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Microsoft Loses $126 Per Unit on XBox 360
ahess247 writes "BusinessWeek has taken a look at the insides of the XBox 360 and with the a little help from market researcher iSuppli determined that Microsoft is continuing its tradition to taking a big loss on the console in hopes of making a profit on games. From the article: "An up-close look at the components and other materials used in the high-end version of the Xbox 360, which contains a hard drive, found that the materials inside the unit cost Microsoft $470 before assembly. The console sells at retail for $399, meaning a loss of $71 per unit -- and that is just the start. Other items packaged with the console -- including the power supply, cables, and controllers -- add another $55 to Microsoft's cost, pushing the loss per unit to $126."
OK they lose money selling the hook. If buyers purchase enough games or buy into XBox Live, for a nominal monthly fee, they get it all back and then some. The business model pioneered by Atari, Sega, Nintendo, Sony and before that drug dealers all the way back to the days of the opium trade.
What's actually funny (ironic, maybe ha-ha, too) is these sales, assuming the sales actually go through, will enable people to profit at Microsoft's expense. When was the last time you did that?
Oh, and beyond the cost of parts and assembly, don't forget packaging (a good box with packing material is much more than you think, especially if boxes are damaged in transit and need to be replaced, small wonder HP ships expensive Athlon64 laptops in plain brown wrappers) plus the cost of transporation and logistics, and adverising, and development costs. The loss is a bit more than that $126. Why does the fascination with loss-per-unit only focus on parts?
I tend to think Sony still has significant advantage over Microsoft, thanks to economies of scale, they make many other consumer electronics items and can combine channels, where Microsoft will be selling this one thing.
let me know when they have a network version of m.u.l.e. or mail order monsters
A feeling of having made the same mistake before: Deja Foobar
Some with the "MS=monopoly" opinion may call this an anti-competitive move, yet I wonder about the loss-leader aspect of the console itself.
Could some of the suppliers actually buy 1M X360's, tear them down and resell the parts to Microsoft for a profit?
How much, per title sold, does MS receive in licensing fees? $5? $10?
Did MS ever recoup any money (or even profit at all) from the original X?
Do MS shareholders approve of the loss? If so, it is their money to lose.
If you look at MS' "monopoly" use of the loss leader and see that Nintendo and Sony were both still able to compete, why do people still complain about these tactics? It seems to me that it is not anti-competitive but it actually brings more gamers into the market.
This gives Sony and Nintendo a constantly fresh group to entice into their systems.
The hard cost in the article also doesn't take any net costs into account: R&D, technical support, marketing (x10) or updates. I bet the actual loss per unit is double the figure.
I'm surprised we don't see cell-phone-like sales tactics: Buy an X360 for $99 with a 2 year X-Box Live commitment. Maybe it is because the market is too young to sign a contract?
I own multiple X's, but only maybe 8 titles (6 were 2nd hand). The X is a great MCE extender. That is my sole reason for wanting an X360.
Linux this baby.
"It's so convenient to have a system where everyone is a criminal" - A. Hitler
Sell enough and the per unit loss approaches zero.
So why is it that there was so much controversy about Microsoft killing Netscape by bundling IE with Windows, but everyone seems cool about them doing this (and indeed predicted it)? Is it just because Sony and Nintendo will inevitably do the same, so we don't have a true underdog to root for?
I'll make you a deal, Microsoft. If you send me 100 bucks, I won't even buy an Xbox.
Electric Monkey Pants
When the PS2 was first released it was a loss leader for Sony too..
You really think the PS3 won't do the same?
Oh yeah wait, I forgot this is Slashdot, home of supposed Linux fanatics, yet more than 70% of the visitors to the site are still Windows users... imagine that.
I always thought this was amazing when they did this with the original Xbox, but I never heard of if it paid off or not. Perhaps it did by providing this kind of market share, but I've never heard any hard numbers of it the games made up the difference in the end. Regardless, with the crashing reports it seems like this is another rush to market item trying to be everything for everybody (iPod phone I'm looking at you).
fak3r.com
It might be worth while to know that some of the bundles out there go for well over $470. Perhaps Microsoft was hoping more people would buy these instead, as some stores only offer these. http://www.ebgames.com/ebx/categories/systems/xbox 360/
The core bundle runs for $599.93 and the Ultimate bundle runs for $699.92.
Everyone knows you don't make money on the pipe...it's the stuff you put into it that provides the real cash. Cell phones and razors have been using this model for a while now.
