Xbox Losses Double, Xbox Shrinks

seldo writes "According to ITWorld, losses in the last quarter at Microsoft's Home and Entertainment segment have doubled. From the article: 'The segment, which also includes Microsoft's TV platform and PC games, posted a quarterly operating loss of US$348 million, compared with $180 million in the same period a year ago.'" An anonymous reader points to similar coverage at news.com, pointing out that the company also reports "profits for Office, and one small note about an undisclosed presumably Japanese company that Microsoft if propping up. So, the big question on my mind is, who is Microsoft secretly holding above water, and why? The fact that they are presumably Japanese, seems to point towards an XBox partner. Could this explain the sudden flood of Sega exclusive games?" Another anonymous reader writes "Microsoft will be showing a smaller sized Xbox at E3 this May. In addition to the smaller size of the hardware, the Xbox Lite will also be integrated with Media2Go allowing Xbox users to download digital content such as music and movies. Wonder what this means for all the current Xbox Mod Chips?"

Comments

So is this good or bad?

[sql*kitten]

On the one hand, Microsoft are losing money, yay! But on the other hand, if they're losing money they must be selling more and more units, boo!

Help, tell me what to think!!!

Re:So is this good or bad?

[grub]

Not necessarily-- could be spending more on R&D.

You mean giving more money to Apple? ;)

Re:So is this good or bad?

[Autonymous Toaster]

Not necessarily-- could be spending more on R&D.

I hope not.

While I am not one to engage in schadenfreude for its own sake and I certainly support people's efforts in the area of embedded technology in certain parts of the home, I think these losses are good news on the whole. It's not that Mr. Gates's presence in the video game console market is itself really that important in real life - it's that Microsoft has repeatedly exhibited expansionist tendencies, and it's been pointed out that the very name "Xbox" is intended to mean "Anything Box" (ie. the "X" is a cheeky metasyntactic variable).

Not to be a conspiracist, but to me this implies that they have much more on their minds than video games. Imagine if their intention is to further expand beyond the digital media space they've so far occupied and on into real-world objects? Imagine if they make something that could be used to (mis)create toast? I find these prospects very alarming, and thus the news of the Xbox's impending failure can't help but be a little bit of a relief.

Re:So is this good or bad?

[Anonvmous Coward]

"You mean giving more money to Apple? ;)"

Man, I had this vision of a white XBOX controller with only one action button. *shudders*

Re:So is this good or bad?

[killmenow]

Help, tell me what to think!!!

You know, all jokes aside, I find this quite telling. On a site where (I presume) most readers/posters consider themselves free-thinkers, there still tends to be "group think" and the ideal of individualism gets swallowed up by our need to belong to a group. I think it says a lot about the human condition.

Oh, yeah (almost forgot)...Micro$haft SUCKS!

Re:So is this good or bad?

[chas7926]

I find these prospects very alarming, and thus the news of the Xbox's impending failure can't help but be a little bit of a relief.

Who said anything about impending failure? It has been speculated widely that Microsoft is taking at least $100 loss on each XBox, aiming for market penetration, so they can earn the money on game purchases. Even losing 300 million in this particular segment, Microsoft made nearly 3 Billion in profit from Office and Windows. Microsoft is in this for the long run, they are not going to shutdown XBox just because of a growth in operating loss. As a previous poster said, the only thing this points to is an increase in sales. If you are losing $100 per item, and you sell 100 items then you have a loss of $100,000. If you are losing $100 per item and you sell 1,000,000 then you have a loss of $100,000,000. I realize that is overly simplistic, but the point is that I think Microsoft probably views this increase in operating loss as a good thing.

Re:So is this good or bad?

[EatHam]

It would seem to me that they lose even more on an unsold unit.

OK. I've seen this kind of /. logic quite a few times. So here goes my karma to offtopic.

Basic economics people. This kind of logic assumes that they have already built and purchased all of their units. Don't you guys think that Microsoft has some sort of inventory control? They don't build millions at a time and leave them sit around waiting for a sale. They build enough at a run to cover their projected inventory needs for Time Period X. If they had built all of them already, there would have been no shortage around the Christmas when they came out.

Re:So is this good or bad?

