta chips, which pack more power for the buck, run cooler, and are 100% compatible with their existing software base. Also, this will allow them to use cheaper graphics coprocessors by using a cheaper, more powerful main CPU.

These are just a start, but if Microsoft takes these suggestions, their Xbox division will be well on its way to profitability.

Re:How to make the Xbox a success

[binaryDigit]

Keep it open, stupid

This directly opposes Focus on getting better games. While one or two good games might come from Joe and Tom working in their bedrooms for 8 months straight, most of todays games are massive efforts and the cost for playing helps to ensure that only those who are truely serious will play. Don't get me wrong, I'd love to get my mitts on a dev kit cheaply, but games today are way more complex than the average person/small team can effectively deal with.

Manufacturing Xboxes that defeat region encoding and macrovision with small modifications would cause sales to skyrocket

Me thinks that your definition of "skyrocket" and M$'s definition of "skyrocket" might be orders of magnitude different. Who in the US (general game playing population) gives a flip about region encoding? Sure, beating Macrovision might be interesting and sell a few more boxes, but it's a GAME BOX, those features have no interest to GAMERS. This is especially accute concerning M$, since even as you mentioned they have made little inroads in Japan, and after all, isn't getting those hot Japanese titles months before they come here one of the primary reasons that the hardcore gamers care about region encoding.

Microsoft needs to switch to AMD or Transmeta chips, which pack more power for the buck, run cooler

Uh, which AMD chip runs cooler? Which Transmeta chip packs more power for the buck? Do you know the details for M$'s agreement with Intel to know if they could truely save money by switching. Could the other two companies afford to offer prices as low as Intel could?

Also, this will allow them to use cheaper graphics coprocessors by using a cheaper, more powerful main CPU

Isn't this bucking the trend? Aren't games systems moving towards ever more powerful graphics subsystems with modest increases in cpu performance. Sony gets away with using a ~300mhz (IIRC) cpu, I don't think that the console makers are too stressed out about raw CPU performance.

but if Microsoft takes these suggestions, their Xbox division will be well on its way to profitability

They need to produce better games than Sony and offer the user a better experience for the buck and most importantly, they need market share. The power of the last point is elegantly illustrated by Sony. PS1 was the market share (though long money losing) vehicle that allowed Sony to start cashing in once PS1 was established thus smoothing the road to much quicker profitability on PS2.

Re:How to make the Xbox a success

[RatBastard]

• Keep it open, stupid. The barrier to entry is very high for Xbox development. Do you really want to play Ken's Laberynth or Morraff's World on your XBox? AAA and AA games cost way too much money for basement hobbiests to produce. MS doesn't want an avalanche of crap titles for their system. The cost of entry is high to keep all but the serious out.
• Buck the content industry. Excuse me? Have you been paying attention to the whole DRM hysteria with Windows Media PLayer? Do you think Microsoft, of all people, would disable region encoding? MS is four-square in the regional control camp, both for games and media.
• Focus on getting better games. That is in direct conflict with your first point. Hentai games? Are you serious? Look at the hoohaw raised about that BMX title with bare breasts in it! Do you honestly think MS is going to go for Hentai? Be realisitc.
• Microsoft needs to switch to AMD or Transmeta chips. They can't. Xboxes are not PCs. The specs can not be changed. Ever. Every Xbox must have (within very narrow tolerances) the exact same perfomrance as every other unit. That is the strength of the console: the fixed platform. You make major changes to such critical systems as the CPU and you screw the pooch in very serious ways. And as someone else ointed out, AMD chips are hotter than Intel and Transmeta (and VIA) chips do not have the same horsepower.

What Microsoft needs to do is light some big bonfires under the asses of some of their developers to get their shit together and get their games out. Malice is a year late and other anticipated titles will be missing this holiday season.

MS recently started a new bundle of an XBox, JSRF , Controller S and the DVD remote for US $250.00 (or very close to that) and sales have already jumped.

Re:How to make the Xbox a success

[binaryDigit]

Actually I was referring to cpu's in the class that are being used by the respective game units. A 800mhz PIII uses significantly less juice than an 800Mhz Athlon. Yes, AMD was finally able to turn the tables on Intel in the wattage wars, but that was relatively recent and only above 1.4ghz. The original poster mentioned Transmeta, by which one can assume that we are not talking about 2.4ghz processors here.

Re:How to make the Xbox a success

[LordZardoz]

"Isn't this bucking the trend? Aren't games systems moving towards ever more powerful graphics subsystems with modest increases in cpu performance."

Actually, the PS2 does not rely on the CPU for its graphics performance. It relys on a dedicated bit of hardware that can perform blindingly fast Vector Ops (VU0 and VU1), and insane memory bandwidth to move data. VU0 and VU1, however, do not have any branching instructions, and you typcially manipulate it indirectly. I assume that the Nintendo Gamecube is simular to this, and the X-Box uses nVIDIA's Ge-Force Technology to handle transform and lighting.

Most consoles are not really CPU limited any longer, its more of an issue of how much 'bandwidth' they have for processing geometry.

END COMMMUNICATION

Re:How to make the Xbox a success

[binaryDigit]

Actually your example just validated my point. That game systems are not as cpu bound, so manufacturers are focusing on making the gpu faster with only incremental increases in cpu performance.

I personally think (hope) this trend will slow as consoles are required to perform more game processing vs graphics processing. I'd love more time and thought (and cycles) to go into game logic and AI (e.g. sports games) and a heck of a lot less in graphics. I know that fancy graphics sells consoles, but gameplay is being left in the dust in many cases.

Re:How to make the Xbox a success

[Babbster]

MS recently started a new bundle of an XBox, JSRF , Controller S and the DVD remote for US $250.00 (or very close to that) and sales have already jumped.

Not to nitpick, but it's actually [a penny or nickel under] $200. Like here for example. :)

Re:The reason...

[rampant mac]

"If you want to run Itunes you have to buy a 3,000$ computer."

That's odd...

The $300 iMac I bought off eBay plays iTunes. :)

Actuallly, $177M isn't that bad

[joeflies]

Microsoft already said they were spending $500M in marketing ALONE for xbox in the first year. Losing $177M in 3 months isn't all that bad, because it means that out of all the exhorbinant money they spent, they still only lost $177M which isn't an insane number given the insanity of spending $500M in marketing (a sunk money used for demand generation).

I expect that they will scale back their marketing a LOT as soon as they proliferate a base number of boxes, which was their entire objective anyways.

Besides, Microsoft was already planning for first year loses so it isn't like that this wasn't forseen.

Re:Actuallly, $177M isn't that bad

[Yankovic]

Mod this parent up... even simple math says that without the PR says they're more than $300 M in the black! That's pretty phenomenal for a box that's been out for just over 1 year (as of today!). This is actually amazingly good, not bad.

Re:Actuallly, $177M isn't that bad

[skeedlelee]

12 months in a year dude

$500M for 1st yr / 4 quarters
$125M for advertising in Q3
$177M total lost for Q3...

without PR, still $52M in the red...

Dunno that math seems pretty simple :)

I agree though, if most their loss is from PR, then they're not doing all that bad. Not even in the noise, considering what 3.5B from software sales. From the article though, it sounds like this is including profits from their Xbox game sales as well, not just losses from selling the console at below cost.

You mean until they break the competition..

[nurb432]

"Microsoft are said to be prepared to spend $2 billion funding Xbox live over the next five years, suggesting it will be some time before the home entertainment division break into the black."

Must be nice to flood a market, and push out all the existing competition, thats the advantage of a monopoly that has no bonuds, branching out into other markets, to do the same practices that worked so well before..

Re:Sigh....

[Bohnanza]

When did they start charging for IE?

That's right - IE is included "Free" with your $299 licence for Windows XP.

How Sad

[VividU]

How sad that on the day Microsoft launches Xbox Live, we have a story about how much money MS is losing on the Xbox.

The desire among the overzelous Linuxites for the Xbox to fail is palpatable at Slashdot. Just look all the posts advising people to buy a Xbox but not buy any games. Just so MS can lose money. Its pathetic and sad.

Go ahead and buy a Xbox, waste your time and install Linux on it. But I dare you not to play Halo on it (Game of the Year and a work of art).

I dare you not to plug in your Cat-5 and fire up Unreal Championship (released Today!). Oh! and when Halo2 is released later late 2003, please do'nt go and buy it. Leave it to the serious gamers.

The Xbox is a great piece of tech. Real gamers know it. Thats why in the states its outselling the GameCube (read linked article above).

Re:How Sad

[Anonymous Coward]

I love the Xbox too! It's like a PC, but more X-treme! And the way that it's black and green, and it makes that "X"? That doesn't make it look like it was designed by a balding 35-yr-old who reads too much Maxim! Nope, it's edgy and hip, and as an 18-34 yr old white male, that's what I love and that's what I buy!

The controllers are "X to the maxx" too! I didn't think a console company would cater to me (my genes actually got spliced with elephant DNA, so I have huge, flat palms and tiny, curvy fingers). Thanks microsoft for showing me the small demographics count too! They normal handed controllers are $10 more, but normal people can hold a job, so they probably can afford it!

Oh yeah, and I love the games!!! Like Halo ,and all those ones that are on the Playstation 2 also, except they come out later and there framerate isn't as good...but that's b/c the lazy developers are Dev'''ing for PS2 first and Xbox second.

And it really is the more powerful console, so it wold win any benchmarkers against the PS/2 or the kiddie Gamecube. My freind said he was getting one of those for Metroid, and I was like, seeya sucker, my xbox will have Doom3! And you know that's gonna need a high framerate!

Re:How Sad

[sehryan]

But I bought a Gamecube. Why? Mario, Link, Samus.

Now that Mario and Samus are on the market, and Link is close, you are going to see GC sales come up. Think of it like this: Nintendo is holding strong with Microsoft with the Cube, and it didn't really have any of its title games out at the time. So now you have Xbox online vs. Mario, Samus and Link. Sorry, but GC won with me, and it will win for a lot of others now that those names are out.

Re:How Sad

[geekoid]

S there are no real gamers outside the united states? please.

You and the other 12 serious gamers can have fun with your XBox, it will be a nice door stop next year.

Re:How Sad

[NetJunkie]

Just don't try to play Linux AND play on Live. They blocked mod chipped Xboxes.

Re:How Sad

[Frac]

The Xbox is a great piece of tech. Real gamers know it. Thats why in the states its outselling the GameCube

Yeah, all those fake gamers in Japan and Europe, go back to your hole!

Windows is a great piece of tech. Real PC users know it. Thats why in the states its outselling Linux.

(tongue in cheek)

Re:How Sad

[caveat]

halo...it's a good game. it looks phenomenal and plays well, i'm not going to argue that it isn't a fine piece of softare. butit's really just another FPS, the latest installment in the endless string of shooters to have come down the pike in the last few years. now...grand theft auto 3 and vice city, those are truly amazing games; in fact i'd much rather call them "works of art" than halo. halo is a godd diversion for a bored night, lights and glitter and explostions, but i don't find it anywhere nearly as satifying and immersive as the grand theft auto series. i hate to say it, but newsweek was really right - rockstar has invented a whole new paradigm for what video games are and can be, and i'm perfectly happy sticking with my PS2 as long as these really killer apps come out for it.
(actually, i sold my xbox and all two games i had for it - i wanted the money to buy GTAvc and SOCOM navy seals...both much better games than halo IMHO. i can deal with a graphics hit for really quality, innovative software.)

Re:How Sad

[fferreres]

Maybe we should buy the X-Box AND halo, and nothing else. It's probably also true Microsoft had to pay a huge price for Halo too, so that they CANT sell it (unless it becomes an old game) to other console makers.

Re:How Sad

[0x0d0a]

You know, there are a lot of well-founded complaints you can make about the X-Box, but Halo not having excellent graphics is definitely not one of them. Halo has phenomonal graphics.

Re:How Sad

[lfourrier]

Perhaps some day I'll buy a Xbox, when I'm sure linux can boot on an unmodified one.
He!, I need a silent inexpensive web server.
As for games, no time for them.

Losses are larger than 2 Billion over 5 years

[bryanbrunton]

The 2 billion over 5 years was the initial projected loss. I imagine this was the loss figure that was presented to Gates and Ballmer so that the project could get an approval.

They have since upped the loss projects to 2 billion over the first two years of the project. See:

http://www.msnbc.com/news/772001.asp?0si=-

The XBox is classic monopoly leverage at work. Use the revenue from the desktop monopoly to dump product on an emerging market and attempt to control it.

I suggest boycotting Microsoft and purchasing a GameCube or PS2.

Re:Losses are larger than 2 Billion over 5 years

[donutello]

The XBox is classic monopoly leverage at work. Use the revenue from the desktop monopoly to dump product on an emerging market and attempt to control it

No, you moron. That is NOT monopoly leverage. Monopoly leverage is when you use your position as a monopolist to gain advantage in another area that you wouldn't have been able to had you not been a monopolist.

E.g. if Standard Oil only sold their oil at gas pumps they owned. They wouldn't be able to do it unless they were a monopoly because then other companies would be able to buy their gas elsewhere.

Using the money is NOT considered monopoly leverage because the money is not considered ill-gotten since monopolies are not illegal. So it doesn't matter that there is a monopoly in one area since that has no impact whatsoever on the other (as long as the money is still being made in the same quantities).

Re:Losses are larger than 2 Billion over 5 years

[bryanbrunton]

That is NOT monopoly leverage.

No, you moron. I am well aware of the widely held legal definition of monopoly leverage.

I simply don't buy into that definition. I simply define more broadly. And no, I don't deem this worthly of anti-trust action. I do deem it worthy of boycott.

Scum like you usually don't have a problem with giving your money to criminal organizations. I do.

Re:Losses are larger than 2 Billion over 5 years

[donutello]

Seems like you have a problem with the English language. Monopoloy leverage has a very specific meaning. The way you used it is NOT what it means. Call it what you want to, but it's not what the term means.

Scum like you usually don't have a problem with giving your money to criminal organizations. I do.


Again, Microsofts behaviour was NOT criminal. There is a definition for the word criminal and monopoly abuse is not included in that definition.

It's hard to argue with idiots who don't understand the meanings of the words they're using so I won't try anymore. If you expect any respect in intellectual society, lookup word definitions and use them correctly.

Re:Only $177m? Who cares?

[xirus]

I'm surprised that's even legal?!
Even if that's not a lot of money for MS, in Belgium it's forbidden to sell products for less money than you needed to produce it...
It's unfair competition.
If they put Playstation and Nintendo out of business because they don't have the money to use this trick, some American judge should finally see what MS is doing and give them a REAL punishment...

IANAASCM - I am not an accountant, so correct me.

[teamhasnoi]

buuuuuut...can't they write that loss off? I read somewhere that Bill and his Co. don't pay much for taxes (say in proportion to a /. reader), doesn't this mean that the Gov will refund the lost $$$? So in other words, we are still paying MS for X-Boxen?

If I am wrong, please tell me. I have an oogy feeling about it.

Re:The reason...

[Tuzanor]

Do you really think enough XBoxes were sold for linux hackers that it would actually undercut Microsoft that much? Most of their losses are probably from MOD chips (once you have those installed you don't have to pay for games and Microsoft loses out on licensing) and the expensive R&D costs of starting in this market from scratch. Nintendo is really the only company immune (right now) as they use completely proprietary discs.

