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Xbox Sees Earnings Lag, Stronger Sales
Thanks to GameSpot for its article discussing the Xbox-related financial results from Microsoft's Q4/annual 2004 earnings, released yesterday. The article notes: "The Home and Entertainment Group, which includes the Xbox division, had a $339 million operating loss for the quarter on revenue of $499 million and anemic revenue growth of 3 percent - the lowest growth rate of any of Microsoft's seven business segments. Though Microsoft doesn't break out separate results for the Xbox, it's pretty clear that the console business is still a strategic investment, not a profit center." However, it's not all bad news, since "Xbox shipments increased 27 percent over the same period a year ago. Microsoft reports 15.5 million units sold worldwide through the end of June: 1.5 million in Asia Pacific, 3.9 million in Europe, and 10.1 million in North America. The company also quoted industry research group NPD's claim that Xbox has a 33 percent market share in the US, with 50 percent growth in software sales over Q4 last year." Does this bode well for the apparent 2005 launch of Xbox 2?
I think it really all depends on what specs the Xbox2 has. If the Xbox2 won't play first gen games then I think this buying trend (which appears to be people have waited a while to buy) will not be good for the Xbox2 release because all the games bought in December of 2004 and January 2005 (like Jade Empire and Halo 2) will then be useless. And even though Penny-Arcade and the like will own every console known to man normal people like myself (who just purchased an Xbox a few months ago) will wait a few years to purchase a new system. I think this will lead to poor sales for the Xbox2 unless the Xbox1 games will work with the Xbox2 and then maybe I could pay ~$150 (after selling the Xbox for $50) for a new console and I wouldn't have to buy any games right away.
it's what Sony does, or doesn't, do to counter.
Nintendo has already said they're trying to sidestep the next generation of consoles; the focus is going to be on "Revolution" (whatever the heck it is). So they're out, and will probably be content with 20% market share. Look at Nintendo as trying to transition to the Apple business model, with the Gameboy Advance their bread and butter.
Xbox being 33% in the USA market is a good thing; they've got strong sales and they're getting better as the PS2's hardware just can't keep up with new games. Compare PS2 Spider-Man 2 to the Xbox version, the PS2 version looks like ass.
The trick for Microsoft now is to leverage themselves so that they're the next-buy instead of the PS3. They're 33% in the console market right now because the majority of Xbox owners also own a PS2. When crossover titles come out, this hurts them - people pick one console or the other as their primary, and only get the "must have" titles on the second.
It will help immensely for early adoption sales, however, for Microsoft to have the Xbox2 compatible with Xbox games; The Playstation did the same, and people saw it as an "upgrade" rather than a whole new platform. This enabled them to keep a lot of customers, as opposed to Nintendo's N64 being abandoned by many players for the Playstation - you can bet they'd have had better luck if the N64 had been backwards compatible with the SNES.
Of course, Microsoft could REALLY kick ass if someone (them or a third party; preferably them, and in the box) came out with an emulation layer that let the Xbox2 play Playstation/Playstation2 titles as well... they're moving to a RISC processor, so it shouldn't be all THAT hard, especially since they're emulating something that ran at an order of magnitude less clock speed.