[pyrrho]

imagine... imagine. Let me explain in clear terms. I worked in the game industry for 6 years, during the 3dO times, for example.

There is NO DOUBT. The industry thinks that desktops are not the true consumer device and suspect they never will be! The true consumer general purpose computer is expected to be a console, it has to look right for the Stereo/VCR rack, it probably can't have a keyboard shipped with it because people fear the keyboard, but it will probably have to have a way to sneak one on (USB, etc).

This is strongly believed and the only question is When, and What Price Point Wins. 3DO was an early bet, proven too early.

Anyway, there is NO doubt (in my mind at least), that the Xbox is a specific attempt to use the Wintel platform to fill that imagined role as the ubiquitous "general" computer. It's also an attempt to own this platform, which so far they have just taken part in (a major, but not controlling, part), that is to de-commodotize it.

Further, it's the smartest thing about the Xbox. Having to enter through the gaming industry is rough, however, very rough. It might have been easier to just sell the Xbox as a cheap PC to begin with...?

Re:So is this good or bad?

[Anonymous DWord]

Man, I had this vision of a white XBOX controller with only one action button. *shudders*

Yeah, but at least it matches my shoes and my VW.

xbox...

[bluenova]

I wonder just exactly what the content and delivery methods for media to the xbox will be? Surely it will contain the DRM tools that Microsoft is so proud of. Will you just be able to download pre-approved things from xbox live connection, or will you be able to share on a home network?

how to sell an xbox

[linuxislandsucks]

Make the mod chips legal ..the linux users will buy the boxes by the hordes! :)

Re:how to sell an xbox

[Tom Courtenay]

Are you kidding me? If MS legalizes the mod chips then the Linux folk would completely abandon interest. They're only into it because they think they're thwarting "The Man".

This isn't a troll either-it's the truth. I hope the system succeeds (I think it has, to a large degree) well into the next generation.

As much as people love to hate on MS, they've changed the console world forever. There won't be any more consoles released without a hard drive-it changes everything once you've used it. The same thing applies to the network jack-plug it in and you're off and running.

I know it's been said time and time again, but we play the games. Not the consoles.

Re:"Xbox Shrinks.."

[ryan89]

In Japan, they probably use the XBOX as a room divider.

Srashdot?

[rampant mac]

"and one small note about an undisclosed presumably Japanese company that Microsoft if propping up."

Nice Engrish

Xbox Mod Chips

[gpinzone]

Wonder what this means for all the current Xbox Mod Chips?

It means that MS profits for next quarter will be higher from all the people flooding the market buying old XBoxes. :)

XBox mod chips...

[tinrobot]

Obvious. The current mod chips are doomed, of course.

If Microsoft goes through the trouble of reconfiguring the case, then rejiggering the motherboard is trivial. Wouldn't be surprised if they put a bullet-proof kryptonite cover over the chips or soemthing.

What it means for Xbox Mod Chips

[jwdeff]

Wonder what this means for all the current Xbox Mod Chips?

The same thing it meant the last time a change was made to the xbox.

Time to make new mod chips.

Smaller XBox?

[bob921]

Now what will I use to crack open coconuts?

I suspect it's Sega

[BrerBear]

It would have been much cheaper for Microsoft to bundle some of their own games, like Halo, with the Xbox. Instead they chose to bundle two games which Sega made exclusive to Xbox, and which didn't sell very well in their own right: Sega GT and Jet Set Radio Future.

My guess is that Microsoft did this to appease Sega and boost sales of their titles, in order to keep Sega making Xbox exclusives.

Re:I suspect it's Sega

[Saige]

Sega's not making exclusives only for the XBox. Monkey Ball, anyone? Both were exclusive to the Gamecube, and big sellers also. Interesting that the company would choose to make exclusive titles for separate systems.

And I so wish they had released Jey Set Radio Future non-exclusively, as I would have so bought that for my Cube already.

Re:I suspect it's Sega

[Jace of Fuse!]

What Sega is doing is more like aiming their titles at the core audience of the respective consoles.

Sonic, Monkeyball, and the like make sense on the Gamecube.

Panzer Dragoon sOrta on the XBox makes sense.

Shinobi on the PS2 makes a whole lot of sense, though I wish they had made that one cross-platform in the same way they did some of their other titles.

