Xbox Hackers, Linux, the DMCA, And Modchips

HardcoreGamer writes "The New York Times has a long article on Xbox hacking, why Microsoft hates it, and who does it (Google). 'Xbox hackers are exploiting Microsoft's business model, which is to sell Xbox hardware at a loss...' but Microsoft doesn't make the money back on software -- as it planned to -- if you decide to load up Xbox Linux. Where else can you get a PIII-733 with graphics and audio for $180? The reporter talked to the IDSA; Andrew Huang, author of 'Hacking the Xbox: An Introduction to Reverse Engineering'; a Manhattan exec who hacked his Xbox and said 'The reality is that if you could bypass Microsoft's operating system you would end up with a fairly powerful computer for less than $200;' and others. The article discusses the DMCA, modchips, the Xbox Linux Project and lots more. A good -- if long -- read. A shorter version of the story is at the International Herald Tribune. Best quote? 'Microsoft is a company passionate about innovation and creativity. We are also very committed to respect for others' intellectual property and we request the same respect applied to our innovations.'"

Comments

Respect ?

[theefer]

Since when is this word part of the capitalist vocabulary ? Doesn't seem to consistant with the ongoing lawsuits, FUD wars, hypocrisy, etc.

Exploiting other company's business model flaws is the basis of the world economy, so let's not be stupid, if they don't want flaws to be exploited, they've better not have flaws in the first place. Too bad, it's too late now.

Re:Respect ?

[gilesjuk]

Indeed, they would encase the whole PCB in opaque resin or glue the case shut if they wanted the XBox to be a huge secret. They didn't and so they must live with their decision.

Sure the business model is sell for a loss and make back the money on licensing etc.., this just exposes how stupid that business model is. It's being tried on printers and printer ink now, the consumer is getting screwed. Sure printers are affordable, but heavy users of inkjets would sooner pay more for the printer and have cheaper ink.

Re:Respect ?

[alienw]

You do realize the xbox has a place for an LPC header inside? The only thing you have to do to get a modchip in there is to solder in a header into the provided holes and plug in an LPC FlashROM chip on a circuit board. I'd say that's a pretty big flaw.

Re:Respect ?

[mikewolf]

are you kidding?

this is the same business model that gaming systems have used for years.

it makes perfect sense for video games...

the hardware is expensive, but if you can sell it for cheaper you can triple or quadruple your game sales revenue...

don't think this is some new business strategy that MS through the years, this is standard practice, and it works for gaming systems (otherwise all of the gaming companies would be out of business by now)

it might not make sense for printers, but i'm not sure that i agree with your comment about the ink cartridges, b/c why couldn't you buy generic cartridges and circumvent giving the manufacturer any money back????

Re:Respect ?

[gilesjuk]

It did make sense until the arrival of the internet.

Once a console's copy protection has been busted and the method is easy, then it's game over. See Dreamcast for an example of that.

Re:Respect ?

[Waffle Iron]

don't think this is some new business strategy that MS through the years, this is standard practice, and it works for gaming systems (otherwise all of the gaming companies would be out of business by now)

The main difference is that older gaming systems had hardware that was either an underpowered toy, or totally incompatible with any software, or both. It was intrinsically useless for most other purposes.

Microsoft may have made a mistake by boxing up a standard PC that can run off-the-shelf software, selling it below cost, and then trying to lock it up with a flimsy electronic scheme. I realize that they were trying to leverage PC game software for their platform, but there are downsides to that approach that they have to live with now.

Re:Respect ?

[kotj.mf]

it might not make sense for printers, but i'm not sure that i agree with your comment about the ink cartridges, b/c why couldn't you buy generic cartridges and circumvent giving the manufacturer any money back????

Because the printer manufacturer puts a chip in the cartridge that makes sure you can only use the manufacturer's ink, and then invokes the DMCA when a generic manufacturer attempts to circumvent that "feature." Pay attention.

Generic cartridges are quickly becoming a thing of the past.

Re:Respect ?

[fiftyvolts]

I would like to point out that the above post provides incomplete information. Console companies have done this for a long time, but all it has done is run their profits into the ground.

"Lies!" you say? well its not. Take exhibit A: the case of Sega Saturn vs Playstation. While Sega was trying to make the "Ultimate 2D machine," Sony was flexing its CE muscles and spending millions on researching how to manufacture their own chips cheaply and quickly for the playstation.

When they both were released the Saturn retailed for $399 and the playstation at (drum roll please) $299. Sega attempted to get in on the market by selling their product at a loss and match the $299 tag on the PSone. Sony on the other hand was _making_ money on the console because it had spent its time and effort on mass producing its own components. The Saturn, as we all know, was a business failure.