____
~ |rip/\/\aster /\/\onkey
Billy Boy can probably look between the cushions of his couch and find more than that.
Microsoft has been out of the "making money" business for so long. All Gates really wants is attention at this point.
MS isn't getting the retail price, they are getting a wholesale price. Isn't retail markup usually in the 100% range? So MS is losing more like $325 per unit.
It's actually worse for Microsoft. The $126 loss statement doesn't take take the fact that stores make a profit into account. Thus the full retail prices does not go back to Microsoft.
Add in marketing, shipping, beta testing, opportunity cost and everything else, and I bet that the real loss per box is much higer.
What are you eating? isItVeg?.
Don't like Microsoft? Just don't buy the damn thing....
Buses stop at a bus station
Trains stop at a train station
On my desk there's a workstation....
If it keeps crashing like a windows95 box, MS will lose much more than $126 per unit... pfft
Support NYCountryLawyer RIAA vs People
Seeing that they are selling for over $800 on ebay, they seem to be losing a bit of money ... not that they need it or anything.
OK they lose money selling the hook. If buyers purchase enough games or buy into XBox Live, for a nominal monthly fee, they get it all back and then some. The business model pioneered by Atari, Sega, Nintendo, Sony and before that drug dealers all the way back to the days of the opium trade.
A lot of companies do this sort of stuff deliberately. For example, Wal-mart will sell 2 liter pop bottles at a loss because they know if they can get people to buy the pop they are more likely to think, "Oh I think I should get X while I'm here." It's a business method that ironically works too well for these companies to just ignore. They obviously wouldn't do it if it didn't work since they are all in it for a profit -- but this can easily be a slippery slope. Since MS nets around $24 million/year at least I don't think they'll be too worried. The essential question is, who would buy the system if they weren't going to game with it?
Heh, looks like they're not subsidising the price anything like as much in UK:
UK price: £280 inc tax / $482
Sales Tax: £49 / $84
Net price: £231 / $398
Build price: £273 / $470
Net loss: £42 / $72
Ironic really, especially considering the historically high console sales in UK / population, and relatively efficient distribution available.
Maybe the difference is retail margin? I'd expect it is, given that Game Group has a near monopoly on videogame sales here.
Don't forget to factor in the retail markup. I doubt the retailers are selling this with no markup, but I suppose it's possible.
If you , me and 175,000,000 of our closest friends all but one this weekend, we'll bankrupt the buggers! w00t!
If brevity is the soul of wit, then how does one explain Twitter?
When you're a big player and can afford to loose money, doing this makes perfect sense. Sure you'll make money off of royalties and accessories and subscriptions, etcetera, but that's not the point. The object is not to make money at this point, what they're gunning for is market share.
When the market is crowded and there isn't much room to butt in, you have to sell it at a loss to attract buyers. Nintendo and Sony are already household names and proved their worth decades ago. But this is something relatively new for Microsoft. So, in order to grab a peice of the market share pie and get their name around, they have to make it attractive to purchase.
Take for example the market of DVD players. How many brands are out there? Too many. Everyone wants a peice of that pie so they'll try to lower costs as much as possible and mark their price to get the lowest margins possible. The bet is to flood the market with enough units of your name so that when everyone else who makes DVD players has begun to die off, yours is the one people think of when they go to get a new DVD player.
No, there isn't a conspiracy here, folks, it's just a company willing to take it in the shorts for bit until the have a big enough market share. (It's just with Microsoft that they want 99% of it.)
We're all hypocrites. We all have hidden parts, it's the contrast between them that make us more a hypocrite than others
That only helps if the component prices drop faster than the console price does. Once the PS3 and the Revolution come out, expect to see the XBox360 drop in price.
*sigh* back to work...
I hate articles like this.
They may give the reader a rough idea of the current BOM costs, but utterly fail to include many other sources of revenue.
1. Developer Fees. I'm thinking you can't develop a commercial product for free. I know you can't with a Sony console, I would be surprised to find out MS is giving that away.
2. Royalty Fees. I'm sure there's royalties per game sold back to MS. I bet it's the same for aftermarket controllers too. It's the "razor blade" market strategy.
3. Manufacturing Costs. They will chop about a third off the manufacturing costs as components become cheaper and manufacturing becomes more efficient.