Doesn't take a monopoly to invest lots of money

[Plasmic]

Are you joking? Many companies invest hundreds of million dollars to build a product, take it to market, and scale it. Look at projects like Sprint's Broadband Wireless Group and their national ISP build-out to companies laying dark fiber across the country and around the world -- huge capital investment before they see any ROI.

Re:Doesn't take a monopoly to invest lots of money

[Reality Master 101]

Wrong. I'm saying the government shouldn't subsidize project losses in a profitable company. The full $177m should come out of MS's piggy banks, and I'd bet MS isn't paying much.

You're missing the bigger picture here. I'm assuming that you're referring to be able to write off losses from taxes (which is the government letting the people KEEP our money, not the government giving back money, subtle but important difference). The purpose of writing off losses is to promote economic growth.

You seem to have some need to punish success, but the purpose of government is to serve the people, INCLUDING Microsoft. If Microsoft is successful with XBox, that means more American jobs are created at the expense of jobs in Japan. This is exactly what the American government should be doing.

Re:Doesn't take a monopoly to invest lots of money

[Reality Master 101]

I object to the American populace losing ~$100M of tax money from Microsoft because Microsoft purposefully and deliberately priced the Xbox so low they knew they would have this loss.

Look at from a longer-term view. Microsoft does not intend to lose money forever. They want the books to be positive at the end of the day. The government allowing Microsoft to deduct losses now is an attempt to help Microsoft to become profitable in the future. Profitable in the future means revenues to the government. It doesn't do the government any good if they kill companies in the start-up phases before they get a chance to produce taxes.

$100M could do a lot towards fixing our schools so there aren't 55 kids in a kindergarden class. It's a start...

Two things to say about this:

1) It wouldn't do anything for the schools, since this is mostly federal taxes. Schools are locally financed (although, the feds have been sticking their nose more and more where they shouldn't lately)

2) I'd rather have Microsoft grow and create jobs for the parents of the children, rather than have the government take MORE of our money. The government has more than enough money to fix the schools. Insist on efficiency, not higher taxes.

Re:Doesn't take a monopoly to invest lots of money

[droopus]

"I'm Fred. I open a coffee shop next to Dunkin Donuts. I sell donuts and coffee at a loss to compete with the market leader. I lose 177,000 dollars in a year. I don't have to pay taxes on that money since I didn't make any. However, uncle sam doesn't *give* me money because I lost 177 million. "

But if Fred's Coffee Shop is simply a division of the "Fred's Monopolistic Hamburgers" chain that had a profit of $5 billion last year, Fred can indeed deduct the $177 millon from the taxes he has to pay on his wildly successful hamburger chain, therefore reducing his overall tax bill.

MS's strategy to initially lose money on the xbox was a sneaky way for them to save millions in taxes, and essentially get entities who would have benefited from those taxes to basically pay for xbox first -year deployment. Hm.

Now I'm hungry. Thanks a lot.

Re:Doesn't take a monopoly to invest lots of money

[IamTheRealMike]

The government allowing Microsoft to deduct losses now is an attempt to help Microsoft to become profitable in the future. Profitable in the future means revenues to the government. It doesn't do the government any good if they kill companies in the start-up phases before they get a chance to produce taxes.

That's right in a general sense, but as Microsoft doesn't pay any income tax, for reasons that can be found elsewhere so I won't go into here, the US government arguably loses money due to Microsoft as they spend tax dollars on Windows and Office licenses.

Re:Doesn't take a monopoly to invest lots of money

[Daetrin]

2) I'd rather have Microsoft grow and create jobs for the parents of the children, rather than have the government take MORE of our money. The government has more than enough money to fix the schools. Insist on efficiency, not higher taxes.

Gee, i'm sure glad Microsoft will be around to take care of us in the future. Come on! Microsoft has thousands of temp workers to mass produce code so they can avoid paying for benefits. You think with profits of multiple billions per year they could afford to pay benefits for a few thousand more workers. Furthermore, about one third of Microsoft's employees aren't even in the USA.

If Microsoft found a way to replace all their workers with trained monkeys, they wouldn't hesitate an instant. Believing that Microsoft is somehow more concerned about our welfare than the government or that Microsoft becoming more successfull will result in benefits to the average american is ludicrous.

Is this really frontpage news?

[solostring]

Is this really frontpage news?

After all, M$ has repeatedly said that it is expecting to lose $2billion over the next few years, and has had to drop the prices od the unit a couple of times since its launch to shift the units. Plus, with the extra costs of constantly remodifiying the boxes to stop the Xbox-linux crowd etc. etc.

Microsoft has taken a big gamble by putting the amount of money that it has into the Xbox, and hopes that its unit will the THE home entertainment system of the future. It is common knowledge that they are banking on losing money selling the units to recoup their losses with the sales of games, but with the recent winning battles by the Xbox-Linux crowd, and M$ losing every 'closed box DRM encryption' battle so far, maybe its a gamble that will seriously cripple the company in the future....

Its going to be interesting to see how this turns out :)

Where's the line?

[back_pages]

This is a legitimate question from an aspiring non-lawyer...

It's my understanding that the anti-trust laws are in place not to prevent monopolies, but to prevent companies with monopolies from using that monopoly to muscle in to other markets. I'm fully aware that this isn't the legal definition, but I've always heard it explained this way.

It's a clear situation when BrandX widgets have total market dominance, and suddenly they only accept BrandX replacement fillers. That's a case of BrandX obsoleting all the competing replacement firms.

What if BrandX has $30 billion in loose change resources and can afford to sink the competition by writing off hugely unsuccessful business ventures? Is this not precisely the type of anti-competitive action the anti-trust laws are supposed to prevent? Why is one company, leveraged by its monopoly in one market, allowed to compete with a business model in a market that would bankrupt all the competition?

Is there some aspect of the anti-trust laws that elude me? Is there some other principle at play? I'm seriously inquiring, it would seem to me that this is a flagrant, blatant, and overt abuse of Microsoft's monopoly, and they own up to doing it in writing.

Re:Where's the line?

[nagora]

Is there some aspect of the anti-trust laws that elude me? Is there some other principle at play?

The difference here is that selling Xboxes at a loss is standard industry practice: the PS2 and GameCube are both sold at a loss. If MS sold the games at a loss too, then you would have a valid point under the law, IMO, but as long as they're playing by the same rules as everyone else it would be difficult to bring a case.

TWW

Re:Where's the line?

[bryanbrunton]

the PS2 and GameCube are both sold at a loss
And your proof that the PS2 and GameCube are sold at a loss is where?

Rumor is that the PS2 and GameCube are both currently breaking even or making a profit. Just look at the GameCube: the machine was designed to be produced cheaply. The XBox on the other hand will never be produced (as) cheaply. Microsoft should just count itself lucky that Intel decided to flog Celerons for the XBox on a zero profit model just to spite AMD.

When a "Loss" is not a "Loss"...

[rocjoe71]

Between losing money in the real world vs. the business world is a very, very big gap.

A "loss" for a business might just mean they didn't gross as much money as they promised their shareholders. Sometimes "loss" means "profits are down from the same time last year"-- but there are still profits to be had, just not *as much*.

I'm leaning towards the explanation that Microsoft is always making money, just how much money goes up or down and where their loss/gain is calculated against some break even point that we are not made aware of.

Re:When a "Loss" is not a "Loss"...

[rocjoe71]

Yes, it is nonsense, twaddle and B.S.

The point is a loss in business terms is highly subjective and they rarely qualify the meaning of loss in words-- You have to look at the numbers they provide to really know for sure.

MS will drive out Nintendo and Sony? Hah!

[gosand]

They'll chip away at Sony and Nintendo's profits until even these successful companies can't make a profit.

This will NOT happen. That is like saying that MacOS will drive Windows off the desktop.

Sony is HUGE, and they could probably fight MS toe-to-toe, especially in the console market. Nintendo is the 800 lb gorilla when it comes to game consoles, with Sony weighing in at a hefty 700 lbs. Microsoft is a screeching, shit-flinging chimpanzee.

Re:Sigh....

[dildatron]

They actgually make an IE for HPUX and Solaris for free (I've never used the one on Solaris, but IE for HPUX sucks donkey balls.) Mozilla on either platform is MUCH better.

My point was that you don't HAVE to buy windows to have IE - you can get an outdated crappy version for free on a few other OSes!

Re:Sigh....

[Big Mark]

"make those things appear everywhere"

Yes. If all I had to pay for was the games and EXTRA accessories (I'm not paying for the first two controllers, power supplies etc) I'd be first in line for a freebie.

Instead, I'd rather spend the US$ xyz they're currently charging on a GeForce4.

Re:Only $177m? Who cares?

[ceejayoz]

AFAIK it's perfectly legal here.

They make a huge profit on the games, so maybe that's a loophole or something.

antitrust

[subgeek]

xbox consoles have always been sold at a loss. the more they sell, the more they lose.

ianal, but i remember some sort of antitrust law that says you can't sell at a loss to force out your competition. to be able to do so just proves that you are using your existing dominance in one market to expand into another.

so if MS has never made an attempt to make money on the consoles, it doesn't take a whole lot of imagination to think it just could be possible that losing money was part of the plan from the beginning. they need to lose money in order to sell the console at the same price as a ps2. but then they can put more graphics power into it because a loss is ok. we laughed in the beginning when we heard that xbox was sold at $100 loss. but somehow i don't think that ever worried MS.

plus this is a loss for the division that makes the consoles, not necessarily the same division that collects royalties from game sales.

i'd love to see a huge xbox cluster running linux. cheap hardware and it has a reverse windows tax.

It's not all good news

[spakka]

See this story which says Xbox has overtaken GameCube, at least in UK.

Market Distortion

[4of12]

As the story at the Register points out, any other business with ventures losing money like Xbox and MSN would kill them off as clearly bad business decisions.

A company willing and able to sustain hundreds of millions of dollars poured down a holes that are peripherally related to their core business of PC software, for years at a time, is crazy.

A company willing and able to do that against large, established business like AOL/Time Warner and Sony is downright scary.

A normal business, run to increase profits, would look at the margins on Office and Windows and simply jack up their prices. It's an iron-clad guarantee to increase profits at MSFT. There is virtually zero price elasticity of demand for Windows and Office and MSFT management owes it to their shareholders to optimize profits by taking advantage of their stranglehold on the market.

[Note: I don't own any MSFT.]

Re:Market Distortion

[donutello]

As the story at the Register [theregister.co.uk] points out, any other business with ventures losing money like Xbox and MSN would kill them off as clearly bad business decisions.

You mean like RHAT or LNUX or AOL?

Lots of ventures make losses in their first few years. That's considered an investment anticipating a return in the future.

A normal business, run to increase profits, would look at the margins on Office and Windows and simply jack up their prices. It's an iron-clad guarantee to increase profits at MSFT. There is virtually zero price elasticity of demand [mintercreek.com] for Windows and Office

Do you have analysis backing up that claim? Or did you just make it up? With all the people looking at OpenOffice and Linux right now, do you seriously believe they could increase prices without seeing demand fall off?

Re:Market Distortion

[Zathrus]

any other business with ventures losing money like Xbox and MSN would kill them off as clearly bad business decisions

If they were short-sighted, sure. Microsoft is not short-sighted. They very much have a long term plan, and know that short-term sacrifices are often necessary to realize long term gain.

Microsoft believes that, long-term, Internet access and console gaming are going to be high-profit ventures. I question the first (it's commodity), but I think they're right on the second. Sony poured tons of money into the PS1 before it became profitable. And they were up against corporations like Nintendo and Sega, both of which have a much longer history in gaming and had established markets. Sega is now out of the market and Nintendo has been floundering recently. Sony's Playstation division is now hugely profitable. But by your logic they should have ditched after the first year since they were losing so much money.

Sony shareholders should be damned glad you're not senior management.

Microsoft shareholders are damn glad too.

A normal business, run to increase profits, would look at the margins on Office and Windows and simply jack up their prices

Uh... they're running at over 80% profit right now. They did just effectively jack up prices with the last licensing agreement for corporations. They are now losing business on new sales from Gateway and HP (Office or Works no longer bundled). They are facing increased downside pressure from Linux on the server, primarily due to TCO. So they should raise prices more?

I am a MSFT shareholder. And I am damn glad you aren't on the board. Frankly, I'd like to know if you have influential decisions on any other corporations, simply so I can make sure I don't own any of their stock.

Re:Market Distortion

[bmajik]

the register is dumb. also, you are dumb.

the spending on xbox is an investment. if it pays off, microsoft will have a few things

1) a huge source of licensing revenue
2) a huge source of recurring service revenue (xbox live)
3) a presence in the living room (this is _huge_)
4) another platform to provide best-of-breed tools, support, etc for

Microsoft's business is not "PC software". It's software. And its migrating from software pure-play to software and software services. XBox gives them a platform to sell first party software, and to collect platform licensing fees for 3rd party titles. It also allows them to adapt software tools to an additional platform and charge for _those_ as well.

If MS jacked up the prices of windows and office, everyone would yell bloody murder (just like they do anyway). cranking up prices on products and calling them "done" is how you lose. investing in R&D is how you win. xbox is a big investment and if it pays off it will do so handsomely. if it doesn't, well, there have been bad investments before. as long as more investments pay off than tank, things will continue to be just peachy in redmond.

Re:Market Distortion

[miffo.swe]

You should be ashamed of yourselves. Does your mother know about theese MSFT thingies you own?

Re:The reason...

[IIRCAFAIKIANAL]

The simple answer is: Linux has killed the X-box sales.

Yes. Of course. That's the reason. Everybody that bought an XBox hacked it to run Linux instead of buying games.

Maybe they lost money because:
1) Couldn't break into key Japanese market
2) Expensive, generic hardware that lends itself to piracy (far more likely than, say, Linux use)
3) Ugly machine, shitty controllers (this stuff counts in the console market)
4) They had to pay to get third party developers (ie/ Bungie)
5) They wanted to combine PCs and consoles (in a fashion) but failed miserably on both counts

Obviously, they went in knowing they would lose money. They are losing money in other sectors too (ie/ MSN).

Does this make sense though

[greechneb]

If they spent $500 million on marketing, that would have bought approximately 2 million machines completely. Why not give out a million and a half machines free, then you have a market share already, and then you get games guaranteed. Of course I'm not in marketing, but if somebody gave me a free game system, I'd be very willing to buy games (probably a lot) to play on it.

Re:Only $177m? Who cares?

[cheeseSource]

Not quite sure about Nintendo but Sony sells at a loss as well. It's part of their bus. plan. All the money is "earned" from the software.

Look at the parts that are making money...

[BeBoxer]

What's truly amazing is the amount of money they are making in their core OS/Office arena. From The Register article, I've pulled the numbers for Client OS, Server OS, and Office. Lets lump all three together, which seems fair. Especially since the Client and Server OS code bases have been merged with the advent of XP.

First, revene (all amounts in billions):

Client: 2.89
Server: 1.52
Office: 2.38
------------
Total : 6.79

Operating Income:
Client: 2.48
Server: 0.52
Office: 1.88
------------
Total : 4.88

Now, I'm not an MBA so I'm probably doing the math wrong, but doesn't that indicate a profit margin of 4.88/6.79 = 71.8%? At a time when pretty much the entire industry is bleeding red? Rockefeller and Hearst would be proud. I swear that Microsoft blows as much money as possible on their loser ventures like MSN just to cover up the obscene profits they make on Windows and Office.