I want NiGHTS on the Cube. That's all I can say.

Xbox Shrinks?

[grub]

Increase the size of your XBOX in 10 days with our Herbal XBOX Viagra!

Who is te JPN developer?

[GweeDo]

The only logical answer is Sega. There is no other developer out there that is giving the Xbox any kind of serious support in JPN. Xbox is only getting games from them that are on all three systems or nothing much at all. MS needs to figure something out with the JPN market if they hope to really fight in the Consoling gaming market. I don't see them getting any major head way though (but that doesn't upset me at all) due to these already tight partnerships: Nintendo has Capcom, Namco, Square, Sega (amusment vision) Sony has Square/Enix I know I am not listing all the JPN developers..but those are the big buys (for the most part)

Rare

[NixterAg]

MS bought Rare in late Sept. for $375 million. I wonder how much of the $348 million reported as losses can be attributed to that acquisition.

Like them or not, MS is in the console business for the long haul whether they turn a profit within the next 3 years or not.

Re:I'm wondering...

[NineNine]

It doesn't say XBox per se, but the division that makes XBox, along with other products is losing more money. For all we know, they're developing all kinds of crazy stuff, which is why losses are larger.

Microsoft's Home and Entertainment segment, which includes the Xbox, PC games and the company's TV products, posted an operating loss of $348 million in the quarter on revenue of $1.28 billion. A year earlier it had a loss of $180 million on revenue of $833 million.

This isn't really news.

[siphoncolder]

We've all known for a LONG TIME that MS isn't going to make money on the XBox for YEARS. How is this news now that they've posted a loss this far into it? Didn't we already KNOW that?

MS has a history of going long-term with high-profile products, and it's paid off for them. This venture was no different, and losses were expected. Maybe if this story was posted say, 3-4 years down the road, it'd be newsworthy, since that's when MS is expected to BREAK-EVEN with the Xbox.

This sounds like editor & zealot bait - fanning the flames of hate. Woo-hoo, MS is losing money?

Woo-diddley-hoo, they knew it before we did. Get a grip.

Re:This isn't really news.

[FatRatBastard]

MS has a history of going long-term with high-profile products, and it's paid off for them.

Except this time they're on the hook for hardware. BIG DIFFERENCE (at least for MS). MS's usual modus op. is to bring in HW vendors to flesh out their visions, that way their only on the hook for the software R&D. If the product tanks (every version of the MS tablet up to now, early PocketPC, etc) MS has only eaten R&D costs. HP, et al will have to eat their own R&D costs plus the hardware costs (manufacturing ramp up, shipping, etc) of the product that tanked.

Now, I'm not saying that the XBox will fail, or that MS aren't in it for the long haul. But being on the hook for hardware (and at a loss no less) is much more risky thank software only.

The real question...

[Anonymous Coward]

So if MS keeps posting losses on the xbox like this, the real question is, which will happen first?

-Microsoft runs out of funds and has to close its doors.

-Our sun dies

Still #2 And A Very Cool System

[mgmartin]

Coming from a big PS/2 background and advocate, I was converted to the Xbox from my brother. For the same price of a PS/2, I got Dolby 5.1 in all games, network adapter, built-in hard drive, etc. The Xbox is very cool, and from what I've read, the #2 console. So despite the current losses, I think there is a lot Sony has to live up to in its next gen console to even catch up to what the Xbox now offers. And #2 ain't bad for a 15 month console life span!

Re:Still #2 And A Very Cool System

[mgmartin]

Can you name the game that has true 5.1? The last game that came close was Pirates that I tried with a semi-DTS 4.0. In any case, the point was ALL games on xbox do 5.1, only a handful of games on PS/2 attempt to through a custom design developers have to code in ala EA sports games or SSX trickery---we're not talking about DVD 5.1, we're talking about games. And uh, xbox has 2 memory slots on each controller.

Re:Still #2 And A Very Cool System

[Eros]

First off, I want to say I agree the XBox is a technically superior system. But this doesn't matter for the following reasons.

All the other systems have Dolby 5.1 capability, it just depends on if the games support it.

The network adapter and built-in hard drive don't mean swat because nobody will be taking full advantage of them until the other two consoles get them. Hold on, I'll justify why.