4. I'm guessing their BOM costs are very well-negotiated and rock-bottom low, so I'm thinking the numbers they use are too high.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
Don't underestimate m$ pricing. E.g. see what a
ethernet cable
costs in Europe. That is 30 euros, mister!
And for the Americans: that is 35 US dollar, for an ethernet cable.
Damn! That is a profit margin of at least 10000 percent.
Bram
Bram Stolk http://stolk.org/tlctc/
power supply, cables, and controllers -- add another $55
*Retail Price* *Maybe* - The estimates given for the raw materials cost sound suspect. I'm pretty sure that a contract to deliver parts for the XBox comes with a much lower price per unit than your average trip to the computer superstore.
=)
That made my day.
You know Sony, when they roll out their PS3 will price it so aggressively that Microsoft will have to cut XBox prices. They only get away the price they have now because they're competing with prior generation consoles. Assuming Nintendo also roll out something they market pressure will increase for a price drop.
A feeling of having made the same mistake before: Deja Foobar
Except you can buy an Xbox for $140 new now because the prices on the hardware have to naturally fall to stay competetive as well.
All game machines start out at several hundreds of dollars until the sucker market is exhausted and you have to start targetting people who are only willing to pay $200, then the ones who will only pay $150, then the ones who will only pay $100.
The machine's price will fall at a faster rate than the cost will.
I voted for Bob Dole once. That was the smartest thing I ever did since he lost.
this is precisely what didn't happen with the Xbox - in fact, the Intel CPUs actually went up in price, as they became obsolete and unlike anything else Intel were producing...
init 11 - for when you need that edge.
It cemented their place as a solid second in the video game market -- a market already quite a bit bigger than the film industry. It got them so recognized as a powerhouse that they have a real chance to gun for first in the next round.
They may have lost billions doing it, but thats the cost of entry into a market that big. Especially when it gives you a prime position in the living room at a time that all home entertaiment is going digital, pipes are getting bigger and bigger, and people are starting to get used to shelling out hundreds a month on their various digital services.
1. They have nowhere near a monopoly in the game market. So no, there is no oversight, nor should there be.
2. If this is "dumping" then you should jump up and down about gas stations (gas is often sold at or near cost), Coke and Pepsi (with a true monopoly, fountain drinks are sold at or below cost), all cell phone companies (my cell phones were all free), etc.
3. They're not competing on quality? I don't exactly have $400 burning a hole in my pocket that I have to spend on a game machine. Considering that the XBox 360 is the most expensive console out there right now, there is absolutely no dumping going on.
Idiot.
Not $10 per disc bought.. $10 per disc pressed.
That's not too surprising. The original xBox is, after all, an x86 PC, but sells for less than one. The PS2 is a low-end MIPS processor and some wierd vector units, hard to program but cheap to make. The xBox 360 is a new architecture, but not, apparently, a cheaper one.
In the end, Microsoft stockholders would be better off if Microsoft got out of the game console business. It's a money drain.
Right, because no other company can compete with Microsoft in the console market.
Socialism: A feeling of discontent and resentment caused by a desire for the possessions or qualities of another.
See, I never buy these numbers. They're always based on "Average" costs, not the price of the inputs. Anyone who took Econ 101 knows that "Average" costs is a manufactured number; the real measure of cost is marginal costs, i.e. the actual cost of the inputs that go into making a single unit.
So it is possible to sell a unit under what the market perceives as your average cost and make money, because, by definition, if you raise the denominator (units), then your "costs" go down. Lots of people in other industries have done this (e.g. Lexus) - figure out what you think you can sell at a various price points and then price accordingly.
This is not to say that MSFT is not making a loss on its consoles, but I suspect it's significantly less than $124. Figuring that an average console owner buys 20 games over the life of the console, and MSFT gets $10/game in royalties (ignoring MSFT games and console licensing costs for now), MSFT stands to earn $200 from software over the life of the console, for a total gain of $76 over the life of the console. Given that that period could be 4-5 years, they wouldn't be selling at a loss of $124 per console - the ROI would not justify the investment (for a company that is MSFT's size, anything less than 15% ROI - maybe even higher - would be untenable).
You would think a business rag would get that, but apparently not.
So all the Anti-Microsoft-geeks on slashdot will now run out to buy a console just to hurt Microsoft!
Still, you could have fun smashing it in public.
Oh, say does that Star-Spangled Banner entwine / The myrtle of Venus with Bacchus's vine?
