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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.
a. Speed
b. Precision
You know the rules, Steve. You pick one or the other.
Those who believe the Internet is private,
find their privates are on the Internet.
"The software giant also plans on releasing the gaming-focused Vista operating system to the public in January 2007."
Since when is MS Vista focused on gamers?
You are reading a copy of my copyrighted post.
Microsoft has always said that the console race is a marathon, not a sprint. However, this initial costly sprint remains important during a period when the company boasts the only next generation system on the market.
A marathon where you're bleeding money for most of the race. Sure hope another company doesn't zip past you on a bicycle or something.
Sendou Wave Kick!!
Microsoft has chosen to forge a bold, third path: (C) None of the above.
If it's for-profit but free, you're not the customer -- you're the product (e.g., the Slashdot Beta's "audience").
Well.. MS Vista doesn't really contain any benefits for gamers, in any way.
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 if you want to keep playing video games and get all the features and whatnot, you are going to have to upgrade to Vista. So you just have to learn to think like Microsoft. The way you probably think, "focused on gamers" means "designed to appeal to gamers and make gamers want to buy it". The way Microsoft thinks, "focused on gamers" means "we will be forcing gamers to buy it".
In other words, Vista is "focused at gamers" the same way a sniper rifle might be "focused at" someone unexpectedly running across the White House lawn.
In this console generation's cycle. Why do I say that? Because it's widely and publicly known within the industry that the iTMS' profit margins are razor thin. The store drives sales of the hardware, which is where Apple is making their money. Now tell me, in the next three to five years does anyone see Microsoft making content delivery on Xbox Live at the level of success that the iTMS has had? Can they negotiate with ABC in order to get Lost delivered to 360s? Pixar movies? It goes the other way around. In order for Microsoft to reap the rewards of Live they need people to buy a 360 in order to just use Live. Charging $2.50 for a horse skin is not going to do that.
Likewise, I find it interesting that to this date MS refuse to state how many Live subscribers and users they have. They always issue press releases with non specific, skewed numbers to celebrate success. And Halo 2 continues to be the top game on Live. Not a 360 title.
The content provider sets their price, not MS. Blame Bethesda software for the stupid horse armor.
If they don't compete in the right markets they'll easily become outdated and post very slow growth outlook. They want to dominate all computing platforms. That includes the internet. In the future that will mean the multimedia living room. If they don't fight for the entertainment center in your home you'll eventually have a fat computer running another OS.
Taking losses in all these niches fits with their business goals, believe it or not. It's their goals that need fixing as much as their methods.
Developers: We can use your help.
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).
Since when did MS even know Operating Systems?
Stick to Office Suites.
Another non-functioning site was "uncertainty.microsoft.com."
The purpose of that site was not known.
It minimises their risk. Instead of putting all their eggs in one basket, they spread them around, and since they are Microsoft, they'll usually have at least some degree of success in every market they're in. Income from multiple sources is a sign of a healthy business.
The Xbox was a mighty success considering it was their first attempt at that market. They beat Nintendo easily and they were pretty much on-par with Sony. I'm talking in terms of units/games sales, not how good games were, by the way.
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.
At least MS recognizes they can't live on keyboards and mice alone and the future of computing for the masses will not be driven by PCs, but by game consoles, TVs, iPods, cars, and many other non-PC based that integrate into everyday life.
It's all about the user experience, not the keyboard.
But it still remains to be seen how well MS competes in a world dominated by primarily device-driven devices - particularly since this seems almost the exact opposite of their business model and strengths.
I had nothing to do with the new feature.
I don't need large brains to have a good time.
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.
You should have seen the speed of that chair... The deadly precision with which it hit that wall!
Mind the frickin' laser...
When you're sat on a $40 billion slush fund, I didn't think you had to justify making a loss. I mean, the money's there to be spent taking the company into new markets, right?
So what M$ and Ballmer did was exactly right. Heck, I bet Sony'd love a $40 billion slush fund right now, then they could offset PS3 losses against it. In fact, any company would love to do this - all to often you hear about a single product bombing and taking a whole company with it...
"I love this X-Box, YYYEEEAAHHH!!!!" *throws chair*
Similar to the upcoming US election results
You can have it fast, cheap or done right.
You may pick 2 of the 3.
He's picking fast and done right and screw the amount of cash it'll take.
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.
Didn't the Xbox experience similar losses?
The Xbox lost $4 billion over its lifespan (and counting - some of those new losses are still attributable to the original).
What MS seems to have forgotten is their original predictions (and you can still do a Google search and find these quotes) were for an "investment" of around $2 billion, followed by sustained profitability by the 3rd year of the Xbox's life.