Re:Look at the parts that are making money...

[BeBoxer]

So the term "profit margin" refers to profit as a percentage of cost, as opposed to a percentage of revenue? Wow. That really does make it an obscene amount of money. And to think that they still feel the need to raise prices.

Re:Only $177m? Who cares?

[timothy_m_smith]

My understanding is that the rules in Belgium apply to products which are also produced in Belgium. So, if I sold cheese at a loss the law would apply. However, since the consoles are designed and produced in other nations and have no direct competitors in Belgium (or anywhere else int he EU for that matter) that the law would not apply.

Less than I thought, but still bad...

[thatguywhoiam]

... coming from the point-of-view that losing money is always bad. Of course, it's an expense, as another poster pointed out. Nothing unexpected.

It's bad from a PR perspective. It's bad considering that Nintendo and Sony are now actually turning a profit on the consoles, a slim one but a profit nonetheless. Sony has managed to fit the entire Emotion Engine + CPU + sundry other parts onto a single chip, which reduces cost significantly. I'm not sure how Nintendo has pulled it off.

Xbox Live is doing better than expected, but the total numbers are pretty intimidating for MS. Last I checked (2 weeks ago), the score is:

- approximately 8 million GameCubes
- approximately 10 million XBoxen
- approximately 52 million PlayStation 2s

By those numbers, it's safe to say Sony has wrapped up this round, if you're looking for a 'winner'. 5X the market share is too compelling for game designers. The games go where the customers are.

[tangent]

I like the Xbox, even if it is a little limited in scope. There's a completely different philosophy at work at Sony's computer entertainment division that I don't think MS really understands. The Xbox is basically a kickass 3D sandbox. The PS2 is a super-flexible games machine; by this I mean that the PS2 is oriented for all kinds of games, not just 3D. The PMUs for example, can generate procedural textures on the fly. Take the oft-lamented VRAM issue. VRAM holds lots of shiny textures. But what if you are generating textures from (basically) pure math? No texture overhead. (Bryce 3D, to name a weird example, gets away almost entirely without using graphical textures.)

And now we see Sony moving fast to innovate in areas that Microsoft basically can't... namely, they've gone and asked IBM for a radically different kind of chip. MS is in no position to do this, as part of their whole pitch is the fact that it's a PC in a box, with MS's x86 programming tools.

[/tangent]

Re:Less than I thought, but still bad...

[SkankhodBeeblebrox]

And now we see Sony moving fast to innovate in areas that Microsoft basically can't... namely, they've gone and asked IBM for a radically different kind of chip.

You don't think MS could go to IBM, Intel, AMD or any other manufacturer and wave money in their faces, and get them to design a new processor from the ground up?? And while I'm responding to your post, how is Sony going to IBM an example of *sony* innovating? IBM is doing all the grunt-work...

"Money talks..."

Re:Less than I thought, but still bad...

[thatguywhoiam]

You don't think MS could go to IBM, Intel, AMD or any other manufacturer and wave money in their faces, and get them to design a new processor from the ground up?? And while I'm responding to your post, how is Sony going to IBM an example of *sony* innovating? IBM is doing all the grunt-work...

Sure, MS could ask for a new chip, but they won't. As I mentioned in the original post, part of their leverage is the fact that DirectX and other specific x86-related development environments port over to the XBox so easily. Developers, developers, dev... [ducks]

Sony is cooperating with IBM on the chip design. IBM has the fab plants necessary to make Cell chips in the amounts Sony needs. IBM can leverage some of Sony's R&D. Seems like innovation to me.

Besides, they're not going to turn away from all the legwork they've done to get Intel and AMD 'Palladiumizing' their CPUs. Particularly if the next XBox is a 'convergence' device that downloads movies and other media. The temptation to crack into what is essentially a PC will be great for many users.

Re:Less than I thought, but still bad...

[spectecjr]

And now we see Sony moving fast to innovate in areas that Microsoft basically can't... namely, they've gone and asked IBM for a radically different kind of chip. MS is in no position to do this, as part of their whole pitch is the fact that it's a PC in a box, with MS's x86 programming tools

I bet you believed that story which said the PS3 was going to be a SETI@HOME-like system too.

Simon

Re:Less than I thought, but still bad...

[thatguywhoiam]

I bet you believed that story which said the PS3 was going to be a SETI@HOME-like system too.

You're damn right I did. If by 'seti@home-like' you mean distributed computing. It was widely reported by many.

Re:Less than I thought, but still bad...

[spectecjr]

You're damn right I did. If by 'seti@home-like' you mean distributed computing. It was widely [redherring.com] reported [com.com] by many [theregister.co.uk].

Yes, I mean distributed computing.

And so what if it was widely reported? That doesn't make it realistic or any more possible than if it was only reported on www.iamaclown.com.

60 frames a second of graphics is what you should expect from a console. That's a new frame every 16ms.

It takes me 10ms just for a packet to get out of the building I work in. So there's no way of realistically doing distributed processing on a console system unless everyone's running 10Gbit fiber. Just won't happen. And then you're limited by the speed of light after that.

Streaming data, you say? Games are interactive. Only certain very specific classes of games would work like that.

And what happens if you don't want to leave your PS3 on all the time? Or everyone decides to play the games at once?

Answer: It's pie in the sky bullcrap. I'm not surprised that The Register swallowed it -- it's not like they know anything about technology at all.

Simon

Re:XBox Linux

[ceejayoz]

I would like to buy an XBox just to fsck it to microsoft

The idiocy of that statement has me just about falling out of my chair with laughter.

Re:500lbs Gorilla ...

[cygnus]

Yea, I'm waiting for them to go into fast food. Give McDonald's a run for their money.

Just think, a free 2-day Serial Key to MS-Office with every BillyBurger sold!

or maybe they'll pull some sort of hailstorm "food rental" service. you'll have to log into passport to unlock your mouth, and then puke up your food if you don't pay the recurring fees.

Article is wrong

[Yankovic]

According to the 10-Q filing, the article is wrong. The $177M net loss is for all of home and entertainment, only a subset of which is Xbox. In fact, comparing it to last year, where the losses were at $68 M and there was NO xbox, you can conclude that total losses resulting from xbox activities would not be greater than $109 M, and in fact probably even less than that. There are many other things in the home and entertainment division such as Windows Media Center PC, UltimateTV, MSN TV, and so on, many of which were probably not profitable, and contributed to the overall losses.

Re:Article is wrong

[donutello]

You are right that $177M is not just on the XBOX. You are wrong in concluding that the money is no more than $68M, however.

I believe the XBOX was in development last year. So while nothing was being sold, they still had to pay the employees, maintain/invest in equipment, facilities, etc. and spend money on marketing, etc.

Without having a further breakdown, we can't conclude much about how much money exactly was lost on the XBOX.

Re:Article is wrong

[Salsaman]

There is a mistake in your logic; you are assuming that the the other components of 'home and entertainment' made the same returns this year as last year.

If those returns were higher, then xbox could've lost more than $68 M and still produce the same overall loss.

Re:Article is wrong

[fferreres]

...you can conclude that total losses resulting from xbox activities would not be greater than $109 M

Why so? They could be losing 300 on the XBox and compensating with profits on the rest of the division. It's not rare to see great differences in year to year profits for this kind of divisions.

Quick Turn of Profit.

[superdan2k]

I know from past stories that Iraq is in the market for game consoles. I say that Bill should lobby the UN to allow him to open the Iraqi game console market. Hell, they should just force the entire country to adopt Windows on all their hardware. The whole place would shut down inside two days. War over.

Re:The reason...

[ceejayoz]

The simple answer is: Linux has killed the X-box sales.

Yeah, 'cause MS is really going to feel the financial hit from the 50 people who bought X-boxes to run Linux on. The $5000 they lost will break their morale, I suppose.

Re:What else can I say but ...

[MCMLXXVI]

Actually you are incorrect. If Linux really took off on it the loses would be closer to double that.
They lose around 100$ a unit. Imagine a 100 or 200 unit rendering farm. That's a 10k lose for Microsoft. Multiply this by the amount of cheap businesses that would see this as a viable option.

Re:Business Plan...

[Nerant]

6) Realise that "4)" isn't gonna happen.

Re:Only $177m? Who cares?

[xirus]

Yes, I know that, but maybe the US should implement such a law...

If a huge company like that just spends tons of money on a certain product, and sells it a lot cheaper than it's competitors (who need to make profit of it) the competitors will be out of bussines. Wich isn't only bad because a lot of people will loose their job, but this way the big company can make his product a lot more expensive and there would be no need to improve it significantly...

Re:Playing for the long term

[FatherOfONe]

First of all Saddam shouldn't you be worried about your country being blown off the earth, rather than video game consoles...

Second, if you developed games would you sign a deal to ONLY develop for the Xbox. Hmmm give up 95% market share instantly! You would have to pay that development team a ton!

Here is the problem for old Microsoft.

Their machine is close to a PC. However most modern PC's are faster and all of them have better monitors. The developers who develop games for the PC can port their games over with little trouble, BUT (and this is a HUGE but), those developers are the ones who generally target the PC. So the people like me who would consider an Xbox but have a PC will just buy the PC game. Why do I need an Xbox? All the games look better on the PC and generally play much better and the game selection is MUCH better.

Unreal Tournament 200x on your TV or on a 20" 1280X1024 monitor? Yes the Mech game looks good, but does anyone believe that one won't be released for the PC that blows it away?

This contrast Nintendo and somewhat Sony. They have always developed games that are console based. Their games generally don't port that well to a PC (some do). I don't own a Nintendo Game Cube, but I am considering it because their games look fun. What I like to call "Living Room Fun", in that their games are made so that the whole family can enjoy them. Will those games ever be ported to my PC? Maby, but it will be a long while, and they probably won't play as well and lastly my whole family doesn't want to sit in front of a computer.

I own a PS2 and can't help but think what if Sony wins the console war this year at Christmass. It will all but be over. Heck even if they break even with Microsoft and Nintendo they win. I can't help but think that every month the PS2 keeps outselling the GC and Xbox is another month Sony can refine the PS3.

Oh sure they're selling consoles...

[Mantrid]

Oh sure they're selling consoles at the nice, cheap price *but*... ...does X-Box have Vice City?

Despite Microsoft's attempts Sony is really keeping its grip on the console market. People are still choosing PS2 over the technically superior X-Box - why? Because PS2 has the killer apps, and that's really what counts.

Microsoft's FULL xbox plan

[Anonymous Coward]

This is all part of MS's plan. The goal is to force Nintendo and Sony to drop prices until they go out of business, then raise the prices up again. The problem they're running into is that they CANNOT beat Nintendo and Sony with a mini-PC. It has to be distinct, otherwise when they raise the price people will ignore it and buy PCs. That's why they keep emphasizing that it's not a PC and that's why they won't publish titles (even award winning ones!) that started out as PC games unless changes and upgrades are made for the console. They want to harness the console|computer dichotomy for monetary gain (i.e. same hardware, more money because it can play games with the "console" DRM marking. As long as customers still feel there's a PC/console distinction, this won't raise any price fixing red flags).

And they WILL sink money into it. 15 billion dollars and four generations of console machines? Sure! Each iteration is cheaper (since they have more R&D) and each one teaches them more about how to cut price without screwing themselves.

In 10 years we'll look back and wonder why we let MS buy all the best console developers, use their money to force everyone else out of the market, and the practice absurd price fixing. The answer? "It looked like they were screwing up! We didn't know it was a plan!"

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:MS will drive out Nintendo and Sony? Hah!

[binaryDigit]

That is like saying that MacOS will drive Windows off the desktop

Not even close. This is like saying that IE will take over the browser market (four years ago). Hey, guess what, they did. Sony is not even in the same league as M$ as far as corporate resources. Not that Sony is a tiny company, obviously, but M$ not only has it's war chest, but they have a monopolistic hold on the OS/Business Suite market that affords them huge quarterly profits (3.5billion, yikes), they don't even have to dip into the warchest if they don't want to. Sony has no such single cash cow to suckle on. Note that Sony's profits for the last quarter were in the $350million range, a full 10% of M$!

Now I'm not saying that Sony can't compete, just that if M$ really, REALLY wanted to, they could easily outlast Sony in a battle of wills. Oh, one other point about M$ and profits, you have to remember that this was profits in a quarter that did NOT see the introduction of new versions of any of their major titles, esp new OS versions.

Re:Only $177m? Who cares?

[timothy_m_smith]

You are missing the point. If I start a company tomorrow it will need some capital to get going. There very, very few businesses that you can go into and start producing and selling immediately. There are even fewer businesses that you can enter and make a profit instantly. Most new businesses lose money for a time while they make capital expenditures and get their product developed and marketed. These new businesses also have to get funding from their founders, investors, family, or whoever. So really, there is not much difference between MS taking a loss in a new market like video game consoles and me starting my own console company and losing money.

That being said, there are laws in the US against price dumping. Price dumping is intentionally undercutting your competition to put them out of business. I believe it is pretty hard to prove. However, in the console market, MS is certainly not undercutting b/c they are still higher priced than Nintendo and the same as Sony. Microsoft has been forced to this price point by competition.

Fair's Fair

[GMFTatsujin]

I have no idea how much money has evaporated due to lost productivity by businesses using MS products that crash left and right.

Hell, the value of man-hours consumed by Solitaire alone must be close to the GNP of your average South American country...
GMFTatsujin

Re:Business Plan...

[stud9920]

6)Invent own, original jokes.

This is a common tactic

[Anonymous Coward]

used by cash-rich companies against cash-poor competitors. There's really nothing unusual about it except that it's Microsoft. Take Blockbuster video and Hollywood video, for example. When they try to crack a new market (region), they basically do the economic equivalent of carpet-bombing. They open stores every TWO BLOCKS in some cases. The reason is: even if there's a mom-n-pop video store only a mile away, they want to make sure you walk/drive past three of their stores before you reach their competitor. If they divert enough customers, their competitor goes out of business. Then, they close down their excess stores, because they've been losing money like crazy by having way too many stores in a small area. But in the long-term, they make money, because without competition, you can charge whatever you want and make it all back.

Much as MS abuses the law in many many other areas, this is just a (shitty) business practice you see every day.

Re:This is a common tactic

[joshua404]

Yes, "cash poor" competitors like SONY and NINTENDO, you mongoloid.

I suppose it also wouldn't penetrate your sloped forehead if I mentioned to you that Sony dropped the price of the PS2 first, would it? Of course not, it might interrupt your mindless bashing session.

Re:Rare may go to WinXP, not GCN

[Anonvmous Coward]

"What makes you think Rare will crawl back to Nintendo? If the Xbox fails, Microsoft could just make Rare develop games for Windows XP."

Pssst: Rare will never develop PC games. They won't be able to sell millions of them. Hundreds of thousands maybe, but not millions.

MS wouldn't suddenly de-value their prize company.

Perspective

[the_gadfly]

Microsoft are said to be prepared to spend $2 billion funding Xbox live over the next five years, suggesting it will be some time before the home entertainment division break into the black."