1. Buy 200 billion Xbox 360s.
2. MS loses 25.2 trillion dollars.
3. No one buy any games for these 360's so no royalties go to now bankrupt MS.
4. Port OSX and Linux to Xbox 360.
5. Network together all 200 billion 360s to make ULTRAMAX, the supreme overlord computer that controls everyones daily lives.
6. ??? (who knows what the future will hold then).
Let's get going on this people.
"Leo Fender was in a 'state of grace' when he designed the Stratocaster." -- Paul Reed Smith
For those that hate MS and buy and xbox to put Linux on it, these aren't customers who will later have an MS-centric media center. If you're only buying the hardware and using it for your own software you're hurting Microsoft. It doesn't get Microsoft any closer to controlling your living room.
Developers: We can use your help.
First of all, did you read the article yourself? Sega sold the saturn at a loss, that was before the xbox.
Second, he pretends that sega lost money on the dreamcast. They may have sold the console at a loss at first (I'm not sure), but the dreamcast and its games made sega millions. They didn't leave the business because of the dreamcast, they left the business cause they were already screwed, the dreamcast just couldn't save them.
Not really. Sony was able to drive down the cost of their console because it owned all of the pieces and could integrate them. However, with the original XBox the manufacturing costs basically stayed level over the entire life of the console. Microsoft still loses over a hundred bucks when it sells an original XBox today. Microsoft's problem with the original XBox was that it specced what were basically commodity parts when it launched. It chose the least expensive hard drive that it could find, a processor that was already in the sweet spot for price/performance, and a graphics chipset that was made by a competitor of its processor. No integration was possible, and the only component that hadn't had all of the profit squeezed out of it was the memory. While it is certainly true that these components get cheaper over time, there is a floor price below which the price doesn't drop. That's why newer XBoxes come with larger hard drives than the original run of XBoxes. Microsoft would happily purchase 8G hard drives if someone was offering them at a lower price than 20G hard drives, but no one is. Likewise Intel is still charging almost the same price for the XBox processors that it did when the XBox first came out. Microsoft's XBox bought Microsoft a spot at the table, but it did so because Microsoft was willing to give away billions in hardware. The XBox has lost nearly 3 billion dollars over its lifetime, and it is still losing money.
It appears that this time Microsoft has essentially made the same mistake with the 360. It's possible that IBM's Cell processors will drop dramatically in price over their lifetime, but both Sony and Nintendo will also be using variants of the same chip (and Sony owns enough of the technology that it will probably benefit most). You can guarantee that if Microsoft comes close to making a profit that Nintendo and Sony will simply undercut them. Microsoft has also tied a great deal of the functionality of the XBox to a hard drive, and the price on those is not likely to drop substantially over time.
Microsoft is giving away too much hardware yet again, and it is going to bite them.
Hey, thanks for making the assumption that everybody who was bothered by the rootkit is only going to boycott Sony publishing!
Sony uses the Sony brand everywhere because of the brand recognition it provides, so when one part of Sony fucks up, all of Sony fucks up.
"This is considered plagiarism."
Sony tends to lose a little money on each console for the first 6 to 12 months of sales and then as production volumes and process improvements come into play, they start seeing a small profit on the consoles, even as the prices get cut through the lifespan of the console. They're willing to eat a little of their potential profits to get the box out into the market. Now, Microsoft's blowing money left and right by comparison.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
Remember Atari did NOT actually charge to license games for the 2600, so they had to be making a profit on the hardware. However, that led to some REALLY bad games being produced, and people associated the bad games with Atari, thus abandoning the franchise. When the NES came on the scene, Nintendo really started the "pay us to make a game for our console" business.
Monstar L
Comment removed based on user account deletion
What you really have to look at is the price that microsoft is paying for components, etc. There are many products where the sum value of the individual parts may in fact exceed the item value (for example, car parts individually can be incredible expensive).
When they are buying at volume from parts sellers, they could be getting quite a cut on the cost of components. I doubt that MS is about to reveal the actual cost of components too, though they might be happy to go along with the idea of "selling at high loss" to make the 360 look like more of a bargain.
One must remember that the FDIC approached Microsoft a while back with the comment that they were sitting on tens of billions of dollars. And that they needed to a) give out a dividend and b) re-invest said capital as a responsibility to their share-holders or be fined for violation.
;)
In other words, Microsoft was basically told they needed to re-invest 50% of their cash hoard. So the Xbox gave them a strong "market" investment area. And allowed them to burn thru "investment capital" while at the same time building their portfolio. So when Microsoft loses $350 million a year on the Xbox. This is in fact not outside the scope. It is new market capitalization. And they can now point to such investment in order to avoid fines and legal lawsuits from the investment end.
