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Next-Gen Shift Costing Sony and Microsoft
The shift to the next generation of consoles is costing their parent corporations dearly. GameDailyBiz has an article up claiming that the gaming division at Sony may lose almost $900 million this year, thanks to rollout costs for the PS3. The 360, already in the marketplace, is looking pretty solid. However, in among increased Microsoft revenue announcements (up 13% for the quarter over last year) and a healthy number of shipped systems by the end of June (almost 5.5 million) is a hard statistic. From the Gamastura article: "As for specifics on the Xbox 360 and Xbox's financials, the company's Home and Entertainment division, which includes the Microsoft Xbox video game console system, PC games, the Home Products Division, and TV platform products for the interactive television industry, lost $388 million for the quarter on $1.06 billion in revenue, a sharp increase from the $175 million loss the previous year." A reminder that these systems may be successful, but they're costing to get out there.
I love Nintendo's strategy to try and keep everything quiet compared to Sony/MS boasting how bananas-great their consoles will be, only to quietly dull down the specs as time goes on, realizing that they can't really give you "24/7 virtual reality graphics that will do your homework for you!" I think Nintendo has something right: they're building machines with the technology already readily available. You don't build consoles with the intent to push the technological envelope. Why not? Because once it's out, you've already got to get working on what the next big thing will be, essentially stiffing customers because you make them pay for an expensive machine which will be replaced without too much of a guarantee that the next one will work with your other games (XBox-Xbox360). Of course, with all of the leisure-time money floating across the US, perhaps they just see this as soaking up the leak of excess money.
Of course, my eyes will be dead set on a PS3 once it comes out, if it can do most of what it claims, and it can provide the games/content I desire.
I was in Best Buy a couple of days ago, and it's clear that Microsoft is spending enormous amounts of money to buy shelf space and display areas in major retailers. Custom plexiglass display stands, special silver and white shelving, prime end-of-row positioning, big display TVs, couches, posters on the windows, the works.
I didn't see anyone actually buying anything 360 related, though. Everyone was browsing the PS2, PSP and Nintendo handheld areas.
GCHQ Quantum Insert installed. If only our tongues were made of glass, how much more careful we would be when we speak
The question is whether Microsoft continues to see any benefit in losing money to break into the console market. To determine the answer to this you first must understand why Microsoft entered the console market in the first place.
Back in 1998/1999 Microsoft was trying to determine where the next threat to their control of the home-computer market was going to come from. With the upcomming release of the Sega Dreamcast and Sony Playstation 2 Microsoft saw a disturbing reality forming; videogame consoles (which were already in most homes) were increasingly adding features that were in the domain of the Windows operating system (Web-browsing and Email were both promised features of the Dreamcast and PS2). The threat was that if Console's maintained their popularity they could become a replacement for the Windows based PC in a generation or two.
Now, Microsoft believes that their greatest threat comes from web-based systems so do they still believe that losing money on consoles is their best approach?