The same goes for the DreamCast and N64 which were both also sold at a loss. Time will tell on the XBox and GC. I think Nintendo might have learned their lesson and will tred more carefully, but MS... well, let's just say that the odds of the XBox making them money is quite low.

Sony is not selling the PS2 at a loss either, keep that in mind...

By the way the above can be read about in more detail on this site. It's more entertainning there anyway.

Re:Respect ?

[Waffle Iron]

does anyone seriously believe that enough people are going to buy an XBox and use it for non gaming purposes to actually hurt M$ financially ?.

Probably not. But they're worried that the broad availability of hacks around their XBox restriction technologies will allow widespread copying of games. That's a valid concern, but they would have been better off selling a box that was not usable as a PC.

Making it a PC attracts far more interest in hacking the box, which makes the circumvention methods much more easily available. This also makes it much more difficult to justify squashing the hackers on legal grounds because the small minority of people running Linux have an arguably valid reason to hack the box.

heh

[Wibla]

"We are also very committed to respect for others' intellectual property and we request the same respect applied to our innovations.'" Yea, we've seen some _Very_ good examples of that in the past...

Re:heh

[Anonymous Coward]

"We are also very committed to respect for others' intellectual property and we request the same respect applied to our innovations.'" Yea, we've seen some _Very_ good examples of that in the past...

I am wondering what they think is so innovative about the X-Box? It's just a PC with chip developed by Intel, a motherboard and graphics processor developed by NVidia and piss-poor security developed by god-knows-who. It is the cheapest possible way for them to get into the market. I honestly can't think of a single thing they've done that could be labelled "innovative".

Not Completely Valid

[grimani]

I think the P3-733 for 180 comparison is not completely valid.

The XBox is not really extensible like a regular PC. How many PCI slots do you have? How many USB/FireWire ports? As a console, many 'regular' features unnecessary for a console that we take for granted are not included.

This kinda limits the usefulness of the XBox.

It's kinda like those deals on the Dell server machines you can get with some creative configuration and coupon applications.

Sure, you get for $300 a full powered server machine...but it has no AGP slot. So much for gaming...

Are there updated drivers for the XBox video card available at all?

Re:Not Completely Valid

[dackroyd]

How many USB/FireWire ports?

Four USB ports. The Xbox controllers are USB devices, just with a different connector. The Xbox-Linux people sell usb-Xbox convertors.

Sure, you get for $300 a full powered server machine...but it has no AGP slot. So much for gaming...

Ex-squeeze me ? It's an nForce motherboard with a builtin GeForce 3 type card (Geforce 3 + a bit extra). So yeah you can't upgrade it to the latest card, but it's more powerful for graphics than 80% of the PCs in use for games today.

Are there updated drivers for the XBox video card available at all?

I believe the standard nVidia linux drivers just work on the XBox.

We're not hacking.

[mikeophile]

We're embracing and extending the XBox.

Creativity?

[DragonMagic]

So...

They're all for innovation and creativity... but you should respect their own...

Yet you can't innovate or create new items with their hardware that you PURCHASE, because they won't respect YOUR innovation and creativity.

Sounds like they want their cake and to eat it, too.

Re:fairly powerful computer for less than $200

[garcia]

Don't troll.

The fact of the matter is that an XBox has
TV-out and excellent graphics and sound cababilities.

Walmart machines do not.

People want to use the XBox as a multimedia center for their living room. A quote from another article related to this one (I refuse to read NYT) said something along the lines of, "the XBox looks excellent next to a TV in your living room, it's more silent than a typical PC, and its small form-factor make it perfect. Not exactly what Bill Gates had envisioned."

whatever, it is for the ability to say you did it

[AssFace]

To claim that they are doing it for price is a bit off. The people do it so that they can feel in some way they have gotten away with something. They are told that they shouldn't, then they do, and they gain bragging rights. They gain a tiny amount of control in a world that has little of it for the average perosn - they are briefly a David to the Goliath of Microsoft. The money isn't an issue.

True, to get a PIII 733, a NVidia graphics card, etc etc for $200 is a good deal at first glance I suppose.
Were I in the States, I could go to pricewatch and order me up some parts.
PIII 733 by itself is $67, you figure you still need a motherboard and case, that is easily another $80 at least, and then you need the graphics card...

But looking again, you can get a PIII 1G and the motherboard as a combo for $65.
You can get a case for about $30. You can get the video card for about $80.
So a better system for cheaper... and the thing is, that is only if you are still looking for the PIII, if you stepped up to an Athlon XP, you would then get far more processing power, and you would only be spending a little more.

