sonycowboy
Member
http://www.marketwatch.com/news/story.asp?column=John+Dvorak's+Second+Opinion&siteid=yhoo
By John C. Dvorak
Last Update: 12:01 AM ET Sept. 16, 2004
Editor's note: John C. Dvorak is a regular contributor to CBS MarketWatch. Dvorak is a longtime technology industry observer and columnist. His daily musings can be found at www.dvorak.org/blog.
BERKELEY, Calif. (CBS.MW) -- You can see why Microsoft is so interested in pushing itself into the game console business when you start to look at the phenomenal sales the game industry generates.
Consider some of these numbers.
Computer and video game software sales alone should top $9 billion this year (over $11 billion by some estimates) which is about the same amount of money that is generated by the entire Hollywood movie industry. In 2003, more than 239 million video console and PC games were sold in the US.
That's two games for every household in the U.S.. Half of all Americans aged six and older play some sort of video game once in a while. A third of game players are women.
The fact is that most of the world is video game gah-gah.
This is not something that is lost on Microsoft (and its X-Box console) which pursues console leader Sony (SNE: news, chart, profile). Sony's Playstation division is thought to be supporting the entire corporation despite the diverse offerings from Sony.
Microsoft (MSFT: news, chart, profile) knows that it cannot forever dominate the desktop computing world when it's being hounded by competition. Much of the competitive software is offered free as the important open source initiatives are finally getting into gear.
It was years ago that insiders at Microsoft knew they had to have a plan B if things changed on the work place desktop. It's two cash cows are the Windows operating system and Microsoft Office,
Both are vulnerable, particularly Microsoft Office.
It was decided that if the company could manage to get into the PC game and game console business the way Sony did, it would be possible to create a new and impenetrable cash cow for years to come. Or so the thinking went.
Microsoft first went into PC games and managed to put together a string of well designed and popular hits. It also began to develop an online strategy that it hoped would make the X-Box get a jump on the Playstation. The strategy has yet to pay off as the online gaming market, though popular, was has not become a monster, yet.
(As an aside I should mention Nintendo. It took a different almost niche strategy with its Game Cube and Gameboy Advance hand held game playing machine. They milked the Mario Brothers brand and continue to appeal to the younger gamers. But it's the little Gameboy that has become a sensation for all ages and I'll be discussing it and the Nintendo strategy in a future column. Suffice it to say, people love the Gameboy.)
It may take until the war goes into the X-Box II and Sony Playstation 3 era before anything comes of this battle. X-Box has eeked out a 25-percent market share in the USA but hardly cracked game-crazed Japan. Most of the smart money is betting on Sony since it has a lock on the best games (but not all) and it has been superb in locking down top game designers to rigid development contracts. The company also has more chops in the consumer electronics channels and knows the fickle nature of the business better than anyone. Sony, no baloney.
Meanwhile the first Microsoft offering, the current X-Box is clunky and hardly a feat of engineering. The company was late with its games and never put together a great lineup instead relying on a few blockbusters, especially HALO.
That said, I'm picking Microsoft to win this war.
Simply put, the people at Microsoft are smarter, especially the executives. The X-Box 2 should be at least as jazzy as the Sony offering, and Microsoft now looks like it's serious about a fight to the death. With over billions in cash in its coffers and a minimum of distractions, Microsoft also looks as if it can focus more on the X-Box than Sony.
Sony looks bloated, has to run a music business, a film business, a consumer electronics business, a broadcast gear business and on and on. If the company was smart it would sell off half of its agglomeration of disjointed interests.
On top of all this, the X-Box business looks as if it has avoided the kind of ruinous corporate meddling so common at Microsoft -- the kind of second-guessing that forever plagued the MSN project, for example. I'm putting Microsoft on top of this heap by 2007.
By John C. Dvorak
Last Update: 12:01 AM ET Sept. 16, 2004
Editor's note: John C. Dvorak is a regular contributor to CBS MarketWatch. Dvorak is a longtime technology industry observer and columnist. His daily musings can be found at www.dvorak.org/blog.
BERKELEY, Calif. (CBS.MW) -- You can see why Microsoft is so interested in pushing itself into the game console business when you start to look at the phenomenal sales the game industry generates.
Consider some of these numbers.
Computer and video game software sales alone should top $9 billion this year (over $11 billion by some estimates) which is about the same amount of money that is generated by the entire Hollywood movie industry. In 2003, more than 239 million video console and PC games were sold in the US.
That's two games for every household in the U.S.. Half of all Americans aged six and older play some sort of video game once in a while. A third of game players are women.
The fact is that most of the world is video game gah-gah.
This is not something that is lost on Microsoft (and its X-Box console) which pursues console leader Sony (SNE: news, chart, profile). Sony's Playstation division is thought to be supporting the entire corporation despite the diverse offerings from Sony.
Microsoft (MSFT: news, chart, profile) knows that it cannot forever dominate the desktop computing world when it's being hounded by competition. Much of the competitive software is offered free as the important open source initiatives are finally getting into gear.
It was years ago that insiders at Microsoft knew they had to have a plan B if things changed on the work place desktop. It's two cash cows are the Windows operating system and Microsoft Office,
Both are vulnerable, particularly Microsoft Office.
It was decided that if the company could manage to get into the PC game and game console business the way Sony did, it would be possible to create a new and impenetrable cash cow for years to come. Or so the thinking went.
Microsoft first went into PC games and managed to put together a string of well designed and popular hits. It also began to develop an online strategy that it hoped would make the X-Box get a jump on the Playstation. The strategy has yet to pay off as the online gaming market, though popular, was has not become a monster, yet.
(As an aside I should mention Nintendo. It took a different almost niche strategy with its Game Cube and Gameboy Advance hand held game playing machine. They milked the Mario Brothers brand and continue to appeal to the younger gamers. But it's the little Gameboy that has become a sensation for all ages and I'll be discussing it and the Nintendo strategy in a future column. Suffice it to say, people love the Gameboy.)
It may take until the war goes into the X-Box II and Sony Playstation 3 era before anything comes of this battle. X-Box has eeked out a 25-percent market share in the USA but hardly cracked game-crazed Japan. Most of the smart money is betting on Sony since it has a lock on the best games (but not all) and it has been superb in locking down top game designers to rigid development contracts. The company also has more chops in the consumer electronics channels and knows the fickle nature of the business better than anyone. Sony, no baloney.
Meanwhile the first Microsoft offering, the current X-Box is clunky and hardly a feat of engineering. The company was late with its games and never put together a great lineup instead relying on a few blockbusters, especially HALO.
That said, I'm picking Microsoft to win this war.
Simply put, the people at Microsoft are smarter, especially the executives. The X-Box 2 should be at least as jazzy as the Sony offering, and Microsoft now looks like it's serious about a fight to the death. With over billions in cash in its coffers and a minimum of distractions, Microsoft also looks as if it can focus more on the X-Box than Sony.
Sony looks bloated, has to run a music business, a film business, a consumer electronics business, a broadcast gear business and on and on. If the company was smart it would sell off half of its agglomeration of disjointed interests.
On top of all this, the X-Box business looks as if it has avoided the kind of ruinous corporate meddling so common at Microsoft -- the kind of second-guessing that forever plagued the MSN project, for example. I'm putting Microsoft on top of this heap by 2007.