They also were aiming for Xbox 360 profitability from day one (again, Google "xbox 360 profit"). So for them to now say "oh, we expected this, and it's all for the good of the future" is at best revisionist on their part, and at worst outright denial.
The fact of the matter is they are billions of dollars behind where they initially predicted they'd be. They're more than $2 billion further in the hole than they ever wanted to be and they're three years behind on their profit forecasts, with no guarantee that it will ever turn around. Assuming a relatively modest prediction of a $500 million profit per year, they're now close to $4 billion (and counting) behind their initial predictions, and really $5 billion in the hole all told. That's assuming they would have been close to $1 billion up at this point, rather than $4 billion in the red.
$4-$5 billion isn't chump change even for MS.
All MS has done is a major land grab. They've proven that you can grab market share provided you just pump a huge wad of cash into the industry. I don't think that's news to anyone. But that's only the first step in building a business and I'm sure that, whatever their public statements, internally they realize that this is not all going according to plan at this point. They may have bitten off more than they can chew - if they *never* turn a profit (and remember, they need to turn $4 billion worth of profits from now on to have even broken even overall), then what exactly was the point?
(You can say they denied Sony market dominance, or whatever, but to what end? Should MS be sticking its nose into every single random and unrelated market just to keep another player from being dominant? Are they going to get into cleaning products next and go head to head with Proctor & Gamble? Are they going to take on Wal-Mart with a bunch of MS-branded superstores? I mean, there does come a point at which it just gets stupid.)
MS has the cash to keep up this charade as long as they want. I don't think anybody expects a quick exit. But at some point, there will come a day of reckoning, when MS finally has to look at what's working and what's not company-wide, and if the entertainment division is still losing money hand over fist on that day, then heads will roll and shops will be closed up.
Good point, but isn't laying those foundations the most important part? Putting themselves ahead in units sold sounds like some damn good foundations to me!
I hope Nintendo comes through and takes the lead because I think they're the best games company out of the three, but it does seem unlikely.
Except thats totally wrong. They got blown out of the water by Sony, and lost to Nintendo in 2 out of 3 markets (only winning in the US). In total, they ended up about on par with nintendo, while losing 3 billion over the lifetime of the product. Thats not a success, if I owned MS stock I'd be wanting the people in charge fired.
I still have more fans than freaks. WTF is wrong with you people?
"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.
Relatedly, Live's downtime yesterday has resulted in an underwhelming feature addition: messaging.
/. crowd.
This is a myth. Microsoft have said repeatedly that the downtime was not for any specific new features but to prepare the various systems (Xbox Live, xbox.com, forums, etc) for future upgrades and the onslaught of E3 (masses of trailers, demos, etc). The messaging addon is nice, but you can't seriously believe they took down the entire network for a day to add a feature like that.
I can understand the 13 year olds on the forums not understanding the need for downtime for infrastructure upgrades and rework, but I'd expect a little more from the
---- Den ene knappen er powerknapp, den andre er Bender voice knapp "Bite My Shiny Metal Ass"
Hardly surprising, there are what - 22 million Xbox units out there compared with maybe 4 million 360s? What surprises me is how many 360 titles ARE in the overall top 10.
Likewise, I find it interesting that to this date MS refuse to state how many Live subscribers and users they have
Some facts from Microsoft:
So there you have it. 4 million consoles (let's be generous, the figures are a little old), and "more than half" are connected to Live. So 2+ million on the 360 alone. I seem to remember the Live attach rate for Xbox 1 being around 10%, so figure another couple of million there. Plus there's been 10 million downloads (5 per user on average) and 4 million game downloads (2 per user). The download-to-sale ratio for XBLA is also very high (can't find the quote right now) - something like 30%. For me the success of XBLA is huge, and not as significant for MS as for the indy game developers who now have a very large paying audience.
I see a lot of positives here.
---- Den ene knappen er powerknapp, den andre er Bender voice knapp "Bite My Shiny Metal Ass"
The funniest thing that I am seeing is that a lot of people are saying that microsoft should do a lot of the things that Nintendo is doing but yet people are saying that Nintendo will fail ?
Likewise, I find it interesting that to this date MS refuse to state how many Live subscribers and users they have.
... the most popular game on a console that has an install base of over 20 million is played more often than the most popular game on a console with an install base of 3.2 million.
If you're looking for specific numbers accurate down to single digits, you aren't going to find it -- no company is that specific; specific information gives too much away to compeditors. They occasionally release figures when they hit milestones, and release general information about the service in their quarterly reports.