I don't begrudge people their money and I'm not an anti-corporate type. MS may be evil, but not for simply making money. Still, it's good to put numbers like $2 billion in perspective. The state I live in has about 8 million people. We're facing a budget shortfall (two-year budget, compared to MS's five-year plan) of about $2-3 billion, and people are flipping out -- school funding may be cut, roads might not get fixed or else taxes are going seriously up. One can argue about the reasons -- like government spending way too much already -- and it's not really important to my point. I just wanted to give that figure a context: It's a statewide disaster. Or an investment in making a line of video game hardware successful. Take your pick.

Loss Leader

[nuggz]

Doing something at a loss to get ahead somewhere else is a common plan.

Grocery stores do it on "staples"
Sell bread, eggs, milk, butter really cheap, almost give it away.
Then the consumer might buy other stuff, meat, vegetables, and they end up coming out profitable overall.

Car dealerships might subsidize oil changes to keep you coming back to them for bigger service.

Video game consoles might sell the console below cost because they think they'll make it back in games.

This is standard business practice.

Revenue - Expenses = Profit or Loss
Profit if it is positive, loss if it is negative
This is a simple equation.

Re:Only $177m? Who cares?

[tomhudson]

It's NOT legal if it damages a competitor. Then, it's called dumping.

As far as American law is concerned, there's an ongoing trade dispute over stumpage fees charged by the Canadian government to Canadian softwood producers. The US government has lost in the courts 18 times, but still fights it, arguing that the lower stumpage fees allow Canadian companies to sell lumber at below actual cost, and hurts American producers.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Microsoft has the time to wait out the competition

[MtViewGuy]

However, I don't think Microsoft will fail with XBox.

The reason is simple: Microsoft has US$40+ BILLION in liquid assets. That gives Microsoft more than enough time to wait and watch Sony and/or Nintendo make a marketing misstep and Microsoft will swoop in to take marketshare in a blink of an eye.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Actual quote from Steve Ballmer (Where?!)

[Malic]

Can you cite a reference? Please!? So cool!

Re:Only $177m? Who cares?

[angel'o'sphere]

No its not legal.

America has so called anti dumping laws.

However they get only applied if a non american company tries to sell for dumping prices inside of the US.

E.g. Korean car manufactors selling 30% cheaper than US car manufactors or VCR crafting companies regulary got a punishment import tax.

The US puts taxes at will on any kind of product if they think their own industrie soffers from forreign laws. E.g. genetic manipulated Soja needs to be noted as incridience in european food(by law). Europeans as majority do not buy genetic manipulated food. Feeding animals with genetic manipulated food is not allowed, as it gets to difficult to prove its absence in the final products (like ham). Result: US is threatening europe with a tax war since years just because Soja sales droped in Europe.

However: what is legal and what not, all over the world, is final descided by a US court.

Silly situation.

angel'o'sphere

Worst. Acronym. Ever.

[glenstar]

can't they write that loss off?

I am also not an accountant, but I don't think my accountant would be too pleased with me if I sold products/services for less than they cost me. And, I have serious doubts as to whether the IRS would look kindly at a loss that was created *on purpose*.

Re:Worst. Acronym. Ever.

[vidarh]

I have serious doubt that it would be any of the IRS' business whether or not the loss was created on purpose. Practically any large startup will lose money in their first year or three, and it's certainly standard practice in most countries that such losses are brought forward. In fact, in the case of acquisitions of young startups by more mature companies, such accumulated losses often help bring the price of the startup up, as the aquiring company can often realize tax benefits from it by restructuring their business.

Re:Only $177m? Who cares?

[Iguanaphobic]

As far as American law is concerned, there's an ongoing trade dispute over stumpage fees charged by the Canadian government to Canadian softwood producers. The US government has lost in the courts 18 times, but still fights it, arguing that the lower stumpage fees allow Canadian companies to sell lumber at below actual cost, and hurts American producers.


In British Columbia (A Canadian Province), the stumpage fees go to the government. The government then uses the money to ensure adequate regulation of the companies. Cutblocks get re-planted, streams are protected, roads are deactivated. The problem is that in the US, they have a auction systems for timber. Private landholders auction their lumber from their private land holdings. Not only do they have to do their own re-planting (adding expense) they also require a profit. (Adding more expense)

When you look at the lumber barons who are doing the lobbying in Washington, most are from the southeastern US. They sell inferior quality wood compared to BC softwood. THeir product is also higher cost, mainly because they refused to spend the money to upgrade their mills. So they produce a low grade, high cost product (very labor intensive) that simply cannot compete in the marketplace. The BC mills spent billions upgrading their mills to be highly efficient. Now they are being penalized for their foresight.

Inevitably, whenever a US industry gets into a non-competitive situation where they can't dominate, out come the lawyers and the lobbyists. (steel) The WTO will overturn this tariff. Until then, thousands of workers and business' in British Columbia will suffer.

Did I mention that the average new house in the US is costing $3K-$5K more? They don't tell you that in Businessweek do they?

don't worry- developers aren't flocking to redmond

[SethJohnson]

Microsoft may well be able to eat into Sony's market, since both depend so heavily on third parties

The key obstacle for this to happen is the number of tltles released for a console by third-party developers is based on the number of console units sold. Since xBOx hasn't sold as many consoles as PS2, developers are resistant to dedicating resources to porting their upcoming titles to xBOx. It's a snowballing effect because consumers don't want to buy the console that has fewer titles available. Microsoft has had to take the expensive route of buying companies (Bungie) in order to get killer-app titles like Halo released for its system. The fact that GTA: Vice City just came out for Ps2, but isn't available for xBOx pretty much cut off the air supply for xBOx this holiday season.

Linux is the target ....

[devleopard]

It's obvious that Microsoft is trying to adopt the business philosophies of Linux-based companies in order to better compete with Linux. The idea of losing millions with a slim chance of attaining profitability in the distant future is something that companies like VA Software, Lineo, etc have been very good at.

Re:Only $177m? Who cares?

[blaine]

No, Sony does not and never has sold at a loss. Please stop perpetuating this myth.

Info here.

To sum it up, most people (at this point) believe that Sony still makes at least $50 per console sold, Nintendo is just about breaking even, and Microsoft is still losing at least $70 per console sold. (this is taking into account drops in production prices, drops in sale prices, etc).

Four words...

[RadioheadKid]

Zelda and Mario Kart

The Game Cube is still sleeping, just wait until these franchise games hit the market.

Comment removed

[account_deleted]

Comment removed based on user account deletion

You WILL buy an xbox

[Aqua OS X]

Perhaps not today, perhaps not tommorow... but you WILL buy an xbox.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Big Deal

[angst_ridden_hipster]

It's all an investment.

How much do you think Microsoft lost on Internet Explorer through its first three or four versions?

How much did that end up costing Netscape?

Of course, even taking the dynamics of the bubble into consideration, Sony has much deeper pockets than Netscape ever did...

Did you even read the numbers?

[RatBastard]

Did you look at the numbers? Do you really think that you are going to "fsck it to microsoft" (If you want to say "fuck" then say "fuck", Jesus!) by buying an XBox and running Linux on it? They are reporting a loss of $177,000,000.00 on revenues of over $500,000,000.00 with an estimated department budget in the billions of dollars over the next five years!

You might as well try to kill a blue whale with a Nerf bat for all the good your little act will do.

If you want to buy an XBox because you wan to tuen the worlds most powerfull (spec-wise) console into a crappy (spec-wise) and unubradable PC then have at it. If you want to hack an XBox for the fun of hacking something, go for it. But doing it to "stick it to the Man" is just pathetic.

Why bother. all you are doing is padding their sales numbers and reducing the greater loss they would suffer if that XBox sat unsold in some wearhouse somewhere.

Its working

[sh0rtie]

In the UK the XBOX has now put itself as the number 2 console , ahead of Nintendo's gamecube.

Xbox wins race of the also-rans
http://www.guardian.co.uk/online/comment/story/0,1 2449,840789,00.html

Oh come on

[Have Blue]

EVERYBODY does this, especially Apple. How many times has the "They're supported by hardware sales" argument been invoked against x86 OS X here? How much do you think Apple is losing on the iApps or movie trailer hosting? How many other companies are shelling out for research that won't bear fruit for another few years? This is perfectly normal corporate gambling, except that MS is doing it in the market instead of the lab.

Re:Oh come on

[talks_to_birds]

"The problem with computers is that they do exactly what they are told."

I really hate this damned machine,

sometimes I think I'll kill it.

It never does just what I want,

but only what I tell it.

t_t_b

Myth Alert!

[Abcd1234]

Actually, this is a myth.

Re:Only $177m? Who cares?

[Gaijin42]

Actually, its not legal if the only intent is to damage the competitor, if its just a good marketing strategy, its not illegal.

Additionally, the fact that there is a subscription (XBox live) and accessories involved makes the case more complex. Companies can, will, and has argued successfully that dumping should be determined on the costs of everything the average buyer buys.

But the *real* fun is this:

[Bobzibub]

"Challenges to the Company's Business Model. Since its inception, the Company's business model has been based upon customers agreeing to pay a fee to license software developed and distributed by Microsoft. Under this commercial software development ("CSD") model, software developers bear the costs of converting original ideas into software products through investments in research and development, offsetting these costs with the revenues received from the distribution of their products. The Company believes that the CSD model has had substantial benefits for users of software, allowing them to rely on the expertise of the Company and other software developers that have powerful incentives to develop innovative software that is useful, reliable and compatible with other software and hardware. In recent years, there has been a growing challenge to the CSD model, often referred to as the Open Source movement. Under the Open Source model, software is produced by global "communities" of programmers, and the resulting software and the intellectual property contained therein is licensed to end users at little or no cost. Nonetheless, the popularization of the Open Source movement continues to pose a significant challenge to the Company's business model, including recent efforts by proponents of the Open Source model to convince governments worldwide to mandate the use of Open Source software in their purchase and deployment of software products. To the extent the Open Source model gains increasing market acceptance, sales of the Company's products may decline, the Company may have to reduce the prices it charges for its products, and revenues and operating margins may consequently decline."

bwa ha ha...The monopolist eats their own words.
http://www.sec.gov/Archives/edgar/data/789019/0001 03221002001614/d10q.htm#tx220_6

Cheers,
-b

Re:IANAASCM - I am not an accountant, so correct m

[donutello]

Don't believe the FUD you hear on Slashdot.

Take a look at MSFT's financials. I'm quoting the two relevant lines:

Income Before Tax $2,243,000,000 $4,026,000,000 $3,357,000,000 $1,887,000,000

Income Tax Expense $718,000,000 $1,288,000,000 $1,074,000,000 $604,000,000

Re:XBox Linux

[RatBastard]

1. Your numbers are suspect. Recent estimates place the loss for each console sold at about $40.00 US.
2. They loose even more money, the entire cost of the unit, for every XBox rotting unsold in a wearhouse.

Save your money to buy something you actually want rather than using it to reduce The Beasts losses.

MotoGP

[Christopher Bibbs]

While not an Xbox exculsive, it is definately a great game. It was part of the XBox Live Beta and it quickly became a favorite amoung the testers. Whatever system you have, you must play this game. Online is ten times better than solo.

After having played online on a PC and online on a console, I think its safe to say that broadband console games will put gamers into heaven. Forget PC games and forget dial-up (sorry, but its true).

Here's the Crime!

[n-baxley]

Here's the crime:
Windows: $2.48 on $2.89revenue = 85% margin
Office: $1.88 on $2.38 revenue = 78% margin
Servers: $.519 on $1.52 revenue = 35% margin

<fact>I know a lot of companies that would literaly kill to get those kinds of margins!</fact> <sarcasm>But certainly windows is a bargain at their prices.</sarcasm>

Re:Here's the Crime!

[xswl0931]

Revenue and Income doesn't take into consideration R&D costs. Just because manufacturing costs of software is low (this doesn't apply to MS) doesn't mean R&D is also low. Recent news has stated MS is boosting R&D to $5.2 Billion for fiscal 2003.

Re:Here's the Crime!

[n-baxley]

That's a very good point. I wonder how much of the R&D budget goes towards Windows development? I guess the inordinate margins on Windows allows them to develope more technologies for things that aren't yet revenue generating, but I still think that's an awfully high margin, as evidenced by their ~$40 billion "savings account". I suppose the real crime should be that with all that money sitting around, they should be issuing dividends to their stock holders.

Re:Here's the Crime!

[LordSah]

MSResearch got something like $5 billion last year. Their work goes into all kinds of stuff: Windows, the spam filter for MSN8, SQL server, etc, etc. Some of the stuff MSResearch is working on will never make it into a product, and some of their work is just publish (so everybody uses it). Cartoon cel shading for 3D games first came out of MSResearch, and I think that the algorithms are public domain.

The budget for MSResearch doesn't include the budget to pay the development teams for the work on new products. I can't quote you specific numbers for the budget for just Windows, but it's in the billions.

Not DVD

[RatBastard]

The XBox is a rather expensive DVD player. US $200.00 plus US $39.00 for the DVD remote. You can get a perfectly good DVD player from CostCo/Sams/whatever for $79.00.

Thank god it is legal to "price dump"

[hudsonhawk]

Otherwise Sony (being the only vertically integrated of the three companies) would be the only one able to sell their console at a low price.

Look, I hate MS as much as anyone, but romaticizing Sony or Nintendo as good guys is a pretty biased view.

If people really cared about the good guys winning the console war, people would've bought more Dreamcasts. Since they didn't win, you just have to go on which one has the games you want.

Besides, we're not talking about Wal-Mart selling drugs below cost to drive the local competition out of business; we're talking about a "give the razor, sell the blades" pricing model here.

There's a world of difference.

Scott

Re:Only $177m? Who cares?

[arkanes]

It's not just selling under your own costs - it's selling under your own costs, AND your competitors price point. For example: I have a better engineering line, so I can make my units 10% cheaper than my competition. If I then undercut them by 10%, that's not dumping. I'm just passing on my savings. If my pipeline sucks, and it costs me 10% more, but I sell at the same price because otherwise I won't sell anything at all, thats not dumping either. But if I make them for the same price, but I sell for 10% cheaper(note that I'm assuming in all these cases that we sell for the exact price it costs to produce), because I've got large cash reserves and they don't, THEN I'm dumping.

They need to think about their business model

[sam_handelman]

1) World Domination
2) ?
3) Profit

Re:MS will drive out Nintendo and Sony? Hah!

[Theaetetus]

Sony has no such single cash cow to suckle on. Note that Sony's profits for the last quarter were in the $350million range, a full 10% of M$!

Sure about that?

From IT Matters: The Nihon Keizai Shimbun business daily said without citing sources that Sony's group operating profit would likely reach ¥270 billion (US$2 billion) in the fiscal year to March 2003,

Yes, while Sony's Playstation2 unit only became profitable in the first half of this year, you can't forget that Sony, in addition to consoles, also has Sony Consumer Electronics, Cellphones, Laptops, televisions, VCRs, DVDs, phones, Sony Professional (DAT recorders, CD-Rs, mixing consoles), and Sony Music, to name just a few.
Microsloth is a juggernaut in the computer industry. Sony is a juggernaut in the electronics/entertainment industry... which is much bigger.

-T

Re:500lbs Gorilla ...

[jsse]

That's an EXCELLENT idea you know what, my licenses to use MS products are valid as long as I eat at McBill everyday. :)

Few people would complain that kind of license renewal offer. :)

Re:Only $177m? Who cares?

