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[DMeisterJ]

I reread the post you quoted, and God, I think I caught your unfinished-sentences-itis :lol.

Anyway, do you think Microsoft can make it in the long run without the financial weapon? With Bungie more or less out of the picture, Rare being Rare, Sony putting up a fight (in the home console arena that is) and Nintendo maybe garnering more third-party support next time around and having the upper hand with motion-controlled games, I think it's doubtful, but I'm willing to hear other people's takes. Again, I haven't been following things as closely lately.

I think the big story next gen is going to be how Microsoft continues to prove that they can be competitive in the console business... They have been able to capitalize on how Sony has beaten themselves this gen, but looking at how well Sony has turned it around this gen, I do think that it's going to be an uphill battle for Microsoft if they don't get the drop on Sony again and become the home for third parties because of the lead of launching first.

 

[markatisu]

i thought there was a comment that this KH is pretty much KH3. I bought it because of that comment as 356 was garbage imo.

Its more mainline then 365, but its not actually KH3. There will be a KH3, everyone knows it.

There is no way the PSP version comes close to the LTD of the last DS installment, that thing continued to sell well into Christmas.

 

[Kilrogg]

I think the big story next gen is going to be how Microsoft continues to prove that they can be competitive in the console business... They have been able to capitalize on how Sony has beaten themselves this gen, but looking at how well Sony has turned it around this gen, I do think that it's going to be an uphill battle for Microsoft if they don't get the drop on Sony again and become the home for third parties because of the lead of launching first.

I don't understand. You seem to contradict yourself here... ?

 

[charlequin]

Anyway, do you think Microsoft can make it in the long run without the financial weapon?

There's no inherent reason why they can't. They've done amazing things with the 360 in building brand equity, a huge amount of network lock-in on a loyal customer base, and ingratiating themselves with developers. And it's not like Sony can afford to throw tons of money at their next console either, or like Nintendo will do so even though they really can afford it. Everyone's going to go into the next console generation with a business plan that actually has a way of profiting built into it.

 

[REMEMBER CITADEL]

This might be the case, but we do know though that Microsoft's investors are becoming impatient with the Entertainment division and would prefer the company to focus their efforts on the PC market again.

I don't know, calls for refocus coming from certain investors probably have more to do with the perceived danger to Microsoft's core business, after the whole Vista fiasco and the rise of companies such as Apple and Google, than the Xbox business specifically. Of course, Microsoft won't be able to spend heaps of money on what are basically peripheral activities if their core business is hurting.

Well, there's certainly one change from the Xbox (which had essentially a blank check) to the 360, and plenty of evidence that there have been further restrictions since then -- the way Kinect's been priced to sit (despite it being hypothetically the future of the entire Xbox brand) being foremost amongst them.

Kinect probably is an important part of the future of the Xbox brand and possibly Microsoft in general, but in this particular iteration it's more of an experiment and a means of keeping Xbox 360 relevant for a few more years. Going for an aggressive expansion probably doesn't make much sense when completely new hardware is expected in 2-3 years, both from Microsoft and their competitors. Besides, Sony is not positioning Move as a huge market-grabbing device either.

I also think they've learned a lesson or two from Nintendo who have always put profitability ahead of practically everything else. Even GameCube, considered the biggest loser of the last generation by many, made them money from the get go.

That said, I think it would be interesting if Microsoft's gaming division splintered off into a separate company (which is something I don't see happening in the foreseeable future, by the way). One of the biggest problems for MGS in particular seems to be Microsoft's corporate culture and bureaucracy. I'm curious to see how a leaner, more adaptive entity would fare in its place.

 

[Mindlog]

I think the big story next gen is going to be how Microsoft continues to prove that they can be competitive in the console business... They have been able to capitalize on how Sony has beaten themselves this gen, but looking at how well Sony has turned it around this gen, I do think that it's going to be an uphill battle for Microsoft if they don't get the drop on Sony again and become the home for third parties because of the lead of launching first.

I don't believe™ that's quite right. The bigger story is going to be online platform migration. XBL, PSN and WiiWare need to survive the hardware upgrades as smoothly as possible. The groups that are becoming tied to these experiences have invested a lot of money and will be more receptive to new hardware.

Hardware manufacturers need to be spending now in order to have their online pleasantries in place come launch time. There is little margin for error with next-gen online infrastructure compared to traditionally crappy launch software.


Third parties can't be choosers. As long as the hardware is easy to code for it will be supported (consoles, portables, phones, e-readers, ATMs, petrol pumps, gumball machines.)

 

[Boney]

Kingdom Hearts is far and away S-E's most successful series in the US.

As I said.. poor kids..

 

[REMEMBER CITADEL]

I'd just like to add that I do see the traditional Xbox business and probably the brand dying off in a relatively distant future, but only because Microsoft's main entertainment platform in 10 or 20 years from now is going to be Live, not Xbox.