It is because XBox is no where near #2 -- worldwide. It may very well be #2 in the USA, but with Japan's big gaming market, that doesn't mean dick. Take a look at the hardware console charts half way down the page.

http://www.the-magicbox.com/topten.htm

XBox is holding less than %5 the total market. And remember the GameCube came out 5 or 6 months after the XBox and holds around %15. Not many gaming companies are going to develope a game that utilizes the hard drive and network adaptor exclusively for the XBox. The market just isn't there.

Hell, last year somewhere around 300-400 games came out for the PS2 -- remember all the Japaneese stuff we don't see. And only 68 for the XBox. Not to mention all the PS1 games that are still being produced.

If you still don't believe me on the numbers search for the lastest sales annoucements from Sony, Ninetendo, and Microsoft on last years consoles. I don't remember Ninetendo's but Sony was around 50 million units and Microsoft around 8 million.

Hell, most developers still make XBox games that look like ass and by the time they figure out how to take advantage of that hardware, the PS3 will be out.

Re:Still #2 And A Very Cool System

[Tom Courtenay]

Who is modding this "Informative"? All he did was call him a jackass and get all defensive.

Everybody needs to relax and enjoy whatever console(s) they have.

Re:Still #2 And A Very Cool System

[Namarrgon]

All the other systems have Dolby 5.1 capability, it just depends on if the games support it.

Completely false. The GameCube doesn't even have a digital audio out. The best it can do is ProLogic II. The PS/2 can do pre-encoded Dolby Digital 5.1, good for cutscenes and DVDs, but nothing in-game. A (very) few games do in-game encoding to DTS, but this requires dedicating one of the two vector processors to sound encoding.

With the Xbox, the Dolby 5.1 encoding is done by two dedicated DSPs on the sound chip, and is automatic for all games. It's the only one with the grunt (and the licence from Dolby) to do it.

The network adapter and built-in hard drive don't mean swat because nobody will be taking full advantage of them until the other two consoles get them.

There are ports of PS/2 games that have had custom soundtrack playback added, from the hard drive. There are a number of games that require the hard drive on the Xbox, Morrowind and Project Ego being a couple - PC ports may well require it. And of course, there are still Xbox exclusives that use it to good and occasionally innovative effect, such as Blinx.

XBox Live is making very good use of the ethernet port. So are tunneling apps like XBConnect that let you play peer-to-peer online multiplayer Halo/Mech Assault/Tony Hawk/Unreal/whatever. Can't do that with just an iLink connector.

Hell, most developers still make XBox games that look like ass and by the time they figure out how to take advantage of that hardware, the PS3 will be out.

And I suppose developers will instantly know how to use the (considerably more complex) PS3 hardware to best effect? Quite the opposite - look at how long it took before the PS2 hardware got used properly. Xbox has a big advantage here, with its far easier/more familiar dev environment.

Most PS2 games look like ass too. It depends on the quality of the game, of course. Halo is very nice looking, Rallisport Challenge looks superb, Splinter Cell is amazing and Halo2 is looking awesome. PS3 is still a while away, and Xbox2 is also scheduled for that timeframe.

Re:Microsoft Propaganda

[bluenova]

The thing that I've noticed with the XBOX games is the lack of replay value. Buffy game - great for about 7-8 hours, then once it's beaten, it's done. Halo -great game, but you're tired of it after a little while. Etc, etc... The X box live has been a huge disappointment for myself personally, anytime it's been used it's been without the sound, due to the number of 12 year olds who think they're Eminem... 2 cents...

Shrinking of XBox, turning point for M$?

[binaryDigit]

OK, M$ was NEVER going to profit from xbox sales without getting the cost of the box itself down to either lower their loss on each box, or maybe show a profit (don't know exactly which point they're at right now). What's curious is that even though their using "commodity" parts, it has taken them this long to get the thing shrunk. You would think that with all the resources of the various portable manufacturers, they'd be able to tap into a lot of talent when it comes to making smaller/more compact packages. Heck, it's not like the things bleeding edge hardware wise, cooling should not be an issue, and performance isn't (as far as needing to increase it), so why has it taken SOOOOOO long to come up with a smaller cheaper (for M$) xbox? This is a critical time for xbox, it has to wait the entire year before the next holiday rush. In the meantime Sony will be starting to get the PS3 marketing machine into gear, so this smaller xbox is going to have to pull it's own thru this tough period. If it makes it to xmas, M$ is either going to have to rev the hardware again (smaller and faster/better) or pray that next xmas's sales are spectacular, or xbox won't live too much beyond '04.