[mrcparker]

The reason why non American companies are the only ones ever caught for dumping is because countries like Russia and Japan have a tendency to go way overboard when it comes to dumping goods.

Look at what these countries were doing about 5 years ago with the steel trade. They were dumping steel at such a low cost that US companies like Huntco were getting creamed and having to shut down facilities. The cost of imported steel was so low that after paying to ship it over, process it, and then ship it to the location the imported steel was still way under US rates. The steel was at such a low price that it was almost like the foreign companies were giving it away.

It takes a while, and blatant dumping, for a company or country to get called for it. The steel dumping suits almost did not go through. Microsoft might be dumping their product, but dumping goes on so much that it wouldn't see the light of day. If MS was to be accused of dumping, they would have to lower the price to an insanely low cost.

This is simply an artifact of accounting methods

[shreak]

MS is required to post a financial report by the SEC. The SEC defines how often this has to occur (2 times a year I think). If your business plan lasts longer than this period you are going to post short term losses and gains that have no meaning outside the larger context.

If I open a new comic book store, I have to pay 1st months and last months rent (2x rent), Buy shelves, inventory, register, computer, business license, phone installation, internet installation, website setup costs...

Now I start to sell comic books at the going rate. Can the comic book store up the street call foul because I'm operating in the red at this very moment? I won't have all that start up stuff paid off within the next 6 months (when a public company would have to file a financial report). I won't have it paid off in a 12 months. I'll be lucky to be operating in the black in 18-24 months. I'm not cheating, I just have a business plan that lasts longer than the SEC filing period.

=Shreak

$177 = 3 Months. 1 year = nearly 1 BILLION LOST !

[Viewsonic]

And these past 3 months have been selling MORE XBoxs, so that figure is more likely to be 1.5Billion in total XBox losses! Insane! Byebye XBox.

I actually respect this...

[Skip666Kent]

I respect the fact that MS is showing a willingness to nurture their product for the long term rather than giving up at the get-go just because it failed to change the playing field over night.

As a MS shareholder, I want them to dump XBox...

[Viewsonic]

And that's about it.

Re:MS will drive out Nintendo and Sony? Hah!

[binaryDigit]

From the horses mouth

I know that Sony has all that other stuff (and cool stuff it is), but my main point was that even with all that stuff, they don't enjoy the monopoly and the profits from that monopoly that M$ enjoys. Also, $2billion for the year still pales to $3.5billion for the quarter, even given the larger overall market that Sony participates in.

Add that $177+ over 12+mos ..1 Billion loss.. EEKK

[Viewsonic]

And considering the competitors are making PROFITS, this is super bad. This is terrible bad. This is .. time to let the platform die bad.

Re:Only $177m? Who cares?

[xswl0931]

You misunderstand the dumping law. Basically you cannot sell the same item in the US as another country and have a huge difference in price. So if Nintendo decides to "dump" in the US it's gamecube for $50, they would have to sell it for an equivelant amount in Japan to not be considered dumping. So that means they can take a loss selling in the US if they also take a loss selling in Japan, but they can't sell in Japan for $100 and in the US for $50.

Re:So what would Rare do in that situation?

[Anonvmous Coward]

"And selling Rare back to Nintendo and creating a competitor would devalue Rare in Microsoft's eyes just as much, no?"

Nope. You've got some funny ideas there, heh. MS would do what they could to increase Rare's value so that Nintendo would have to pay a premium to have them back.

Sounds a bit more logical than rearming a competitor that's no longer a competitor, doesn't it? MS didn't forcefully buy Rare, Nintendo was looking to sell.

You're insane. The "tech" is a CELERON.

[Viewsonic]

And Halo was far from "Game of the Year" compared to the Cubes' Star Wars offering. And overall Microsoft is in 3rd place worldwide. They will never get Japan, and this means no Japanese developers, which means no decent games. Why should XBox owners all run out and buy PC ports anyways? It's pretty sad.. And XBox live will be a huge failure, after 1st year, it goes $10/MONTH .. No kid is going to be paying that.

Re:You're insane. The "tech" is a CELERON.

[0x0d0a]

Finally, Xbox Live is going to be $10/month after the first year?

Yes. The grandparent post is correct. $50 for the first year (plus the kit), $10/month after that.

It looks like the idea is to get people to sign on with a flat-rate purchase (the $49.95 first-year price) and then start milking them when they're comfortable with it.

What, you thought MS was going to simply pay for something like this and provide service for perpetuity?

Re:You're insane. The "tech" is a CELERON.

[Babbster]

Seriously. If you could post a link to where this has been announced (since being a beta tester apparently didn't expose me to enough information), I would appreciate it. As far as I know, there has been no announcement of a price whatsoever. What they have indicated is that they will charge the fee yearly which militates against the idea that it will be $10/month since that would necessarily be a charge of $120. I can see a lot of parents having a tizzy fit if all of a sudden $120 popped out on their credit card bill. Note that this isn't to say that $10/month ISN'T the price, but simply that nobody knows yet. (It's also not to say that Microsoft would never do anything evil, since I consider them evil myself - along with nearly every other corporation, but still.)

My heart is breaking.

[talks_to_birds]

Despite the losses Microsoft will not have to rein in its marketing and promotional efforts any time soon. The company has a cash pile of more than $30 billion to fund expansion.

Even if it did not have this huge amount of cash on hand the $3.5 billion profits from its operating system and software divisions in the quarter more than offset any loss.

I imagine billg broke into a cold sweat when he heard the news of this financial catastrophe...

t_t_b

Re:Xbox Gen 2 is where they earn the real dough

[Theaetetus]

... except that the PS3 is already being prototyped - and will have full backwards compatibility with PS2 and PS1 games.

From PS Reporter:

Japanese media reported on May 6th that the PS3 console is in development. The goal is to make new processor technology, called "grid" about 200x faster than current console technology. This is almost achieving their original goal of making the PS3 1000(!) times faster than the PS2. This goal was publically set by Mr Okamoto, the Senior VP and Chief Technical Officer of Sony Computer Entertainment, at the 2002 Game Developers Conference in San Jose, California.

And there was a story just about two or three weeks ago that there was a rumor that Sony was going to try to push up the release date even more.

-T

No, it's an investment... and lots of stores do it

[Gruneun]

It's not dumping. Period.

Microsoft, like every other game console producer, takes a hit on the console. It isn't to put the other guy out of business (though sometimes that's a benefit), but rather, to get you hooked on a specific console. After that, they recoup their loss on the games. After all, who buys a console and then never buys a game? The only significant difference here is that Microsoft is banking on turning the profit in an online system, rather than just games.

Last year, the Sheetz gas station near us was selling gas for $0.95/gallon, significantly less than what they paid for it. It wasn't to kill the competitor, but rather to get people in the habit of filling up there. The money they made from their food, drinks, and various items inside the store made up their loss and they slowly raised the cost of gas to normal rates. I fully recognize that, but you know what? I still shop there and I'm not the only one.

Accounting gimmicks. Does anybody know...

[freeBill]

...if this number takes into account valid accounting procedures?

If they are not expensing stock options, this number could be much higher (unless the depressed stock price has also depressed their accounting gimmickry). It would be interesting to know what the real numbers are.

It will also be interesting to know if the Enron-WorldCom scandals will result in shutting down this phony accounting scheme, especially since MS is the foremost practitioner. It could really send their stock into a tailspin if the people holding their stock found out their "profits" are often really losses.

Re:Microsoft of Borg

[Chris Johnson]

It's not a superior product. I know this may come as a shock, but Microsoft lie :) they put a great deal of effort into conning you with specs, and it obviously worked. What they have is a mid-performance gaming PC. You can build a PC that's _way_ better, or if you got a PS2 you could use a very different architecture with obscenely greater video bus bandwidth which makes texture caching more or less completely pointless.

Besides, xbox is useless if the games aren't fun :) who the hell cares if the central processing unit runs at a higher clock speed?

Re:Only $177m? Who cares?

[jandrese]

I thought the concern with GM food isn't the genetic code itself, it's the various enzymes or other chemicals the genetically modified food produces. It's a similar concern as feeding cows growth hormone so they grow up bigger and fatter and have a higher return, but then that hormone is in the food you eat and causes you to grow big and fat as well. I havn't seen any scientific studies that actually back this up, but it is at least plausable.

Stop kicking the horse... Please?

[Mulletproof]

Common, if you're gonna hit microsoft on this practice, you're going to have to hit Nintendo, Sony and the late-great Sega on it as well. They all sell their consoles at a loss in order to hit the consumer's impulse buy range. The only real difference here is that Microsoft has deeper pockets with which to do this with. It gives them the ability to market superior hardware while hitting the same impulse buy zone. And yes, it also creates hideously large loss numbers.

As for putting Sony and Nintendo out of business, somebody really isn't in touch with the real world. First, the XBox is nearly dead last in console sales. That differential will decrease over time, but unless Sony and Nintendo do something incredibly stupid or MS incredibly brilliant, that's not likely to change in this round of the console wars. Second, Sony is a big boy. It has a diversified market beyond gaming. Their products have global reach and ideal penetration within their respected markets. Sony isn't going anywhere. Nintendo, on the other hand, has a far smaller foundation and hasn't exactly been making stellar decisions as of late. They haven't had a great console since the SNES, and the Gameboy is STILL their principle source of income. They're more likely to kill themselves off rather than be a victim of any MS "dumping" campaign that everybody else also seems to be engaged in.

But it's just another day in the anti-MS neighborhood, I guess...

Re:Stop kicking the horse... Please?

[sean23007]

Nearly dead last? Yeah, you must mean second place. After all, there are only 3 real players, so "nearly dead last" is the same as "nearly in the lead." Gamecube is dead last, PS2 is in the lead. Xbox is between them.

Re:Only $177m? Who cares?

[blaine]

Uhh, no, if you read it you'd notice that of $175 they were making per console, roughly $120 was from the console itself. $55 was from software and accessories.

Sony is not stupid. They do not sell at a loss. Sega sold at a loss and is now defunct as a hardware business. Nintendo sold the Gamecube at a slight loss but most accounts have them as about even now. Microsoft has billions it can throw down the drain, and so it sells at a loss.

Also, just a FYI, when Nintendo sells at a small loss it is almost meaningless to them, and I'll tell you why:

When a game is sold for $50, maybe $20 of it is profit. Of that, typically the console maker gets $5, and the game producer gets $15. However, Nintendo is in a special position in that it makes most of the really popular games for it's own console. Thus, if they sell at a $20 loss (which is about twice what most people estimated), but you buy the Gamecube and a single Nintendo produced game (which I guarantee you will), they've broken even, because they get all $20 of profit.

Microsoft, on the other hand, does not produce the games. Therefore, even if you are nice and say they're only losing $30 per console (which is way below most estimates), they need to sell 6 games just to break even. How many people do you know who have 6 XBox games? I don't know any. Every person I know with an XBox has less than 5 games, and typically has bought a single extra controller. Every person I know with a Gamecube has at least 5-6 games and most of them also buy 3 extra controllers due to the number of good 4 player games.

Something tells me MS is the only company really digging itself into a hole in the console business right now.

Re:ActsofGord

[blaine]

Given that his reasoning is based of official Sony stock reports, I'm more likely to accept it as fact than the word of random idiots on the 'net who think they know everything there is to know about the console market. But hey, that's just me.

Re:Economic Impact

[Chris Johnson]

....obviously, because arguing for a monopoly being good for the economy on the grounds that it spends money is a pretty basic mistake.

Ideally, you'd have an actual market functioning, in which lots of people could make game systems. They've got complicated enough that this isn't really possible, but so far there is at least SOME choice and SOME evidence of a functioning market.

Maybe this is even thanks to Microsoft itself, seeing as Sony has such a strong position- but since they all seem to want to get into a position for price-fixing and entry-barrier raising, it is disconcerting that we have to settle for a balance of power like that. It's not reasonable to gamble everything on 'gee, maybe if we're lucky none of them will quite win and we can continue to enjoy the result of their actually working and making an effort'. Who would want that to stop? But it will, if the competitive market fails. Microsoft are unquestionably the most likely to slack off and produce crap and devote their efforts to harming newcomers, but Sony would surely slack off a bit too.

Can't give them away

[cruachan]

I've seen several offers here in the UK of 'choose any 4 X-Box games and get a free X-Box'.

Coincidentally walked into my local mall games store today. X-Box used to have a small section (about half the size of the PS2 and a little smaller than GC) at the front of the shop. It's now been relegated to a dark corner right at the back.

Re:No, it's an investment... and lots of stores do

[Cutriss]

Microsoft, like every other game console producer, takes a hit on the console.

Geez...you don't still believe that myth, do you?

Chapter of Proclamations

Re:500lbs Gorilla ...

[IamTheRealMike]

Nah, they'd just give away free burgers to schoolkids and students, but sprinkle them liberally with crack, uh, I mean DirectPlay Food Center Edition(tm).

Re:Don't complain, buy one

[Chris Johnson]

Um, buying one is giving them money, which they don't care that much about in this area, and giving them mindshare and a sale to count, which they want more desperately than anything else.

So if you don't like Microsoft, don't buy one :)

If you don't like Microsoft, publically describe the xbox as the lame attempt at manipulation it is. Honestly, it's really NOT so great. It's only a midlevel gamer PC. That's not the greatest architecture in the world.

Umm, math?

[TheConfusedOne]

MS stated they were going to spend $500 million in advertising during the first year. The numbers you're looking at now are related to what, the current quarter? (Lost $177m in 3 months ended Sept 30th.)

When do you think they spent most of that $500 million? That's right, the launch events, the pre-release hype, and everything leading up to that first day. (Think of all of those campus tours and giveaways and what not.)

This is talking about the losses of the box for the most recent quarter. Marketing expenditures for the XBox have decreased dramatically since then.

In fact, losses accelerated when they clipped $100 off the price tag. They've managed to do some work to decrease the cost of the box since then but nowhere near a 33% cost reduction.

Re:Big Deal

[IamTheRealMike]

How much do you think Microsoft lost on Internet Explorer through its first three or four versions?

On the first three or four versions??? Internet Explorer has never made a profit, only massive massive losses. Why? Because some starry eyed futurist over at Redmond HQ got scared that maybe oneday the web would become a kickass way of building applications. They were terrified that somehow, magically, the dire NS4 codebase would turn into an easier way to write apps than Windows was.

How much did that end up costing Netscape?

It cost them everything.

Rather amusingly, Microsoft made it a self fulfilling prophecy, by destroying Netscape the Mozilla project was born, and what have the Mozilla team done? Why, only gone and built a kickass applications platform based on web technologies! The irony is too great really, if they'd just left Netscape along the old NS4 codebase would never have been scrapped in the way it was, and today we wouldn't have XUL/XBL/RDF Templates and the rest.

Of course, even taking the dynamics of the bubble into consideration, Sony has much deeper pockets than Netscape ever did...

Yes, but these guys are playing with hardware, not software, and hardware is far more expensive than software - it's a similar situation but on a larger scale.

Anyone familiar with Cell phone pricing?

[jmoody]

Many of you seem so surprised by this per unit loss yet every cell phone company in North America "subsidizes" phone handsents - creating such a loss. Do you think the cell provider gets your phone for 9.99 ? Do you know why GSM phones in Europe at generally start over US$200 yet in North America they are $19.99 with a contract? This is a common practice in many service industries, broadband internet providers do the same. They subsidize the modems and other hardware - wireless providers do this to such an extent that many have limited growth based on capital available. Anyone who thinks this is abnormal or illegal is not aware of common business practices as the list of examples is immense.

