Xbox 2 to Release in Fall of This Year

GamesIndustry.biz has the news that the Xbox 2 will be launched sometime in late fall of this year. With EA games already working on Xbox 2 titles and rumors of a name for the console in circulation, it looks like the first of the next-gen consoles will be here soon. From the article: "Many have expressed concern that Microsoft is forcing the next generation of console hardware too early, and that the current generation still has much to achieve. The most famous example of this came from then Nintendo of Europe MD David Gosen speaking at an ELSPA summit in London last October, where he lambasted Microsoft for pushing a next generation machine to market in 2005, and even went so far as to question Microsoft's motivation as profit." Additionally, the Seattle Post-Intelligencer has Balmer saying that they will "blow by Sony" with their next console.

Comments

Personally

[mcc]

I'd tend to suspect-- and if this news is true suspect even more-- Microsoft's goal with the XBox2 very much isn't profit. I mean, the "maybe it's profit" bit in the article is still a stupid comment, you're right. But I think the comment's wrong.

The thing is Microsoft seems very willing to do things for motivations other than profit. All of Microsoft's divisions except Server, OS and Office are consistent and heavy money losers. The XBox has been no exception. Microsoft doesn't really seem to ever show signs of minding this. If it's for purposes of expansion, no amount of money wasted seems to be too great.

Now, mind you, Microsoft insists they do very much intend to make a profit on the XBox 2. They claim this has been the goal all along, lose money on the XBox, make it back on the XBox2. But as I said, I'd question this. Here's why.

The chief reason the XBox has been such a money loser seems to be the cost of the console. Microsoft went out and bought a bunch of relatively expensive commodity PC components from off-the-shelf companies to build the XBox from, and the result seems to have been a console so expensive to manufacture that no realistic amount of game license sales that a single consumer might generate could recoup the loss from selling them that XBox. All signs are Microsoft has learned at least some lesson from the XBox that they will be applying on the XBox 2. Leaked information so far indicates that Microsoft has dropped the hard drive and will be contracting to more traditional video game console contractors-- like IBM-- rather than trying to buy PC components (important because IBM, since they're geared for contracting, will be able to lower their prices over time, whereas PC vendors, since they're geared for bulk, if anything raise prices over time-- because who, for example, makes 8GB hard drives anymore?). This by itself would indicate Microsoft is finally in a position to start making money-- though they'd have to make an awful lot to recoup the billions in losses from the XBox 1-- since they seem to be taking steps to manufacture a console that isn't sold at a large loss.

But I think Microsoft has given indication they aren't going to be taking advantage of that position. The problem is the release date. Microsoft has been very explicit that they intend to beat the PS3 and N5 to market-- and if this article is right, they'll be beating it to market by a LOT. But they probably realize at some level that whether they do that or not, they're going to have to retain the technical lead. Microsoft's entire strategy this generation has been based almost entirely on having the best hardware and attracting developers and users through that. They can't change strategies that quickly; surrendering the technical lead to Sony means potentially surrendering a huge chunk of their fanbase from this generation at the same time, if Sony shows even a hint of competence in marketing. This presents a problem. With the XBox, Microsoft had the advantage of two years to tinker with their hardware and let technology improve after the PS2 was released. With the XBox 2, Microsoft will be giving (or expect to be giving) Sony as much of an extra year to prepare their console, plus they'll have to overcome Sony's crazy vector processing ways (which were enough the PS2 was able to almost keep pace with the XBox and Gamecube when programmed by experts, despite being two years older). This would mean that they would have to design the box to be [i]so[/i] powerful that PPC or no, Hard drive or no, it's going to be sold at a loss.

If I'm right about this, and Microsoft does continue selling the XBox 2 at a loss anywhere near the scale of the XBox-- this seems to mean Microsoft simply doesn't, and never has, cared about profit with the XBox, their "it'll make money eventually" profits aside. Microsoft can sell at some loss and still make a profit, of course, technically, maybe, but the chances of this are so shaky it shows profit isn't actually a goal-- just a nice