While at the same time, they buttress their core division by ensuring that if home entertainment consoles become the new "home PCs" they have a strong footing in the game. So it was both a protective and expansive move in a multi-faceted levels.
I also imagine that the Xbox360 is going to do what many thought the original Xbox would (but never did). It's going to crossover. I expect in the third year you will see Microsoft offer a Keyboard, XIE browser, and Live accounts will include email and messenger compatibility with MSN Messenger. Oh...and possibly the following year if such is successful. Office lite....subscription service.
I know better than this, and really, so do you if you thought about this just a little bit...
Developer costs have to be kept low so that people will produce for a given console in the first place- if you extract part of the costs of the console losses even slightly from the developers, they'll very probably skip the console in question and go to another one. It's as simple as that. As a developer, if I'm not going to see a return on a run that ends up producing at least a wash on sales, it's just not going to get done as I'm supposed to be in the business of making money. I have to pay per instance just to run on the damn thing so people can play my game. I have to pay for a developer station so I can test for deploy. I have to pay for a runtime engine or roll my own that'll run on it. And, so forth... All this adds up. The amount of money they "recoup" on developer fees alone is in the noise floor here. It doesn't do anything for their bottom line- it does, however, regulate who gets to provide games and the quality level though. It has to meet with Microsoft's final stamp of approval or it doesn't ship for X-Box/XB360 and you have to pony up some cash and pay a portion of your profits back to them to be able to run on it. That's a bar against any Joe Shmoe wannabe game developer from producing something for sale that makes their console(s) look bad.
Royalties is the only place they expect to really see a return on things at this point (No guarantees of production process improvements- and you'd better NOT be betting on that as that's counting chickens before they hatch...) so they need 13 titles to be sold per XB360 unit currently ever sold to begin see a profit. This means that in order to be profitable, they're going to have to stay the course for at least 2-3 years at minimum to start seeing profits on this mess.
Production process improvements come over time, typically somewhere between 1-3 years of production. Sometimes within 6 months, but usually it's 12-18 months into it that you start really seeing anything out of that. And that's if you've designed everything right. Sometimes you get a design that won't see benefits from production improvements for years. You can't bet on that sort of thing unless you've designed them in from the start and they're more due to volume than device improvements when you run that play. At $400+ per unit, any volume discounts will also be in the noise floor for some time to come as they're already seeing those discounts with what they're producing in the first place.
The numbers being high? Not really. These prices I'm seeing in the article are conservative, as in being close to what they're probably seeing in costs.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
I really doubt these analysts have accurate information on the component costs of the XBox. You would be amazed at the discounts a large company can strongarm out of suppliers. It's likely that Microsoft has a cost+ model for some of the components or set it's own prices regardless of what price the supplier asks for or what the supplier price the sells the same product to other customers. Cost+ is where Microsoft would tell the supplier "It costs you $50 to make a hard drive so I will pay you $51 for your hard drive, you'll make your money on volume". Microsoft may even dictate the prices of the components they're buying. I've seen $300 processors turn into $75 because the customer was large enough to dictate terms "or else". The XBox is probably losing money per sale, but not as much as analysts estimate.
Sony are better at it. They also can tap into their own Consumer Electronics units and distribution channels to minimize development, manufacturing and distribution costs. Microsoft is a software company at the core trying to sell hardware. They never seem able to make any money at that, which brings to mind the phrase 'stick with your core competency'
They're trying to carve out the Home Entertainment market, but it's crystal clear they just don't understand it. Home Entertaiment electronics are disposable.
A feeling of having made the same mistake before: Deja Foobar
People just post these XBox money-loss stats to speed development on the Linux port. ;^)
Weaselmancer
rediculous.
All it takes is a newer, flashier game and gamers will drop expensive consoles like a handfull of molten lead and run to the console which it plays on.
This should be evident to anyone who has observed gamers, over the past decade, who would spend over $2,000 to have the ultimate PC to play Doom or something like it on. They don't care about the box, they care about the game. Many gamers have more than one console, which I think further underscores the point.
A feeling of having made the same mistake before: Deja Foobar
Its interesting, irritating, and I guess expected. When an op-ed for a newspaper puts out financial numbers the post subject is fact. But when Merrill Lynch, one of the countries biggest financial institution puts out a report, Slashdot has a "?" to it. Check it out here.