Obligatory Simpsons Quote

[falzer]

Nelson: Ha, ha!

Re:XBox Linux

[DavidLeblond]

Wow, you're ready to pay $200 for an MP3 player and you think you're some kind of genius?

No big loss.

[serutan]

Yeah, if the evangelists within MS are forceful enough they can carry this thing for 2 years, no problem. Microsoft has like $30 billion cash reserves, and Bill could personally lose $177 million just by leaving his wallet in his other pants.

Re:No, it's an investment... and lots of stores do

[fferreres]

Last year, the Sheetz gas station near us was selling gas for $0.95/gallon, significantly less than what they paid for it. It wasn't to kill the competitor, but rather to get people in the habit of filling up there.

Bad news for you...that's called dumping. Of course, for that small scale nobody cares, it will not affect the industry. But it still is dumping.

The thing is clear: sell at a loss, have the clients think you are more competitive. Then raise the price. Ideally, offer your product at unresonable prices until either you get the most customer share (and your competitors resources are not enough after that so that they can play the same game on you) or, "a la microsoft" wait until they have to close.

Great capitalism...do as we say not as we do (afaik, the USA is one of the difficult markets to export goods and services, Europe beign the most though. But europe doesn't claim to be as pro-market as the USA claims).

I don't mind the USA doing this, only the open-market free trade self declarations bother me.

Myth of losing money.

[Inoshiro]

Consoles don't lose money, except for a small period right at the start. Economies of scale kick in, allowing the games to make up early console losses. Over a recuring 6 to 8 month period, technology advances reduce the cost of producing the console. Sony sells PS2s for $200 USD, but they produce them for far less than that. They're currently on their 7th internal revision, and have integrated many I/O, sound, and video chips into once larger chip (think back to when VLSI came into vogue with PC motherboards back in the early 1990s).

So while early products may be sold at a bit of a loss, these loss periods are short-lived as long as the console maker merely waits a while.

Re:Only $177m? Who cares?

[fferreres]

Price dumping is intentionally undercutting your competition to put them out of business.

But in practice, in the US this is used to prevent imports that are more competitive. For example, the steel industry. Companies abroad can sell cheaper because they have to pay less for work, they have better minefields, lower taxes and good productivity. They can sell at a profit. But nope, the US calls it's dumping and blocks the sales. You see, laws have a very different meaning depending on who you are hurting. It's not about justice, it's just what a country think it's best for their economy (or world domination plan or whatever).

Dumping vs. Predatory Pricing

[Swanktastic]

I've read a lot of very incorrect views on what dumping is and how supposedly Microsoft is dumping in US Domestic Markets.

Dumping is discriminatory pricing based on what marketing you are selling in. For example, the Xbox sells for $200 in the US, and $200 (candian) in Canada. Since the Exchange rate is roughly $.63 (?) US dollars to Canadian dollars, Microsoft would effectively be selling for cheaper abroad (Canada) than domestically. The Association of Canadian Console Manufacturers gets upset that Microsoft is "dumping" in Canada because they are charging less in one market that in another. IT HAS ZERO TO DO WITH COSTS OF MANUFACTURING!

Why does dumping occur? It happens much more often in the United States because the US is the hub of the world economy. The US buyer (business or consumer) or has a better selection of goods than any other in the world. This results in more competition and LOWER PRICES. On the other hand, the importer's home country may have much less competition. Correct price setting theory for this importer should state then that they charges less money in the market with more competition (US) than the one with less competition (their home country). Thus, countries that have a higher degree of imports tend to see higher degrees of dumping.

Predatory Pricing is carried out by a company with monopolistic power to maintain or grow its monopolistic powers. Essentially a pricing strategy that reduces price below the manufacturing prices of its smaller competitors. Usually it applies in a case where a large, national firm is going in to drive a smaller, local firm out of business. The presumption is that the monopoly has lower costs than the smaller competitor. This really doesn't apply to Microsoft in this case.
A) We know that Xbox has higher manufacturing costs than Sony or Nintendo.
B) Microsoft is not a monopoly in the Console industry. If anything, Sony is.

Microsoft has one thing going for them-- a big war chest. This allows them to invest massive amounts of money ($2 billion) into growing their business. But, wait a minute, didn't Sony spend $2 Billion in Research and Development on Playstation 2 chip production?

How is this any different? I'll tell you... Microsoft has sold fewer units. Of course they're going to lose money per unit. They simply chose to account for R&D in a different way-- by paying chip (mobo and graphics card) manufacturers to take care of it for them. From a business perspective, not a conspiracy theory perspective, what they're doing is fairly normal for strategists who intend to get their product into every home in the US that has a television.

Re:Dumping vs. Predatory Pricing

[arkanes]

While I may have had my terminology wrong (I hadn't had coffee yet and was following the parents usage of the term), I didn't mean to imply that Microsoft is doing any of those things in the console market - even though they are selling below cost (are they? I know they haven't paid off R & D, but are they selling below manufacturing cost?), they're doing it in order to be competitive with established leaders in the market. If an XBox cost 50 bucks, they'd be getting some serious investigating.

Ignorant??

[einhverfr]

Well--- Who is ignorant on genetics?

The genetic molecules really are the blueprints for the enzymes, antibodies, and other protiens that build every facet of the food. And BTW, I don't buy the ecological argument against GMO's but I so think that there is a public safety issue.

For example: Some people are alergic to peanuts. The allergy is actually a reaction to certain protiens in the food itself. These protiens are built based on the structure of the DNA (DNA -> RNA -> protiens). Now if you take the gene responsible for this allergy and move it to say, corn because maybe you get better pest resistance, what happens when someone eats a piece of cornbread and dies of the allergic reaction? This is the fundamental public safety issue. If it affects, say one person in 500, that would have a minimal ecological impact, but the public safety issue would be pretty severe. Basically one could no longer controll allergies well by avoiding certain classes of foods.

The other argument against GMO's in food is an economic one-- companies like Mon$anto are trying to proprietize what is fundamentally a commodity market-- food. They want to license the food to farmers, particularly in the third world. In this way, they seek to controll the very food supply we all depend on, and that is a very dangious issue too. The battle against GMO's is the same as the battle for open source software.

Which is why I am all for Linux on the XBox ;-)

Re:Ignorant??

[Com2Kid]

• Well--- Who is ignorant on genetics?
• 
  
  The genetic molecules really are the blueprints for the enzymes, antibodies, and other protiens that build every facet of the food. And BTW, I don't buy the ecological argument against GMO's but I so think that there is a public safety issue.
  

Most of the freak-outs I have seen againt geneticaly modified foods have been in the form of "But the genes will get into us!!!!"

*sigh* That argument gets very irritating very quickly.

• 
  For example: Some people are alergic to peanuts. The allergy is actually a reaction to certain protiens in the food itself. These protiens are built based on the structure of the DNA (DNA -> RNA -> protiens). Now if you take the gene responsible for this allergy and move it to say, corn because maybe you get better pest resistance, what happens when someone eats a piece of cornbread and dies of the allergic reaction? This is the fundamental public safety issue. If it affects, say one person in 500, that would have a minimal ecological impact, but the public safety issue would be pretty severe. Basically one could no longer controll allergies well by avoiding certain classes of foods.
  

Any chemical that has major allergies in society is not going to get engineered into food, a corporation would have to not just be Certified Suit Stupid but more like G.W. Bush stupid to do something like that.

Remember the companies are aiming to increase profits on crops, if the crops starting selling for less because of severe concerns about allergies that would defeat the purpose of the initial genetic modification.

Chemicals that foods are engineered to manufacture are highly researched to make sure that they do

gtg

The other argument against GMO's in food is an economic one-- companies like Mon$anto are trying to proprietize what is fundamentally a commodity market-- food. They want to license the food to farmers, particularly in the third world. In this way, they seek to controll the very food supply we all depend on, and that is a very dangious issue too. The battle against GMO's is the same as the battle for open source software.

Re:Ignorant??

[tgibbs]

Now if you take the gene responsible for this allergy and move it to say, corn because maybe you get better pest resistance, what happens when someone eats a piece of cornbread and dies of the allergic reaction?

The company that produced it gets sued out of existence for incorporating a known hazardous protein into a food. It's worth noting that the peanut, an exceptionally hazardous food, was produced without the benefit of genetic manipulation. The chances of producing an equally hazardous product by genetic modification are extremely small. And in contrast to peanuts, a company that produces an excessively allergenic product does not have the defense that "we can't help it; it's a natural part of the plant."

Re:Ignorant??

[Black Copter Control]

The company that produced it gets sued out of existence for incorporating a known hazardous protein into a food.

Perhaps that's why companies are fighting tooth and nail to prevent marking GM foods -- or even marking foods as GM free. It's really hard to sue someone for GMing an alergen into corn when you can't prove that the corn is GMed.

If someone gets a serious reaction to some food in a restaurant, their knee jerk reaction isn't going to be to sue monsanto for GMing an alergen into the rice. It's going to be to sue the restaurant for not being careful enough with their utensils. Monsanto's just going to sit back and laugh.

Once people realize that the cause of their alergies is a GMed food, they're going to have to fight to prove that the food is GMed to begin with. Laws against labelling food as GMed (or even as GM free) will ensure that the GM companies can play 'prove it' in court for years.

Tobacco companies were able to do it for generations. There's no reason why Monsanto won't be able to do the same thing if it turns out that GM foods have unintended (or simply undocumented) fatal consequences for some consumers.

Re:Ignorant??

[tgibbs]

Perhaps that's why companies are fighting tooth and nail to prevent marking GM foods -- or even marking foods as GM free. It's really hard to sue someone for GMing an alergen into corn when you can't prove that the corn is GMed.

Nonsense. Proof is trivial. If there is an allergen present, a simple immunoassay will determine its levels and identity. And real-time PCR will immediately determine what fraction of the ingredients are genetically modified (so they can't get out of it by claiming accidental contamination). It would be an instant slam-dunk for the plaintif.

If someone gets a serious reaction to some food in a restaurant, their knee jerk reaction isn't going to be to sue monsanto for GMing an alergen into the rice. It's going to be to sue the restaurant for not being careful enough with their utensils. Monsanto's just going to sit back and laugh.

Again, this is just foolish. You are proposing something far greater than the occasional allergic reactions that occur all the time to non-GM foods. If there is a massive increase in analphylactic reactions, it will be noticed right away by emergency room physicians. Especially in the current political environment, the CDC and our new Homeland Security Agency will be on it like white on rice. And they aren't going to stop with the restaurant. They'll do the appropriate assays.

Tobacco companies were able to do it for generations. There's no reason why Monsanto won't be able to do the same thing if it turns out that GM foods have unintended (or simply undocumented) fatal consequences for some consumers.

Nonsense. Tobacco companies were "grandfathered." As a traditional,natural, nonfood substance, tobacco was specifically excluded by law for control by the FDA. GM foods will enjoy no such exemption.

Re:Ignorant??

[dylan_-]

what happens when someone eats a piece of cornbread and dies of the allergic reaction?

The company that produced it gets sued out of existence for incorporating a known hazardous protein into a food.

How reassuring that they haven't died in vain...

Re:Ignorant??

[tgibbs]

How reassuring that they haven't died in vain...

People die all the time from bad food: from infections from bad sanitation, from known toxins accidentally introduced, and from allergic reactions to natural substances. While one might wish that food producers were motivated purely by concern for their fellow man, the hard reality is that the risk of liability is one factor that helps to keep our food (relatively) safe.

Re:Only $177m? Who cares?

[blaine]

they are selling these things near cost

Who is "they"?

Sony does not sell the PS2 near cost. They sell it to make a profit, and a healthy one at that. This is possible mainly due to the fact that Sony makes almost all of the components, and so they can control prices. Also, if anything, production costs have gone down for these components since the PS2's inception. Making $50+ per console is not "selling near cost".

Nintendo sells near cost, but like I said, they make far more on games. Most people I know who own 6 Gamecube games own 3 that were made by Nintendo. That means that they have made the profit equivalent of 15 game sales for the XBox or the PS2, assuming no Sony or MS produced games (which is generally true).

Microsoft sells nowhere near cost, but on the other end of the spectrum. They were selling between $50 and $100 below cost before they were forced to drop the price of the XBox by $100 due to Sony's price drop. This happened way before MS wanted to drop that price. They had hoped (from what we know from interviews) to hold at $300 for at least a year to a year and a half after releasing the XBox, but ended up dropping to $200 after only about 7 or 8 months. At this point, they're selling at least $70 below cost, and that doesn't count as "near cost" in my book.

Comment removed

[account_deleted]

Comment removed based on user account deletion

As a dedicated gamer..

[Inoshiro]

I have a very large collection of equipment, including 7 distinct console types (the actual number of gaming systems is close to 12 or so, but I'm going for unique types, so I don't count GBC and GB, or both Dreamcasts). A lot of my games are Dreamcast games (I have about 40 or 50 in that collection), plus the 2 consoles (1 for front room, 1 for bedroom.. I love the VGA pack).

Have I been out in the cold? No! I was able (and can still) to buy tons of games that kick ass at firesale prices. Jet Grind Radio for the DC was 15$ CDN new at EB. That's 8$ USD! You don't get that kind of value often. That, and the fact that a greater ratio of the games were FUN, is why it's the largest collection of all of my game collections.

I am most certainly not in the cold!

What games do I own for my GameCube? Nintendo first-party ones that kick ass (as Nintendo always has), Capcom's Resident Evil series (which I fell in love with), and Sega games (Monkey Ball, etc). What games do I have for my Xbox? Sega games (JSRF, Sega GT, Shenmue 2, etc), and the odd non-Sega one (Munch, since it was cheap; Mech Assault, for Xbox Live!). As this one fellow I know says, the Xbox has the spirit of the Dreamcast. I bought the Xbox on the strenth of the 3 Sega games listed above. Everything else is cake, like PSO with voice support coming in 2003 for the Xbox.

As to Sony: how many games do I have for my PSX? A handful. I bought some of the MegaMan games (I loved the series on the NES, GB, and SNES), and a couple of RPGs that disapoint (nobody's matched FF3's story yet). I have a similar small collection for the TG16, a much less "popular" console :) The PSX and PS2 were only popular because of shovelware. I can count the number of PS2 games I'm interested in and want to play on with the same amount of fingers I need to count the N64 games I'm interested in!

Nintendo and Sega have are a couple of the companies that have the most experience in game making, and they are the ones who I regularly give money to. I think you'll find that most professional gamers (in that they prefer it to other forms of entertainment, and spend their time and money there to the exclusion of other pursuits) share the same preference that I do.

Yep, the SAME Sega that is LEAVING XBox.

[Viewsonic]

Consider yourself OWNED.

National Pride

[riclewis]

In all this discussion of console wars, many people seem to overlook an important point:

Microsoft is the only american player in the game.

Don't get me wrong, I'm just as concerned about M$ as the next guy, but it seems to boil down to buying my entertainment from either some big japanese company or some bigger american company. I'm no economist, but isn't it better for my nation if my money stays in my nation's economy?

