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Ballmer Justifies 360's Costs
Next Generation follows up on news last week of the enormous financial burden the 360's launch has placed on Microsoft. CEO Steve Ballmer sent around an email discussing the company's bright outlook with the new console. From the article: "While Xbox 360 hardware itself is the most prominent area of videogame-related investment, Ballmer indicated that further development of Xbox Live is also integral to the success of the platform and its respective division, saying, "We must execute our Live strategy with speed and precision." Relatedly, Live's downtime yesterday has resulted in an underwhelming feature addition: messaging.
I think he understands that, your just missing the rule:
a. Speed
b. Precision
c. Low Cost
You can pick two but cannot have all three. From what they've been spending, it seems obvious they choose the first two. I more or less think they done a good job of it (except let me download from the marketplace in the background while I'm watching TV!!!!!) I use my 360 as a Media Center Extender to watch TV, movies, internet radio, etc, etc but the damn thing cannot yet begin a download from XBox live and keep that going in the background while I switch to the media center to watch TV! Really my only complaint, but VERY annoying.
"reality has a well-known liberal bias" - Steven Colbert
I had a 360 for about a week, took it back, and got a ps2 (for a specific game, plus some cash in the pocket). First of all, they did a great job with the dashboard, it looks slick and you can customize it. The achievements, gamerscore, and interaction with other gamers are genius. Geometry wars and burnout were some of the funnest I've had playing games ever. Downloading demos was genius as well, I had as much fun downloading and trying new games as I did playing ones I paid for.
So why did I take it back? Well, perhaps I wouldn't have if street fighter II was out already and Oblivion wasn't such a bugfest (and runs suprisingly slow at times for a 360 game). The machine is noticibly loud (I even took it back and got another and it was still loud). If I had an enclosed cabinet, this wouldn't have mattered as much. The future announced games didn't hold much interest to me. But the biggest factor was that the 360 sucks as a media center, and it couldn't replace my hacked xbox with Xbox Media Center. Lack of divx support and video only available to MS XP Media Center Edition killed it as a media center. My TV only has a couple componenet video inputs, so my decision was to keep the xbox and take back the 360.
What MS needs to do is quiet down the console (they are already taking steps towards this with a smaller chip), add divx support (and FLAC tag support, but that doesn't have as wide an appeal as divx), remove the "XP media center" lock-in for videos (they are taking steps towards this, but we will see what they actually do), improve the media features in general (better media player features), and add more games to xbox live (porting abandonware would be cheap and make a killer system IMO).
Even going by Microsoft's own inflated marketing numbers, the first Xbox had less than seven percent of owners signed up for the service.
Just to put that in perspective, Sony who didn't see the need focus heavily on online gaming last gen had more people playing online with just one of their games, SOCOM, than the entire subscriber base of Microsoft's online service. What a humiliation.
Microsoft's online service is a vastly reduced long time dream of Microsoft that goes back to the days of the Internet taking off outside of the academic world. They dreamed of creating their own Microsoft Network where they acted as the gatekeeper and collected a toll on every access to the network. They have been trying to implement that dream for years in one form or another. And all of them have failed.
The final nail in the coffin for Microsoft's dreams of taxing online access is the free and much better services that are coming out from Sony and Nintendo this year. Microsoft will be forced to drop the fees to zero for playing online if they want to avoid being reduced to an industry joke.
If things had gone as planned for Microsoft, the Xbox would have become so successful that other manufactures would have started making their own versions and Microsoft would have been able to get out of the expensive and risky hardware market and allowed to just sit back and rake in the cash on people who are now moved from the open pc hardware to the locked down Microsoft exclusive hardware that can only run Microsoft's software or software approved by Microsoft. The realization of the 'Windows Everywhere' mantra from a decade ago.
So much for that plan.
It's my opinion that DX10 may actaully make OpenGL more attractive for games. With huge installed Win XP base, any DX10 game not sponsored by MS had to be released for DX9 too. All new features of DX10, like unified shader will probaly supported by OpenGL as well. So with OpenGL you will be able to use one 3d engine for XP and Vista, instead of two. And it's officialy confirmed that OpenGL will not be crippled on Vista. Of cause MS answer to it will be to promote unified XBOX 360/Vista DevKit, but I doubt MS will be able to lure developers to drop XP at all. And even if it do for big and fat, like EA, indie would step in, and they already using OpenGL mostly.
A solution to start making serious money would be to port the games available in MAME32 to run on the XBox. This would involve offering a nominal fee to every owner of each old ROM, setting up a good team to write the emulator code, and figure out the pricing scheme (hint: make it really low). I still have fun with Elevator Action, Double Dragon, and the like, so I think there's definitely a market; I also wouldn't think twice about investing $20-50 in a collection of the oldies that I liked. I've already purchased SmashTV in the "Coin-Op Classics" section, and I'm waiting for SF2:Hyper to finally get released. More of these games would make me happy, especially if some were graphically updated to be shown in full HD glory.
"They also were aiming for Xbox 360 profitability from day one "
Hmm, this isn't true. If you are talking about just the 360 in isolation, Microsoft talked about the 360 going green at the two year mark. But that was back before E3 last year and the year long trainwreck the 360 has gone through.
Those estimates for profitability were made on the assumption of huge numbers of people paying for the online service and certainly didn't include the horrendous expense of having to eat the losses of having to give thousands and thousands of people more than one 360 from the manufacturing and hardware defects. With Sony and Nintendo coming out with free online gaming, Microsoft's hopes of generating huge amounts of cash from online play are pretty much over.
Everything else I agree with what you are saying. I think as soon as Ballmer is ousted there is going to be some major house cleaning where Microsoft refocuses on their core markets and products that are under direct assault. The Xbox project will almost certainly be jettisoned with some remnants of the project being migrated over to the Vista gaming part of the company.
I don't think you know how fast 40 billion can go in the business world.
Let's look at Microsoft's second fiscal quarter, ending December 31, 2002 (I know, it's far back, but I this source has all the info I need for this example).
Net profit: 2.28 billion
Revenue: 7.78 billion
This means that they had 5.5 billion in expenses during 3 months, or about 22 billion in that year. (Assuming all quarters were equal, which they weren't.) If Microsoft didn't have any revenue, their 40 billion dries up in 2 years. In a business the size of Microsoft, this is not a very long time to make decisions that will adjust you to the new situation.
However, MS Vista does contain DirectX 10-- and as far as has been announced so far, DirectX 10 will only be available for MS Vista. Before long, DirectX 10 is going to be required to play any new video games.
So here's a question - rather than get Vista, why not simply buy a 360? All of the games that are going to get the most benefit out of Direct X 10 are also going to be on the 360. Probably first!! Between Vista and a new video card, it really seems a gamer would be better off with a 360.
Microsoft has the unfortunate situation where they are competeing with themselves, success of the 360 can diminish much of the market for one of the few truly enhanced features of vista that is left.
"There is more worth loving than we have strength to love." - Brian Jay Stanley