Re:Mean while..

[Em Emalb]

Dude. Completely untrue. You may very well hate Bill Gates and Microsoft, but do it for the right reason.

Bill and his wife have donated tons of money to shelters/cancer treatment centers/fine arts, etc.

You may hate his company, but he's donated a helluva lot of his loot.

Day of the week?

[moc.tfosorcimgllib]

Help, tell me what to think!!!

It's Monday, so we like video games, so this is bad news. But it's February, so this is good news. But the day of the week is odd, so we're supposed to only bash Sony and Blizzard. But the day matches the 2-digit year, so we only especially make fun of Macintosh users. But it was posted AFTER lunch, so this is good news.

Got it?

Their Initial Ventures Never Are Profitable

[Greyfox]

Microsoft's business plan has always been to give stuff away free or cheap, take over the largest segment of the market, THEN start charging. They can afford to lose a few hundred million until they achieve monopoly status in that arena too. Hell, Bill Gates probably has $100 million or so in his couch. You know how that loose pocket change just falls out...

I bet you when the Xbox2025 comes out and is the last console on the market, MicrosoftAolTimeWarnerDisney will jack the price up to $2500. Which should just about offset the AOL losses...

Shipments are down too

[prockcore]

Everyone seems to be assuming that those losses can only be attributed to selling a ton of xboxes (at a loss.)

http://news.zdnet.co.uk/story/0,,t269-s2129749,0 0. html
says differently.

Osha now expects Xbox-related revenue for Nvidia's fourth quarter, which ended 26 January, to total $40m on 800,000 units, down from previous estimates of $85m on 1.7 million units.

According to that, they shipped less than *half* of the number of xboxes they expected to ship in the 4th quarter.

Re:A perspective from a competitor

[cascino]

I thought you worked at Sega?
How's your Smell-o-vision project going?
Your educational background is pretty impressive too.
What about Super Marx Brothers?
(Thanks Klaruz.)

Re:A very cold system, and #3

[ReelOddeeo]

Xbox is the #3 system.

Sony Playstation: 50 million units
Nintendo GameCube: 16 million (or 10-12 million depending on who you believe)
Microsoft Xbox: 8-9 million

Microsoft is not doing so well. Microsoft says sales of Xbox are on track. Yet what did Microsoft project they would sell? 9 million to 11 million. How many did they sell? 8 million, and they hope to sell 1 million more by June 30. Therefore Microsoft might possibly meet the low end of their projections.

Sources...
CNet: PlayStation 2 shipments top 50 million

CNet: Microsoft says Xbox sales on track ("We expect to finish our fiscal year with just over 9 million units sold worldwide," Koch said.)

And finally, for the Microsoft shills that think Xbox will take the world by storm...
Suppliers dim Xbox sales picture

Smugly fanning the flames.

[Matey-O]

Slashdot LOVES articles that cast the Xbox in a poor light.

Here's my take:

Let's just say they 'cut bait' and stop production on the Xbox. What happens?

My 8-10 games continue to function.

The 6-8 games I'd like but don't yet own get CHEAP. (we have an Atari 2600 and 80 odd carts that we bought for pennies on the dollar in garage sales)

My Xbox still makes a killer DVD player.

I dunno 'bout you, but I feel I got my money's worth. On a dollar per hour basis, it's been a pretty good purchase.

And yet, I doubt it's future is in jeopardy less than 4 months after announceing Xbox Live.

Re:Smugly fanning the flames.

[Jason Earl]

Yes, as an XBox gamer I have to admit that the XBox is a neat system, and it should be with the amount of money that Microsoft is spending per customer. When you plunk down your $200 for an Xbox you are actually getting hardware worth quite a bit more than what you pay. However, as a Microsoft investor, I happen to think that the XBox is the stupidest thing Microsoft has ever done.