 

[Kilrogg]

There's no inherent reason why they can't. They've done amazing things with the 360 in building brand equity, a huge amount of network lock-in on a loyal customer base, and ingratiating themselves with developers. And it's not like Sony can afford to throw tons of money at their next console either, or like Nintendo will do so even though they really can afford it. Everyone's going to go into the next console generation with a business plan that actually has a way of profiting built into it.

Right, right, fair enough. I'm suggesting Microsoft might not be poised for next-gen rise to heaven (or at least, driving Sony out of the picture) as some of us used to think a few months back.

 

[V_Ben]

I'd just like to add that I do see the traditional Xbox business and probably the brand dying off in a relatively distant future, but only because Microsoft's main entertainment platform in 10 or 20 years from now is going to be Live, not Xbox.

I can see them expanding live to every device. Sort of like live, but anywhere. Hey, that sounds familiar...

 

[REMEMBER CITADEL]

I can see them expanding live to every device. Sort of like live, but anywhere. Hey, that sounds familiar...

Also, remember that patent from a few years ago? The one about sharing processing power between different devices in your household? It won't matter on which hardware your games run.

 

[Regulus Tera]

First months

[PSP] Crisis Core: Final Fantasy VII (Square Enix) - 301.600
[PSP] Dissidia: Final Fantasy (Square Enix) - 130.000
[NDS] Kingdom Hearts: 358/2 Days (Square Enix) - 194.000-208.600

I cannot wait for the lulz after BbS sells less than Numbery Days.

 

[jvm]

Did vg247 ever explain where the extra number on their top 10 chart came from?

Edit: Also, I saw not a single other data point out there. Did I miss anything?

 

[OldJadedGamer]

I think the big story next gen is going to be how Microsoft continues to prove that they can be competitive in the console business... They have been able to capitalize on how Sony has beaten themselves this gen, but looking at how well Sony has turned it around this gen, I do think that it's going to be an uphill battle for Microsoft if they don't get the drop on Sony again and become the home for third parties because of the lead of launching first.

This gen wasn't what MS did right it was what Sony did wrong. Next gen MS won't have that option of Sony fumbling since now that crazy Ken is gone they will actually have their shit together. It will be interesting to say the least. But developers have learned to make multiplatform engines so there wont' be a lead platform again. The days of one system being dominate are over.

I truly believe that Sony will charge for online with the PS4 and ramp up their online efforts to be more of a match for MS but the 360 blew away with features 4 years ago that Sony is still catching up on so I'm interested to see what they have service wise in their next system.

I'm excited for next gen since it will be the first time they are all on equal footing right from the start and there is no foolishly perceived winners or losers before the first system even launches.

 

[Boney]

This gen wasn't what MS did right it was what Sony did wrong. Next gen MS won't have that option of Sony fumbling since now that crazy Ken is gone they will actually have their shit together. It will be interesting to say the least. But developers have learned to make multiplatform engines so there wont' be a lead platform again. The days of one system being dominate are over.

I truly believe that Sony will charge for online with the PS4 and ramp up their online efforts to be more of a match for MS but the 360 blew away with features 4 years ago that Sony is still catching up on so I'm interested to see what they have service wise in their next system.

I'm excited for next gen since it will be the first time they are all on equal footing right from the start and there is no foolishly perceived winners or losers before the first system even launches.

I'm pretty sure there are 3 platform holders

 

[OldJadedGamer]

I'm pretty sure there are 3 platform holders

Yes, there are. The reason I left one of them out is because the one I didn't mention marches to the beat of their own drummer so they are a wild card while the two I did mention just try to 1up each other at every turn and are way more predictable.

 

[Road]

Did vg247 ever explain where the extra number on their top 10 chart came from?

Edit: Also, I saw not a single other data point out there. Did I miss anything?

Do you have Microsoft's PR, Matt?

Apparently from there. If you can confirm, thanks.

 

[FrankT]

Did vg247 ever explain where the extra number on their top 10 chart came from?

Edit: Also, I saw not a single other data point out there. Did I miss anything?

The site which shall not be named have a PR response from MS that matches the earlier vg247 numbers. Not seeing it anywhere else. Everything else matches up as well.

Same as vg247;

Xbox 360 sales contribute to $279 million spent in August
Net-net, for the third month in a row, Xbox 360 led the console sales charts with 357K consoles sold, which is an increase of 66 percent compared to August 2009, besting Wii by more than 100K units despite being down by 83K over last month.

Overall, the increase in console sales contributed to $279 million in total spend at retail on Xbox 360 hardware, software and accessories for the month.

In August, four of the top ten console games were on Xbox 360, including Madden NFL 11 moving 921K units, Mafia II with 122K units, Call of Duty: Modern Warfare 2 moving 101K, and NCAA Football 11 with 87K units sold.