They always issue press releases with non specific, skewed numbers to celebrate success.
It's statistics. What, you expect them to intentionally select a set of numbers that make them look bad? Would you even consider a set of numbers that look good to be anything but skewed?
And Halo 2 continues to be the top game on Live. Not a 360 title.
Duh. Halo 2 sold more copies on it's first day of release than the number of Xbox 360's sold to date. Imagine that
Nobody ever went broke overestimating the stupidity of /.'ers. Or, uh, something like that.
(It's a joke, people, laugh a little)
--
This sig is on the Red List
I guess this is one of those jokes that's not funny if you have to explain it. Aw hell, it's not all that funny even if you get it right away, though I did chuckle a bit.
TZ
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
Interesting idea, except that most articles I've seen mention that DirectX9 will be installed side by side on Vista, so I expect game companies will just focus on DX9 for the meanwhile.
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Correct me if I'm wrong, but I thought the "Silver" membership was free? And they are boastng about the "Silver" attach rate? How many Silver accounts are just folks that had Xbox, then upgraded to the 360?
That's not how it's worked in the past, DirectX has just always been backwards compatible (for varying values of compatible. DirectX 5 stuff using D3D frequently fails to run on DX8 or 9.)
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
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.
How do you know they are much better if they haven't even come out yet?
while that may be true... Sony's online service is free, whereas Microsoft's service is paid.
--
Even though Nintendo does not dominate the market for consoles (handheld-consoles are another playingfield) the way Sony & MS do, Nintendo makes the most money/customer.
Apperantly development costs were also expensive http://video.google.com/videoplay?docid=-166836580 8879026423&q=Ballmer&pl=true
Error 2101: all your sig are belong to us
There are several companies who show it. Take Guildwars for example. They sometimes have 3 different Versions of the Client&Servers online. The whole downtime for the first year was NINE HOURS.
In total, they ended up about on par with nintendo
Actually, they lost their ass to Nintendo. "On Par" has absolutely nothing to do with Market Share. It has everything to do with Profit Margin, and in that area Nintendo took a nice healthy shit all over Microsoft then wiped their ass with Sony.
"Everything you know is wrong. (And stupid.)"
Moderation Totals: Wrong=2, Stupid=3, Total=5.
msft is already posting slow growth.
... hi bingo
I dunno, I use Microsoft hardware all the time and (other than the Xbox 360) I don't use a single Microsoft operating system unless I'm forced to at all. Frankly, I think their hardware products are better quality than their software products. But maybe that's just me.
Comment of the year
I've seen comments where people were confused about what Nintendo is doing, but I haven't seen any say that Nintendo was going to fail in this next generation. Most seem to be taking a wait and see position.
*sigh* back to work...
Sure, their hardware's okay - because they don't make it, it's all contracted out to third parties. The Xbox and Xbox360 in particular - Microsoft brings in outside talent to do the design, then contracts with outside parties to do the manufacturing. They just get to put their brand on it.
Sam: "That was needlessly cryptic."
Max: "I'd be peeing my pants if I wore any!"
The 360 supports a mouse and keyboard as well, and presumably you can use the in-game control chaning features to alter the setup.
The answer is different when you throw in a $200 OS into the mix, whereas before with the XBox chances were your PC was about as powerful or perhaps a little more so. The 360 is more ahead of the curve in that regard. And of course not many games were all that high in resolution, where 720p is starting to get pretty decent if you have a good display.
With every step Microsoft takes the balance in that question changes to favor the answer being "get the console".
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Oh is it??
The AACS key is NOT 0xF606EEFD628B1CA427BEA93A9CA9773F
It would be brilliant to see DirectX usurped by an open standard - then it might be more likely a game is ported to the Mac/Linux. Unfortunately all the major engine/middleware/tools are built for DirectX so chances are the games companies will largely stick to DX9 until most people have Vista. And if they can afford it, they may have optional features that exploit DX10 in the meantime.
(1.21 gigawatts) / (88 miles per hour) = 30 757 874 newtons
Hardly surprising, there are what - 22 million Xbox units out there compared with maybe 4 million 360s?
Wrong stats to use. The ones that we can use are:
#1. So there you have it. 4 million consoles (let's be generous, the figures are a little old), and "more than half" are connected to Live.
#2. I seem to remember the Live attach rate for Xbox 1 being around 10%, so figure another couple of million there.
So 2 million Live subscribers on 360 and 2 million Live subscribers on original xbox. A level field. Is it still not surprising that a 18 month old game on original xbox is still more popular on Live than any other title on 360?