Microsoft simply loses too much money per customer to be able to turn a profit before Sony and Nintendo come out with their next gen consoles. The only reason that Microsoft hasn't pulled the plug is that they know how important the Wall Street analysts think XBox is for Microsoft's future. Microsoft has to come up with a new growth market if they want to justify their high Price/Earnings ratio, and right now the only real possibility is the XBox. If Microsoft dropped the XBox, then their stock price would drop. Since all of Microsoft's management are heavily invested in MSFT they would much rather have Microsoft waste money on the XBox then have the stock price drop.

So?

[Junky191]

Still, MS generates $1 Billion in pure profit every month. They could absorb a money-losing Xbox division for 50 years if they wanted to.

What it means for MOD chips

[Dugsmyname]

Wonder what this means for all the current Xbox Mod Chips?

The version 1.1 XBOX that started shipping in September of 2002 was hacked in about 1-2 weeks. This means that unless MSFT has really upped the ante with security, it will be more of a fun challenge to the MOD community, rather than a deterrent.

It's been 6 months since they've changed anything significant on the XBOX, so I'm sure the MOD community is waiting for a new challenge.

Re:Microsoft Propaganda

[Jace of Fuse!]

The PS2 is a remarkably inferior platform, but it does have a very large number of very high quality games. I will immediately be one of the first to point out that the PS2 lacks a great RATIO of good games vs. bad games, but that's a universal complaint anymore.

I have several pretty good games for the PS2, and several really good PS1 games. I havea lot of crap for the system, too... but at least I can say I have that many great games for the PS2.

For the XBox, I only have a few that I can honestly say I like. I've rented several, and the better ones weren't exclusives. I've even given away XBox games that I thought were total trash.

Halo is fab, and Buffy is neat. DOAX is neat. But overall the system IS lacking in great games. I mean to pick up Panzer Dragoon sOrta, since it'll be worth it. But c'mon, the systme has been out this long and the good games are only now starting to really trickle in, and the best ones are cross-platform.

That hardly says good things about the XBox.

The Gamecube is doing marginally better, since I can honestly say I only have one Gamecube game that I would honestly say I think sucks. Not that there aren't shitty games for the Gamecube, too, but most of those are obvious trash. The Nintnedo first party titles have all been top notch, and even ANIMAL CROSSING (as strange and childish as it is) has been a greater source of amusement to me than anything on the XBox.

Oh, and yes, I do have all three systems.

XBOX losses ?

[tmortn]

Hell they have sold 8 million units when essentially in competition with a system that had a year+ head start. Not to Mention Xbox figures to have a longer life than PSII and is in a great position to provide the higher value second tier system when PS3 hits the shelves and PSII game development falls off. Rough guess is at that point X-Box will be selling for 150 or less with a number of PC game ports hitting hard and heavy with alot of first efforts by primarily PC developers at the second teir game prices.

I think PSII is going to have a rough second tier life... I think they really goofed not having more memory or making it upgradable and the lack of an intialy integrated hard drive. Hard drive space is likely going to be very very necesarry in the console market before long and Xbox will be sitting pretty as a value system while it will cost to upgrade PSII and its system memory is fixed with less than Xbox.

Step two after PSIII hits the market they again hit the bleeding edge market late but this time with a system designed with all of their lessons learned ( IE better controller, smaller footprint ). They hope to break even but don't care if they take an ultimate loss again and take direct aim at whatever sony offers after the 3erd generation play station. The goal the next time around is to establish the system is worthy. Not to mention folks Xbox is not a garounteed loss yet, it may well break even or proove profitable in the long run.

Frankly I think MS could deal without penetrating the Japanese market so long as they can garner game design support for US titles or generate a stronger console content generation industry over here. My guess is they are after making the US market able to stand on its own feet in competition. at that point its anybodies game... however penetrating Japans very protective domestic market in an area with so much domestic pride is to me is a very very very difficult.

I am no Xbox fanboy.... my console system is a PSII and I love it... but it has its limitations and by all accounts it is a far more difficult system to develop for. X-box by contrast represents a set PC type of environment with similar development needs where you don't have to account for widely varying consumer hardware choices. This means given time and users the ease of porting PC titles will lead to more content from US game designers that have largely kept to the PC to date.