What is the difference you ask? Well one doesn't say MS sucks and the other does. One compares both PS3/Xbox with numbers and the other doesn't give any. Anyone interested in more accurate PS3/Xbox 360 breakdown you can go here (or here to get the chart). Again these numbers are according to Merrill Lynch a leading investment firm, (not a newspaper or an op-ed).
Take a look at them before you flame me.
"IBM also has designed chips at the heart of the competing video-game systems -- the Playstation 3 from Sony and Nintendo's forthcoming Revolution system, both of which are due next year. Crotty expects that Sony's loss on the Playstation 3 may be even wider, as the cell processor that IBM, Toshiba, and Sony designed for the system is more complex.
Estimates vary as to how much the cell processor will cost. Richard Doherty of Envisioneering Group in Seaford, N.Y., expects the cell chip to cost about 50% more than the Microsoft chip. "Based on what we've seen so far, the Playstation 3 could cost as much as $600 to make in today's pricing," Doherty says.
And Crotty says that since it's a more complex chip, its price will fall more slowly than the price on the Xbox chip."
I was skeptical of this report before reading the article in depth, but now I am assuming they are just flat out wrong on some points. Namely:
20GB hard drive for $53 and DVD-ROM drive for $21. I can get better prices than this. Me. On one unit. Microsoft is talking about millions of units. I know that these are thin margin markets, but the exclusive contract from Microsoft is a huge win for any supplier.
So the per-unit loss on each console is probably between 50% and 70% of what they reported. At the very least, you can probably remove $20-$30 for those two drive components alone.
don't forget that if they succeed in knocking sony out, then they will be a monopoly in video game consoles, too, and can jack up the prices even more on the next round (like windows--$200-$300 retail--and office--$400-$500 retail). that way, they can profit on hardware and software.
I'm not sure this study is correct.
Merrill Lynch looked at both the 360 and the PS3 and found these results.
The short end of it is that the "full" version of the 360 costing $400 at launch is actually making money.
"What do you despise? By this are you truly known." --Princess Irulan, Manual of Muad'Dib
/)
So why doesn't someone just make a licensed "Linux Game" disc for XBox. A lot of people would enjoy playing that, and MS would get royalities. And you could still play game discs on it too!
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
There may be more to this, though. We can't tell yet if the reports of 360's having problems is a general issue, or if it is just the result of a few really vocal complainers. If there are actual design problems, the cost goes up yet again. If they're really bad, the console could falter in the marketplace (no one really wants to fight with overheating or random crashing.) If that happens, the opportunity to recoup costs with games is in trouble too.
Funny. A couple of days ago, I was musing to myself that Sony's DRM idiocy might actually affect the viability of the PS3 if Sony manages to reach the status of corporate pariah and the public holds them to it. Now I wonder if Microsoft has managed to give them back an opportunity by missing the reliability mark. Interesting times. :-)
I've fallen off your lawn, and I can't get up.
I don't know where you're coming from, but Nintendo has generally been the leaders in game console hardware. Sure, when they broke up with Sony over the CD/SNES disputes, Sony went ahead and made massive gobs of money with the PS1 and PS2, but it is still Nintendo who defines what a game console and a portable console should play like. For instance, Nintendo has always been the company that revolutionised the controllers used. They introduced gamepads with the Famicon/NES; they introduced shoulder buttons on the SNES; they introduced the analog stick on the N64; they introduced the rumbling controller with the N64 Rumble Pack; they introduced a superb method of wireless controllers with the Wavebird, and if history continues to repeat itself, they have introduced the modular controller with gyroscopic usage and plenty of other gizmos it will have. With all that in mind, I don't see how you can say that Nintendo is not a hardware specialist...
'Yes, firefox is indeed greater than women. Can women block pops up for you? No. Can Firefox show you naked women? Yes.'
well at least this time Microsoft managed to convert currencies correctly. I guess they've stopped using Excel? ;)
While Xbox 1 sold in the US for USD 299, in europe it went initially for EUR 480. A big big blunder and MS already had to slash its prices by 1/3 a mere six weeks after the launch and instate a bonus program for those silly fools that paid EUR 480 [including myself]
BTW: if you look at Macromedia's Dreamweaver: an upgrade download in the US will cost you USD 199. The same package in Europe will cost you EUR 235.....[purely based on exchange rates it should've been only EUR 167. A 40% increase in price for Europeans!!]