Granted, that doesn't help you if you have no clue how to put together a system, and you only have $200... but I have a feeling the type of person willing to hack a perfectly good game system, and then run Linux on it, is going to be able to put together a computer system on their own.

In the end, I think the monetary reasons for hacking are non-existant, aside from those bad at math.
It is the fun factor and the thumb-your-nose-at-MS factor.

Reality Czech

[Asprin]

They are requesting respect for their innovations, huh?

IIRC, the whole idea was to take existing off-the-shelf PC parts that used an existing PC architecture and put them in a box that could easily mass produced with a very short time-to-market and an OS that allowed existing developers to leverage their existing skills.

Hmmm... That sounds familiar... now where have I heard that before?

Oh, of course! That's what made BG a gazillionaire in the first place!

I'm not against MS wanting to control a closed platform they developed, but I am insulted by their insistance that this is an IP issue. It's not an IP issue, it's a PP (physical property) issue. If they don't like people voiding the warranties on their hardware, they should have made their CDs spin backwards like Nintendo.

Microsoft at it again.

[Penguin2212]

"Microsoft is a company passionate about innovation and creativity. We are also very committed to respect for others' intellectual property and we request the same respect applied to our innovations."

My response to quote, "How long have you worked for Microsoft?"

So, where's the loss?

[Anonymous Coward]

All evidence I've seen regarding Microsoft 'losing money on the X-Box' is related to dolts who think they can go to pricewatch.com and figure out what an X-Box costs to produce.

Hey - jackasses - you're not Microsoft, and you're not purchasing millions of bits of hardware at a time. You aren't getting bulk discounts. You aren't making deals.

Anyone have any actual evidence that Microsoft loses money on each X-Box?

"My friend's second cousin's husband's acquaintance works for.." isn't evidence.

Re:So, where's the loss?

[DarkMan]

It comes from two sources. Firstly, standard practice in the console biz is to start selling the thing at a loss, with the expectation that you can optimise the production pipeline, so that you can make a profit on the boxes sold later. That's actually quite a specific price bracket, and is chosen to reduce the cost of entry, maximising profit from the system in totality (including game royalties). In effect, the hardware is being subsdised from the game royalties. Note that Sony started like that for both the PS1 and PS2, and now makes a small profit (I think it's around £20 a box) on the PS2.

Second piece: The original market price of the Xbox, claims that they were not going to drop the price, and then the round of price cuts. That's circumstansial, but if they were not selling the boxes at a loss [0] after those steep cuts, I'll be very surprised.

Interesting economics point: How many games does the average console owner have, per console? I'll take a stab at 4. Therefore, the correct thing to look at, from a business point of view, is not the profit per console - but the profit from console + 5 games. Me, I'd price the box so that the initial loss on the hardware is around the profit on 4 games [1]. Keep the initial cost's low, more adoption, and leach the money out of the customer base over time.

Now, that's all well and good, but none of that says how much profit is made on each box right now , only what they would have done at launch (loss), and near the end of the xbox lifetime (profit).

I'm going to accept that after the price dropped to 200, they were making a loss per box. They seemed quite forced into it, mainly by Sony, who had probably already improved the manufacture of PS2's, so they were not worried by the price cut.

Do they make a loss now?

Let me evade that for a moment, and discuss the development costs of the console. Aught they to be included in the 'cost' per unit sold? From a strictly business point of view - yes. You need to make back that money, before any profit is generated. From the 'does the manufacturer lose money on this sale' point of view - no. You can make the dev costs back from other sales. This complicates the whole question.

Note that this is based on economic arguemnts, and this sort of anaylsis will applie to any sales model that has a buy in cost that is greater than the per unit cost (printers, razor blades etc).

Let me link to a few facts: BBC: Microst loose $177 million. Note that that's from September last year, and is for 3 months preceding, off revenue of $1.28 billion

Q4 2002 (CNET) made a $348 million loss for the division.

Next quarter (Q1 2003) at CNET, and it's $190 million loss.

And it's too early for Q2 2003 data (rember that we need by divisional break downs, not overall profits for this).

So, they're definitly making a loss somewhere in their buisness, within the division that handles the Xbox. Is that on the xbox itself, or something else? [2]

No one can answear that. Apparently Mircosoft have confirmend that they make a loss on the hardware.

I'll take a different take to the linked article. The initial launch price was $300. Assume microsoft get $7 per game (average of the 5-10 range), and that would put the manufacturing costs at $330, or so; consistant with the analysts estimates in the above link.