It will be interseting to see what Sony does to pre-emt these strengths.... a late market PSII with budget price ( no more than Xbox), upgraded memory, and with the hard drive/ network card included might deliver a real coup de grace to Xbox sales of any sort and put M$ at a severe disadvantage with Xbox V2 if they don't launch with PS3 in the battle for the next genration whether its worthy or not.

I hate M$ and little annoying things in their Xbox release like extra $$ on top of a too expensive release price to unlock DVD playback and an utter crap controller design seem to doom their venture. However, M$ is in it for the long haul and regardless of the people who back it I would love to see a stronger US console development market develop.

This *is* big news.

[badasscat]

I'm sorry, but this is more than $500 million MS has lost so far on Xbox, and that is big news no matter how you slice it. Does anyone honestly think MS got into this business in order to lose money? What would be the point? There are two possible reasons for MS to have gotten into the video game business, and only two:

1. To make profits. This is self explanatory.
2. To use the system to leverage their Windows business somehow, selling the system at a loss in order to eventually put some modified version of Media Center in your living room.

They're failing at #1, and as far a I know, #2 would be illegal - it's basically exactly what they were found guilty of in court already.

No company can continue to lose money at something forever. I'm sorry, but this is a publicly traded company and if I were holding MS shares there's not really anything MS could do at this point to convince me that getting into this business has been a good idea. Sony's profitable, Nintendo's profitable, MS is losing *large* amounts of money. What's wrong with this picture?

Almost lost in this story is that MS is now saying they're barely going to hit the low end of their sales forecasts. You think they expected to lose $384 million? They probably wouldn't have if they'd sold as many consoles as they'd hoped - this means less software sold, and fewer royalty payments. The fact is the Xbox is not doing well, however MS wants to spin it.

And regarding this Japanese company they're "propping up" - I would honestly doubt it's Sega, though it's possible. However, all of Sega's recently-released Xbox games were announced over a year ago (at the E3 prior to the Xbox's launch), and the only recent Xbox game I can recall being announced by Sega is Virtua Cop 3. That's honestly not a lot of support. More likely, the investment is in Tecmo - which has been devoting almost exclusive support to Xbox ever since its release, and which has two of the highest-profile titles ever released for the console - Dead or Alive 3 and Dead or Alive Extreme Beach Volleyball, not to mention the recently announced Dead or Alive: Code Cronus and the hinted-at Dead or Alive 4. All Xbox-exclusive. Sega, by contrast, hasn't released any million-sellers for Xbox, not even close, and hasn't announced much for the system lately.

Re:Doomed by blockbuster

[forkboy]

This could actually be a good thing for two reasons:

1) Game makers would make games that are actually worth playing. Nothing's worse than shelling out $50 for a stinker and being stuck with selling it back as a used game for $15 if you;re lucky.

2) Making games with longer playing times and/or high replayability. As you said, a 20 hour game can be beaten easily within a rental period. This is not so with longer, more involved games that have a lot of hidden content in addition to the main story, such as Grand Theft Auto. (Companies like Gamefly.com that offer unlimited game rentals for $20 a month change that argument though, it's still cheaper to rent two games and keep them for 2 months than it is to buy both and then resell them)

I dont see Blockbuster putting anyone out of business until they can a) offer a monthly unlimited rental plan and b) keep games that are actually worth playing in stock. (And don't forget that there are like 2000+ blockbuster stores un the US, with each of them buying 50-90% of the games for every available console...that's a pretty good subsidy, many of those games are awful and wouldn't have sold near that many copies)

Mod chips are legal, and Microsoft makes no laws.

[Inoshiro]

"If MS legalizes the mod chips then the Linux folk would completely abandon interest. "

No, there are always people who like to modify things. I'm happy to just buy Sega games, Tecmo games, and the odd non-Sega/Tecmo game (Splinter Cell, for example) for use on my Xbox. Legally, I have the right to do whatever I want with my Xbox, including using it as a toilet. I can put any chips I want into it, even PowerPC chips!

People don't want to modify their Xboxes because they legally restrained from that action, they want to modify them because it's a fairly compact (compared to a full tower PC) unit with all the important hardware for DTS/DD and HDTV in one unit.