But the Cell will be used in a lot more than just the PS3. They'll be putting it in PVRs, TVs, stereos, pretty much everything Sony makes, over time. In the long run, the volumes for the Cell could be superior to even x86-64 commodity chips. That amortizes a whole lot of production cost.
-I like my women like I like my tea: green-
The difference is that Nintendo had huge numbers of great games. Microsoft has what, two? And no, neither of them are Halo.
The Farewell Tour II
There are a lot of comments that say the same things, but I'm going to summarize because there are still lots of people posting repeat questions... Most electronics equipment sells initially at a loss, but with the hope that over a couple years the volumes and cost reductions will make up for it. So it is true that the previous generation boxes are not likely sold at a loss today. However, these game console makers can not actually sell for any profit because the competition keeps squeezing it out. Microsoft probably does get some better component pricing than what is estimated, but the conclusion sounds about right. And that is just based on component costs, the holistic cost to Microsoft includes shipping, inventory warehouseing, support, trade shows and events, advertising, prize giveaways, etc. Some of you might wonder why the console makers let them sell out of the stores (why don't they make more for Christmas?). It is not, as some suggest, a promotional ploy to generate excitement, but rather because they need to limit their losses this quarter. They would actually like to sell less! The reason why Xbox news is important to all /. readers (not just gamers) is that it affects the semiconductor industry (for example, the reason why Apple had to switch to Intel is because PowerPC makers wanted to focus on gaming), computer graphics, memory pricing, etc. and ultimately is another step toward the mainstream convergence of computing with the home theatre.
Microsoft probably doesn't care about making a profit on XBox franchise, even with game licensing because their real goal is to dominate all computing OSs in the home.
Microsoft is a software company at the core trying to sell hardware. They never seem able to make any money at that, which brings to mind the phrase 'stick with your core competency'
Apparently that's what they're doing.
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I don't think so. Microsoft has their stamp all over the hardware this time. Microsoft owns their variant of PowerPC and graphics card as much as Sony owns theirs. Looking at the initial hardware costs is deceiving. If you remember, the Playstation 2 sold for a huge loss in the beginning too. It was only later that they optimized production to the point that they were making profit off the system itself.
In Belgium it is forbidden to sell stuff at a loss.
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Wow, this is probably the best value you can get for a P.C. Just put Linux on it, yes I know this will not be that easy. You get the hardware for the price that Microsoft negotiated, minus the amount that they are losing per sale. You'll probably need to find a way to get it too cool faster, though. Considering this, I might just get into it's hype.
So many people here are taking this analysis as fact. It's an educated guess at best. Unless MS releases the true cost, no one knows.
I'd like to see someone buy 10,000 of these and superglue them together into a statue of a giant penguin! Maybe Google would have the loose cash and artistic vision to do such a thing?
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
replacement for the house where the thing caught fire?
Just curious. I'd sooner Microsoft lost money big time with this little venture.
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IT depends on the component type, but on average an electronics systems' cost will go down by about 18% for each tenfold increase in volume of the order. So if the Xbox would cost $470 to put together with retail pricing (i.e. volume of one) the 100k unit pricing will be about $250. The reason this happens is that the vendors just need to make a certain amount of total profit, so shipping ten times the items at half (remember the margin on the retail item is about 50%) the total profit still increases.
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I disagree and feel that this is not insightful at all.
Firstly:
The reason consoles sell so well is that they appeal many people who are NOT hardcore gamers. Flats of students now consider a console in the living room a must, much like the TV they plug into.
Secondly:
Are you saying that the majority of consoles sold are to "hardcore" gamers as opposed to casual players? I would seriously doubt this.
You might recall that Sony said the same thing for the Emotion Engine (CPU for the PS2). Did it happen? No. Nobody wanted to program for it unless they had to. There's no reason to put a Cell chip into most embedded applications; current chips do the job just fine, are much easier to program, have a wide array of support tools, and are already commodities.
You're ignoring 2 things:
Or don't you remember 2000/01?
Why do you say that? It seems pretty clear to me that IBM owns the PowerPC (in conjunction with Apple and Motorola although I am unsure as to the state of that alliance at the moment). MS did not develop, design, or have anything whatsoever to do with that chip. On the other hand, Sony designed the Cell with IBM in partnership. That will make a difference down the line.
Also as an aside I don't think Sony ever lost money on a PS2.
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