They were forced to drop the price to $200 before they wanted to - I think that's clear. So suddently they were makeing over $100 loss per system. How much had they managed to reduce costs by? The above link trys to assert that they drop in lines with Moores law - that's crap [3]. My guess is that the cost is sliding down into the $220 to 250 range, based off the fact the M

Re:*sigh*

[Anonymous Coward]

Ok, build me a $180 computer.

It must have at least:
733MHz PIII
5.1 channel surround sound audio
GeForce 3 graphics
64 MB RAM
8/10 GB HD
4 USB ports
TV out and support for HDTV
Ethernet jack
DVD-ROM
1 controller
2 games

I'll ignore the other parts of a computer (such as the power supply) as I'm sure you'll factor those into your equation.

Now, assuming you can find a machine with all of those components for $180, let me know how well it plays games, DVDs, etc. Will it play games with the graphical qualities of Halo, JSRF, or Brute Force? Will I be able to hear such games in 5.1 surround sound? Can I watch DVDs on this machine with my HDTV (after some hacks to enable progressive-scan)? Will the machine be able to pump out DTS surround signals to my reciever like the XBOX can?

I'm not saying you can't build a decent media computer for cheap, but I hardly think you should discount the power and capabilities (both before and after hacking) of the XBOX.

MS has been convicted for IP theft in France

[Homology]

If MS respected other companies IP so much, why the following : (http://www.gnu.org.pe/resmseng.html)

As an example, the condemnation by the Commercial Court of Nanterre, France, on 27th September 2001 of Microsoft Corp. to a penalty of 3 million francs in damages and interest, for violation of intellectual property (piracy, to use the unfortunate term that your firm commonly uses in its publicity).

The link is to an english translation of the response by the Peruean congressman Edgar Villanueva to US pressure to abandon open source plans.

Repercussions for Xbox Live

[vjzuylen]

The EFF's Fred von Lohmann made an interesting point in the article:

"Others will say that this is about piracy and all that, but they forget that the principle of tinkering with the stuff that you own was the principle on which the entire personal computer industry was founded," he added. "This is basic business and basic science in the technology world and we think that this right to tinker, this freedom to tinker, remains legally protected."

While I certainly believe in the right to tinker with an Xbox you paid for and use by yourself, I see a shady area when it comes to interaction with other (unmodified) Xboxes - like on Xbox Live. I'm talking about cheating here, but I think the same can be applied to use of compromised software in an online environment.

Online PC games have been plagued by cheating players since day one, because of the ease with which their client software can be modified. Xbox Live does not have this problem yet (so far cheaters have been exploiting existing flaws in Xbox games), but I fear this will not last for much longer if easy, modchip-less Xbox hacks become commonplace.

Which brings me to my point: just how far should your right to tinker extend? What if it interferes with my enjoyment of the product? Especially since I paid for the product too, and I'm using it for its intended purposes while you're not?

This is one of the main concerns of many Xbox Live users like myself, and I haven't seen this issue addressed properly by either the media or the Xbox hackers. Can anyone enlighten me? How do Xbox hackers feel about this matter? Are they taking it into consideration?

Re:MS Needs To Use Their Engineers, Not Lawyers

[cait56]

There are really three distinct issues here:

• Selling of modded X-Boxes is clearly an abuse of Microsoft's Trademark.
• Modding the X-Box to bypass game security is clearly a violation of the DMCA. Even if you are running unauthorized third-party games rather than illegal copies, you are still using Microsoft's Intellectual Property contrary to the software lisence that was granted with the sale of the unit.
• On the other hand, even if disrupts Microsoft's business plans, you have the right to throw your X-Box into th trash. If you have th right to throw it away, you have the right to salvage the parts. My hunch is that if you can turn an X-Box into a Linux box without using Microsoft ROMs that you have merely salvaged parts that you owned anyway. That's completely legit, especially if you are essentially just enabling the PC industry standard parts.

Does this really hurt Bill?

[snoopyjd]

It seems to me that their strategy was to lower the price of the XBox to encourage more people to buy it, and it doesn't seem like they are losing money on the actual hardware (marketing, R&D, and other accounting matters may likely show a loss). Additionally, it seems like they have been trying to keep this debate going in the media and on the internet.

Therefore, by giving their hardware praise and talking about how inexpensive it is I think a lot of people are unwittingly playing right into MS's hand. When people see these comments they are likely to buy the product and use it however they see fit, but will probably buy a few games, and maybe participate in on-line gaming. This is exactly what Bill is looking for.

Of course such forward thinking and creative marketing may not have occurred to MS, but then again they did build a corporate empire based on a decision to lose money on their sales of DOS to IBM thereby encouraging millions of other users to lock themselves into their products. But then again I could be another MS spy sent to discourage people from hacking the Xboxes.