Re:National Pride

[SirOgre]

You WOULD have a good point if M$ didn't hoard it's wealth.

Buy an PS2 - money goes to Japan's economy, helping the world's economy

Buy a Gamecube - see PS2

Buy an X-Box - watch as M$ adds to their 30 bil warchest, helping no one but M$

On top of that, many, many games are produced in the US, so buying games does add to the US economy regardelss of platform

SELECT * FROM Consoles WHERE BroadBand=TRUE;

[Inoshiro]

" Xbox Live is doing better than expected, but the total numbers are pretty intimidating for MS. Last I checked (2 weeks ago), the score is:

- approximately 8 million GameCubes
- approximately 10 million XBoxen
- approximately 52 million PlayStation 2s

By those numbers, it's safe to say Sony has wrapped up this round, if you're looking for a 'winner'. "

I thought I'd highlight your comment about the Xbox Live! There are 10 million potential customers who spend 50$ USD and get it all working out of the box for one year. Everything is tracked, you have a friends list, and they even include VoIP for you to chat. I'm even tempted to look in to Xbox Live! without any games as a VoIP solution for keeping up with distant relatives, since it's so cheap and easy! How many PS2 online games support voice chat? Right, SOCOM.

How many of those 52 million PS2s will support online play? Let's see... " Sony, too, is selling add-on hardware to gamers who want to play online; a spokeswoman said the company hopes to sell 400,000 adapters this year. "

You may be asking yourself why they expect to sell so few. To most people, the PS2 is just a DVD player that also plays their legacy PS1 games.

Of the 10 million potential Xbox Live! customers, quite a few million of which will probably go for the easy-to-use service, vs. the 400,000 PS2 people. Besides, if you've ever gamed online for a long time, you know that to get a continued quality service, you need to put money in to it. Myth2's public servers went away because Bungie never received money for it, so did a lot of the "free" online service parts of the Dreamcast games. I'm confident that as long as Xbox Live! gets money, the servers will be there. I don't feel the same way about Sony or Nintendo's (lack of) plans.

Re:SELECT * FROM Consoles WHERE BroadBand=TRUE;

[thatguywhoiam]

Of the 10 million potential Xbox Live! customers, quite a few million of which will probably go for the easy-to-use service, vs. the 400,000 PS2 people.

Excellent point. The XBox definitely has the technical upper hand as far as online goes, right now. Although I might point out that not all of those 10 million Xbox owners have broadband, but I bet it's at least a third of them, considering the 'uber' mentality that comes with the XBox ('serious' gamers... yeeeahhhh...)

You know what, though, the Voice Chat doesn't really impress me. I was really looking forward to it as it seemed the logical replacement for the keyboard on the console, either through communicating with friends or directly voice-commanding the game. I must say I'm dissapointed. It's not Microsoft's fault, either. I just don't like being reminded of the fact that I usually end up playing on a team with a bunch of infantile 15-year-olds who think 'cock-knocker' is a scathing epithet.

One other thing, to put my paranoia hat on: the integrated voice/friends list/etc. in XBox live, while compelling to some, just creeps me right out. It's my own MS baggage. I like Sony's lassaiz-faire approach better.

We'll see what happens when they start charging full price/year. They haven't announced what that price is yet, and the XBox Live! service is very suspect in terms of value until they do.

Re:SELECT * FROM Consoles WHERE BroadBand=TRUE;

[Inoshiro]

"I just don't like being reminded of the fact that I usually end up playing on a team with a bunch of infantile 15-year-olds who think 'cock-knocker' is a scathing epithet."

Typed or spoken, stupid people are stupid :) I prefer voice because I can take the headset off and not listen to them, or pretend like I'm playing against really random AIs. For those situations where, previously, I would've had to use a keyboard, it's supperior. Otherwise it's the same dumbness if you are playing vs. dumb people.

I do like the integration service, because it lets me track my friends and stats vs. the world at large in games. A very similar thing happened with public Quake 2 servers, in that a few services existed that tracked poeple's records. I don't mind it.

" We'll see what happens when they start charging full price/year. They haven't announced what that price is yet, and the XBox Live! service is very suspect in terms of value until they do."

Now that is a very good point. I noticed how they studiously avoided mentioning how much renewals would cost, stating only that you needed to cancel the account before the year was up to avoid the "decided upon renewal fee" :-|

Re:Nintendo has STATED that GC costs ~$90 to make.

[blaine]

Yeah, because the part where nintendo representatives admitted that they were selling the Gamecube at a slight loss at release time must not mean anything, right?

Production costs go down over time. However, I highly doubt that the Gamecube cost $90 to make. Where was this said? I'd love to see some links.

Re:Only $177m? Who cares?

[blaine]

So I'm supposed to take estimations by people not involved in the production of the chips over the fiscal reports of the company in question? Either Sony is cooking their books, or the estimations by Microprocessor Report are wrong. I tend to think the latter.

Re:Technically wrong

[blaine]

There's a serious difference between the Sony business model and the MS/Nintendo business model that you're missing.

Yes, Sony has a higher up front cost. That's because Sony produces the hardware. It's like buying a house versus renting. It may cost sony $2B in research and development, but after that initial investment they own the fabs, they own the production facilities, and therefore they don't have to keep paying 3rd parties for hardware.

MS and Nintendo, on the other hand, currently buy their parts from other companies. This reduces up front cost, but it means that they are forever paying more for their components. No matter how cheap it becomes to create those components, MS and Nintendo can only get them as cheap as their creators are willing to sell them.

Sony cuts out the middleman. Instead of renting, it buys the house and becomes it's own landlord. MS and Nintendo are renting, and paying the mortgage for the landlords (3rd party hardware developers). This is why Sony's business model is superior. They pay more to begin with, but in the end they reap the benefits of that initial outlay.

Re:Only $177m? Who cares?

[fferreres]

Oh, I used the wrong word I guess :( (how do you call "canteras" there?)...

breaking XBox into pieces?

[Jacek Poplawski]

Many people write "let's buy XBox, install Linux there and not buy any games", but I haven't read idea about breaking Xbox into pieces. Is it possible to use any part of Xbox with standard PC? Imagine "PC factory" buying underpriced Xbox parts...

BTW is it legal to sell Xbox? What about selling part of it?

Re:breaking XBox into pieces?

[forkboy]

The internals are probably soldered at the component level...or just all part of the same board. Good luck separating that GPU from the processor from that sound board and putting them into a generic case.

I dont like market dumping.

[miffo.swe]

Sure it gains customers but when you have a couple of succesful companies in a niche market and your neighbor the multi billionere monopolist marches in and spends his lunch money on taking it over life isnt fun.

I do hope that they end like the germans though. Too greedy and engaging in to many fronts in the war of money. They are attacking PDA, Mobiles, servers, consoles, siebel, linux and many more at the same time.

Striving for relevance...

[Mulletproof]

"Documents filed with the US financial watchdog show that Microsoft's Home and Entertainment division, which includes the Xbox, lost $177m (£112m) in the three months to 30 September.
"The documents also reveal that five of the seven divisions of the company are operating at a loss. "

Could you possible sensationalize this article anymore? "XBox falls from orbit, kills wife and kids!" The XBox did not lose $117 million. The Home and Entertainment Division did. Not only that, Five other divisions of Microsoft are also operating at a loss, not that those deserve mentioning.

Jeez, Taco, can't you screen these articles just a tad bit better?

Re:Only $177m? Who cares?

[drinkypoo]

I don't know why this is such a shock to people. Every country passes (or applies existing) laws to assist their own economy. It is unfortunate that we pay more for some things as a result, but it keeps people employed.

As for your specific example of wood, I think it's time to move away from use of timber, anyway. We produce so much plastic, we should be thinking of newer and better ways to make use of it (Recycled) in building. There have been some nice initial examples in the form of decking, but not enough structural use.

Re:Only $177m? Who cares?

[Daetrin]

MS has to sell Xbox at $999 to cover R&D to satiate your law. Xbox dies, and instead of having three gaming consoles we now have two.

Woohoo! XBox dies! Let's pass that law right now!

Okay, it's possible that you have a reasonable point, but next time try to use an example where i'd actually feel sorry for the company being hurt :)

Re:Only $177m? Who cares?

[Anonvmous Coward]

"No, Sony does not and never has sold at a loss. Please stop perpetuating this myth."

So why is it that when you do a Google Search for 'Sony "at a loss"' that you get a bunch of sites discussing Sony's selling of PS2's at a launch?

Here's one article that states Sony sold PS2's at a loss.

Here's another, but it's not clear if they meant the PS2 or not. They might have meant the PS 1.

And here's another indirect reference to PS2's losses.

So no, you are the one perpeutating the myth. The PS2's launch in the USA was hampered by a parts shortage. What happens when parts are scarce? Prices go up. Think about that.

Innovation? No Problem.

[Ian_Bailey]

Well, you can rest easy, because Nintendo has been complimenting their franchises with plenty of innovative games as well. Games such as Pikmin, Animal Crossing and Cubivore are completetly unlike any games that are currently out there, and Miyamoto says that 2003 will be the year Nintendo focuses on new franchises!

However, the real difference with the Gamecube is in the 3rd/2nd party support. Unlike the N64, which barely had any support outside of Nitendo (mainly Rare), the Gamecube is getting original games from Capcom (P.N.03, Dead Phoenix, Killer7), Sega (Super Monkey Ball, PSO) and others (Eternal Darkness, Ikaruga). And none of these are even RPGs.

Truth be told, your statements counter each other. You talk about Nintendo breaking free, but you suggest they do it by making a game in a static genre, much like may other games. If anything, Nintendo may be innovating too much, as none of these highly original works made so far have taken off dramatically.

Re:Only $177m? Who cares?

[Elwood P Dowd]

In British Columbia (A Canadian Province),

What is this "Canadia" you speak of?

Sony's windows license fee just went up

[acomj]

MS probably will make up the money by charging Sony's Computer division high windows licensing fee..

So Sony competes with MS but yet bundles MS products with their computers.

MS isn't a Monoply.. Really...

Re:This is simply an artifact of accounting method

[theLOUDroom]

There's a difference between what you describe and opening a comic book store where you sell comics at below your cost, in an attempt to drive your comptitors out of business, so that you'll eventually have a monopoly on the market. Once you have your monopoly you can raise prices to recoup your losses.
What you describe is legal.
What I described isn't.
I would say microsoft falls somewhere in between. But, perhaps only because they're losing a small-medium sized amount of money on each sale, which they can always claim they plan to makes back on games.

They all subsidize the console.

[Angelwrath]

And truth be told, subsidizing the console is the standard business model for all console manufacturers, isn't it? We all know that.

All manufacturers do this to some extent - Nintendo recoups on its games, same with Sony and Microsoft. This isn't dumping, it isn't an unfair corporate subsidy.

And actually, the losses are partially explained:

"The loss in the home entertainment division has been put down to the high cost of marketing the game console and absorbing the cost of the price cuts Microsoft has been forced to get people buying it."

So we can at least assign an unquantified number to the marketing, which would have been a huge figure. We all know what Microsoft will spend on marketing its products (Half a billion on Windows 95 in 1995 dollars, and a similar figure on Win2K or WinXP, can't remember), so the marketing could account for a significant portion of the loss.

As for the last comment of the person who submitted the article to /., who says "Microsoft are said to be prepared to spend $2 billion funding Xbox live over the next five years, suggesting it will be some time before the home entertainment division break into the black", the suggestion of how long it takes Microsoft to be profitable cannot be made simply on this statement from Microsoft, which is neither binding nor filed in any formal report. When Microsoft becomes profitable all depends on the competitors to it in the console market, and if there is any cross-competition between the console market and any other market like PC games. So when Microsoft becomes profitable (are we using only when, and not if?) is all up in the air.

Re:Only $177m? Who cares?

[aron_wallaker]

What is this "Canadia" you speak of?

A few years back I was backpacking in Europe - happened to check into a hostel with a lot of Canadians in it - not all as a group, just several smaller groups that had randomly all ended up in the same place. So one day we're sitting around have a few beers and someone mentions how it's funny to have this many Canadians in the hostel at one time....when up pipes a good 'ol boy from Louisiana "Yeah, I never thought I'd meet this many people from Canadia in Europe!"

Of course his girlfriend was also from Louisiana and she laughed just as hard as the rest of us.

Re:Only $177m? Who cares?

[Detritus]

Companies may sell below cost because the parent country is desperate for hard currency to pay for imports. If the only viable export they have is steel, they will lower the export price of steel to the point that the increased sales of steel brings in the needed amount of hard currency. They may consider the production costs irrelevant if they are paid for in the local currency.

Re:Only $177m? Who cares?

[Elwood P Dowd]

The joke originated for me with my little brother. He would put on a Hawaiian shirt, wear a camera around his neck, get blitzed in bars in Vancouver, and embrace strangers while shouting in a vaguely eastern European accent, "I love Canadia!" and "You have such beautiful peoples and faces! Yesterday I see the Bell of Liberty!!!" etc.

That kid's a damn genius...

definition of price dumping

[GunFodder]

It seems like companies are only sued for price dumping if they have already succeeded in driving their competitors out of that business. If (and it is a very big if indeed) Microsoft actually wins the console wars then Sony may be able to sue them after its too late.

The real problem is that we continue to let Microsoft spend less than a billion dollars "improving" Windows (the client version) and Office and earn more than 5 billion dollars from that paltry investment. They can afford to corner the market in platinum boat anchors with that kinda cash. They could put 3 billion dollars in big trash bags and just burn it and still be the darling of American business. There has to be something illegal about that.

no commodotized consoles

[GunFodder]

Way back in the day I could buy a joystick and it would work for my Commodore 64, an Atari 2600, and even my Sega Genesis (with only one button though). Any of these machines could be hooked up to a TV using the same RF box with a slider switch to send the console/computer signal on channel 3/4. Even the power supplies for several of my old consoles are interchangeable.

Nowadays the console makers are so greedy everything is proprietary. There isn't a single connection on a Dreamcast, PS2, GameCube or XBox that is interchangeable with a rival unit. The PS2 is reasonably compatible with the PSOne, which probably means that Sony puts the accessories for both platforms in the same accounting bucket.

Re:Region Coding is irrelevant

[Kuroyi]

Automobiles sold in the U.S. have the steering wheel on the left side of the dashboard, because roads in North America require you to drive on the right hand side of the road. The same cars have the steering wheel on the right hand side of the dashboard in the Japanese models. Clearly, a Mitsubishi Eclipse is a Mitsubishi Eclipse, regardless of where the steering wheel is located.

Except that the Eclipse is left-hand drive in Japan as well since it was designed and built in America.

Re:Only $177m? Who cares?

[peterb]

No its not legal.

America has so called anti dumping laws.

...and Microsoft is not dumping.

I'm sorry, but this is a pet peeve of mine. Every idiot in the world speaks authoritatively about dumping when they have no idea whatsoever what it actually is.

Here's a hint: "Selling a product at a loss" is not dumping. Not even a little bit. If you produced a product and gave it away for free, that still wouldn't be dumping.

Dumping is very simple: It is selling a product in a foreign market for less than you normally sell it for in your domestic market. If you don't believe me ask the World Trade Organization. So unless you believe that MS is selling the Xbox cheaper overseas (hint: they're not), MS is not dumping.

You may now all return to your ignorant, dogmatic lives.

They had to have region encding.

[Thag]

"Bucking the content industry" would have ensured that they would not have been able to bundle DVD player software with the console, a big feature to lose when their competitor the PS2 does work as a dvd player.

Jon Acheson

Re:Only $177m? Who cares?

[tgibbs]

And there are ways to get around anti-dumping laws. When Sony announced that they would release the Playstation in the US at $100 less than it was selling for in Japan, to undercut Sega's Saturn, they removed the separate RCA video port. That made the US Playstation a different model from the Japanese one, so the anti-dumping laws did not apply.

Re:Playing for the long term

[Babbster]

I can't help but think that every month the PS2 keeps outselling the GC and Xbox is another month Sony can refine the PS3.

And I can't help but think that unless time passes differently for Microsoft (and to a lesser extent Nintendo which has already announced that they are intending a longer life for the GC than PS2 and Xbox), they will have that same number of months to work on Xbox2 (or Ybox or whatever).

Your argument only works if Microsoft is at some sort of a drop-dead point where they have to, to use your word, win the console war. Since they aren't at that point, your logic is fundamentally flawed.

Re:XBox Linux

[ceejayoz]

Erm... I think you replied to the wrong post.

Re:XBox Linux

[ceejayoz]

Er... how did you infer that I'm going to buy a $200 MP3 player from my post? Did you reply to the wrong post?

Re:No, it's an investment... and lots of stores do

[Fulcrum of Evil]

Well, what you've heard is wrong. The only consoles to sell at a loss are Dreamcast and Xbox.

Re:Only $177m? Who cares?

[Skjellifetti]

IIRC from my undergrad days in econ, technically MS would not be covered by US anti-dumping laws, but by the anti-trust laws under a doctrine known as deep pockets. The idea is that you have enough cash stashed away that you can afford to drop your prices for a sufficiently long time to drive less well endowed competitors out of business and then raise prices to the monopoly level. Here is an example from the US airlines industry. Anti-dumping is a similar idea but under US law applies to foreign companies selling for less than production costs.

There are a couple of problems with both the deep pockets notion and anti-dumping laws. First, a large competitor may well have a lower cost of production than a smaller competitor and costs can be notoriously hard to measure. This can lead to charges that what is really happening is that the DOJ is bringing the case for political reasons, i.e. the protection of small business (the A&P grocery case is the classic example). The second problem is that cutting the price imposes a cost on the big competitor as well (e.g. $177 million quarterly loss for the MS game console) and so it isn't entirely clear that this is a rational strategy. Remember that both the large and small guys do best where their marginal revenue = their marginal cost (i.e. profit maximization) and this is not necessarily the same as maximizing market share as many Korean and Japanese firms have discovered in the past decade or so.

And for the parent who wrote:

The US puts taxes at will on any kind of product if they think their own industrie soffers from forreign laws... However: what is legal and what not, all over the world, is final descided by a US court.

The EU and the Japanese are at least as guilty of protection as the US (try selling Guatemalan bananas in the EU). Most of these disputes are now settled under GATT treaties by the WTO, not US courts. In fact, the US 1916 anti-dumping law has been held to violate the WTO and GATT treaty by the WTO. Under the rules, the US is required to bring its domestic laws into conformity with WTO and GATT rules as are all of the other signatories.

Re:Only $177m? Who cares?

[fferreres]

These are privately held companies that I am talking about. No goverment involved. And of course, if you don't let them export because you don't like that they are more competitive than you in ONE market, then how do you expect them have an open economy.

After all, countries do specialize in what they do best and it's a logical conclusion that they will have lower prices than you on all these products.

I mean, where I live we do not mind not producing our own movies or our own games. We know you can do better (though people here might try to do a game, but not as good) and we import them. But we do expect our exports to be accepted.

You can't request them to repay any debt they have if you block their imports. After all, the monetary side of any operation is the relex of a real good that must be traded. And a debt is a good that MUST be traded in the future.

Re:Don't confuse megacorporation with monopoly.

[tshak]

Please go take a business class (or two). Monopolies are A) not illegal and B) not necessarily obtained by unfair means.

The courts have NEVER ruled that Microsoft obtained it's monopoly unfairly. They just _sustained_ it for a short while unfairly.

Europeans and enhanced food

[0x0d0a]

I can't figure out *why* there's such a massive aversion among Europeans to genetically enhanced food, food from animals that were given antibiotics, food that pesticide was applied to, even (to some degree) non-free-range meat.

What's the big deal? Health organizations were all over this, have scrutinized it, and I can guarantee you (I know people that work in the medical industry) that the FDA is unbelivably uptight about letting *anything* past them if there's even the remotest unfounded possibility that something might have some risk to it. The only reason *not* to eat improved food is because of some irrational gut emotional response.

Re:Europeans and enhanced food

[mikerich]

I can't figure out *why* there's such a massive aversion among Europeans to genetically enhanced food, food from animals that were given antibiotics, food that pesticide was applied to, even (to some degree) non-free-range meat.

Part of the resistance is that the US is refusing to label such food and allow people to make a choice about whether they eat hormone-treated or GM foods. The European consumer has shown that they want to know these things - that the US is refusing to do so is both arrogant and misguided. Indeed inside the US, there has been pressure for BST-treated milk to be labelled, the companies have refused. Why shouldn't we be given a choice what we eat and drink?

If the food is better, it will succeed in the market.

What's the big deal? Health organizations were all over this, have scrutinized it, and I can guarantee you (I know people that work in the medical industry) that the FDA is unbelivably uptight about letting *anything* past them if there's even the remotest unfounded possibility that something might have some risk to it. The only reason *not* to eat improved food is because of some irrational gut emotional response.

The problem is that people who work in industry have then taken up positions on the regulatory bodies that are meant to produce independent advice on the safety of these products.

For instance Margaret Miller wrote most of the FDA's regulations on why BST-treated milk would not be labelled, but she was a member of the team at Monsanto which had developed BST. Additionally, Dr Nick Weber of the FDA who had been negotiating with international regulators had passed confidential committee information to Monsanto.

This cannot be considered as satisfactory regulation. All the science in the World will not save you from corruption - and this is nothing more than corruption.

Finally, you have to remember that Europe has many small farms many of which rely on organic production methods. Any GM planting in Europe would result in cross-pollenation between GM and non-GM produce. People would end up eating GM food whether they liked it or not.

I thought the market was all about choice?

Best wishes,
Mike.

Re:don't worry- developers aren't flocking to redm

[0x0d0a]

Another consideration is how many games people buy per console.

Most people with an X-Box that I've seen get Halo, and maybe two or three other games, and that's it.

Depressing...

[0x0d0a]

...that Bungie, which used to be held up as the anti-Microsoft by Mac fans, is now the *only* thing holding MS's console in place. "Well, there's Halo..."

Re:Only $177m? Who cares?

[mpe]

As for your specific example of wood, I think it's time to move away from use of timber, anyway. We produce so much plastic, we should be thinking of newer and better ways to make use of it (Recycled) in building.

Timber recycles perfectly well. Probably with less hassle than trying to convert plastics into building materials.

Re:No, it's an investment... and lots of stores do

[Fulcrum of Evil]

Well, check out Gord's page on the subject. It's just a little bit more factual than something you heard somewhere. Also check this out. Finally, note that it would probably be illegal for sony, sega, or nintendo to sell consoles below cost.

Re:Only $177m? Who cares?

[Jhan]

Look at what these countries were doing about 5 years ago with the steel trade. They were dumping steel at such a low cost that US companies like Huntco were getting creamed and having to shut down facilities. The cost of imported steel was so low that after paying to ship it over, process it, and then ship it to the location the imported steel was still way under US rates. The steel was at such a low price that it was almost like the foreign companies were giving it away.

(Very similar things have happened more recently.) So, essentially, what you are saying is that that its illegal for any country to produce steel at a lower price than a US foundry can? And it's especially, especially illegal if it will force good old american companies out of buisness?

Summary: "Look at what [they did]. Huntco [... had] to shut down facilities. The cost of [...] steel was so low that after [production,processing,shipping] it was still under US rates.

If eastern steel producers are really dumping the price (as in selling below profit) why can't the US companies simply compete? Do you really believe a poor Ukranian steel company could sell below cost for a decade? (hardly likely). Do you think a major US steel company could price fight with the Ukranian one for the period? (extremely likely).

Perhaps the real problem is oversaturation in the US steel market?

Re:Only $177m? Who cares?

[mikerich]

Nintendo sold Rare because Rare has outlived it's worth. What most people don't know about Rare is that they've been around for a very long time. They were making games back in the NES days and even since those days have remained a relatively small company.

Even before then, they were originally Ultimate - Play the Game and used to write exclusively for the ZX Spectrum. As a Commodore 64 owner I had to go round to a friend's to play Atic Atac and the like.

Sigh, nostalgia.

Another story doing to rounds about Rare is that they have lost a lot of staff recently and the Stamper brothers who founded the company are no longer so interested in writing games.

Still, we'll see. And let's face it a bad Rare game is going to be better than almost anything the XBox has to offer at the moment.

Best wishes,
Mike.

Re:Only $177m? Who cares?

[drinkypoo]

Timber recycles perfectly well. Probably with less hassle than trying to convert plastics into building materials.

The problem with wood is twofold. First, the quality of wood in the US is nothing like what it used to be only ten years ago. It is, quite frankly, crap. Of course you can get better wood, but it's much more expensive. If you live somewhere else you may or may not have this problem. Damn you, Canada!

Wood can be recycled but its usefulness varies. The second problem with wood is that the most useful wood is fairly large contiguous sheets of wood cut from the heart of large (old) trees, which means that you're not producing the really quality stuff on any kind of reasonable timescale to be harvesting much of it, if any, in most places -- some would say anywhere. I don't particularly want to open that debate (and I doubt it would happen this deep in the threads anyway.)

You can make wood into pulp, which is good for a number of things, or possibly into various composite wood products, or into smaller pieces of wood, often with some holes in them. But plastic can often be made (at some expense which varies but is generally coming down to nearly nothing with the byproducts being saved because they are valuable) back into exactly what it started as, or something else equally useful.

I hope (but do not expect) that we will start seeing more use of various plastics, both petroleum and plant based, and subsequent recycling. I know a lot of landfills are required to separate out recyclables so at least some of what you throw away that could be recycled is, or at least it's collected for recycling. Whether it ends up on a barge somewhere, headed for international waters, is beyond the scope of this comment.

Re:Only $177m? Who cares?

[Jace of Fuse!]

And let's face it a bad Rare game is going to be better than almost anything the XBox has to offer at the moment.

I dunno, I'm pretty disappointed by Starfox, to be honest with you. And I think Halo kicks 7 kinds of ass.

What really annoys the shit out of me is that the XBox might as well (at the moment) just be a Halo box, because that's about the ONLY truely must-have game for the system. Don't get me wrong though, it has a few good titles, but most of the best ones it has are also available for the other systems, and the best offerings it has coming out are still many months away.

So, while the people who only own XBoxes are still waiting, I'm loading up on some really killer titles here lately.

Just a few more days till METROID PRIME! WOOHOO!

Fortunately I have all three systems, so I get to stay pretty unbiased between the systems and I get to play the best that each has to offer. I just think it's a shame that my Dreamcast gets more use than my XBox.

Anyone remember Netscape?

[Vryl]

Xbox Live is doing better than expected, but the total numbers are pretty intimidating for MS. Last I checked (2 weeks ago), the score is:

- approximately 8 million GameCubes
- approximately 10 million XBoxen
- approximately 52 million PlayStation 2s

Substitute Internet Explorer, Mosaic and Netscape for GameCube, XBoxen and Playstation 2 respectively and you get the picture at the beginning of the Browser Wars. Now m$ have, what? 98.8% or something, depending how you count it.

Re:Only $177m? Who cares?

[mikerich]

I dunno, I'm pretty disappointed by Starfox, to be honest with you. And I think Halo kicks 7 kinds of ass.

Starfox is bad? That's a shame (it hasn't arrived in the UK yet).

Quite agree about Halo - it is fabulous and a worthy game for any system, but the fact it is still riding so high in the charts after all of these months seems to show the lack of XBox must-have games. So far all the hyped titles - 'Buffy', that platform game with the really ugly cat - have all been disappointments.

What's also worrying me about the XBox is that Microsoft have hyped its on-line abilities but made the system closed and broadband only. Here in the UK, broadband is reaching about 6% of online homes and vast swathes of the country (including me :( ) just can't get any broadband. Conversely, Nintendo and Sony are accommodating modem users which will make their systems much more palatable to users.

The XBox is now competitively priced, but it really needs some exclusive, top-notch games to pull ahead. And where are those games?

Best wishes,
Mike.

PS. Dreamcast - yep mine still gets regular outings for the post-pub madness that is 'Chu Chu Rocket'.

Re:No, it's an investment... and lots of stores do

[Cutriss]

Just out of curiosity, what company did you work for?

Obviously not 3DO (not zero)...but who? And in a console division, or in PC/Mac software?

Re:No, it's an investment... and lots of stores do

[Cutriss]

why do you ask?

I was just curious. I wasn't trying to skew your statements or anything by saying "Oh...well you just think that because ___".

do you also say it is just a myth that consoles have often been sold below their manufacturing costs?

Point one: make that "initial cost".

Personally, I don't know how much I trust ActsOfGord. I long subscribed to the belief that consoles were sold at or around cost, and that the royalties were where the profits came from. If necessary, a console could sell under cost, so long as the market conditions would support it. Sony, for instance, could have afforded to sell the PS2 at $249 on its launch, as the only competition it had at the time was the Dreamcast, which, as history shows, wasn't doing all that well to begin with. The GameCube now has a higher install base in the US than the Dreamcast does.

Of course, Sony sold the PS2 at $299 because it was the right price for the hardware, and they had generated enough hype to make that price seem perfectly feasible. It was the price that the market would support. It's a shame too, because the Dreamcast had exceptional hardware, and a *proper* Internet gaming model - Give everyone the hardware, let the publishers do stuff with it.

The thing is, as I said before, the market has to support your ability to take a loss on the hardware. The dotcom "market" demonstrated this all too well. If you have five vendors in the same space that are all competing to be "loss leaders", you might be the first one hitting the ground, but you're no better off without a parachute. Microsoft had the right idea, but

1. Shackled itself to the hardware of the ever-advancing computer market
2. Didn't adequately negotiate with the Japanese market and publishers, who will ultimately make or break a console
3. Put the name Microsoft on it

Realistically speaking, had Microsoft built the *whole* system and put it out to market under another name or another company (Sega comes to mind), it'd probably be doing *ten* times as well as it is now. However, it's still a gaijin system, and it's made by a company that more and more people are growing to distrust.

A lot of gamers I know that are fans of the Xbox say "Microsoft has $40B in the bank. I know that if I buy this console, my investment isn't going to just go away. Microsoft has the cash to do whatever it takes to make this a worthwhile investment.", which is essentially based off the selfish premise that Microsoft would actually *use* that much money to push the console off on people. Yeah, if there weren't any product-dumping laws, and if the government wasn't keeping such a watchful eye on Microsoft, they'd probably have taken the risk of selling the Xbox even cheaper just to get it out to market.

Re:Only $177m? Who cares?

[Iguanaphobic]

Multiply by 500,000. Put the total into the pockets of fat, lazy lumber barons. Repeat next month.