Microsoft also noted that Red Dead Redemption moved 75K copies for the month.
Additionally, the Xbox 360 attach rate now stands at 8.9.

Year-to-date units moved for Xbox 360 now stand at 2,696,200.

“Next week, Microsoft will launch what is expected to be the biggest game of the year, Halo:Reach, with Fable III coming later this fall, followed by the US launch of Kinect for Xbox 360 on November 4, 2010 – just in time for holiday,” said Microsoft in a statement.

“While the next few months will be busy – preparing for holiday sales, meeting retail demand, and driving incentives – the strong momentum for Xbox 360 is poised to continue through the holidays and beyond.”

 

[Boney]

Yes, there are. The reason I left one of them out is because the one I didn't mention marches to the beat of their own drummer so they are a wild card while the two I did mention just try to 1up each other at every turn and are way more predictable.

Makes sense ;P

 

[Branduil]

There's no inherent reason why they can't. They've done amazing things with the 360 in building brand equity, a huge amount of network lock-in on a loyal customer base, and ingratiating themselves with developers. And it's not like Sony can afford to throw tons of money at their next console either, or like Nintendo will do so even though they really can afford it. Everyone's going to go into the next console generation with a business plan that actually has a way of profiting built into it.

That's true, but at the same time their loyal base was still only good enough for a distant second-place in America. And they had several advantages that they will be unlikely to have next time around:

1) Early launch allowed them to gain an early lead.

2) Sony shooting their foot off.

3) The Wii not being on par graphics-wise meant they had no competition for the dudebro market.

4) Willingness to lose billions to pay for exclusives and high-powered hardware.

LIVE is still Microsoft's advantage, I feel like how Nintendo and Sony respond to it next generation will determine Microsoft's future in gaming.

 

[jvm]

Jtyettis and Road ... I did not see that PR. I am trying to find out where it came from. It appears that vg247 gives that quote ("Next week, Microsoft will launch what is expected to be the biggest game of the year, Halo:Reach, with Fable III coming later this fall, followed by the US launch of Kinect for Xbox 360 on November 4, 2010 – just in time for holiday") and that other sites are citing VG247 as the source. (Many showing up in Google appears to just be automated aggregators...)

I rechecked the notes from Michael Pachter and he very clearly says six titles over 100K.

I do have another source saying that Mafia II total was more than 100K over the 121.6K we know Mafia II got for Xbox 360, which would lend some weight to the figures cited by VG247. The problem is that the source may be combining Xbox 360 + PS3 + PC unit sales ... I don't know for sure.

I'll see if I can get a clarification.

 

[ntropy]

I don't know, calls for refocus coming from certain investors probably have more to do with the perceived danger to Microsoft's core business, after the whole Vista fiasco and the rise of companies such as Apple and Google, than the Xbox business specifically. Of course, Microsoft won't be able to spend heaps of money on what are basically peripheral activities if their core business is hurting.

Microsoft's "core business" hurting? if by core business you mean platform product divisions, then :lol

 

[Karma]

The attach rate of 8.9 puts the 360 software total at 190 Million units in the US alone. Should break 200 Million by the end of the year.

I don't know, calls for refocus coming from certain investors probably have more to do with the perceived danger to Microsoft's core business, after the whole Vista fiasco and the rise of companies such as Apple and Google, than the Xbox business specifically. Of course, Microsoft won't be able to spend heaps of money on what are basically peripheral activities if their core business is hurting.

Their core business has never been stronger. They had a Net Income of 18.7 Billion dollars in 2010. That is their best year ever. Up 4 Billion over 2009. They are increasing their cash warchest by 1.5 Billion dollars every month.

 

[REMEMBER CITADEL]

Their core business has never been stronger. They had a Net Income of 18.7 Billion dollars in 2010. That is their best year ever. Up 4 Billion over 2009. They are increasing their cash warchest by 1.5 Billion dollars every month.

Yes, I'm not sure if I was clear enough. I'm not saying that their business is hurting, just that they would stop spending as much if that were the case. According to the quote wrowa posted, some investors are allegedly impatient despite their record-breaking incomes.

Spending hasn't stopped. It's not just about Reach's marketing budget, R&D for Kinect must have cost them a lot, and the same could be said for its promotion, both the bits we've already seen (Cirque du Soleil, anyone?) and what is yet to come this holiday.

 

[Monty Mole]

The attach rate of 8.9 puts the 360 software total at 190 Million units in the US alone. Should break 200 Million by the end of the year.

I wonder what the attach rate would be if XBLA and GoD games were factored in to the equation.

 

[mintylurb]

In every US open game and every NFL game, I saw Madden 11 being advertised as a PS3 exclusive, even 1% of those audiences go out and buy PS3 version, that would be a huge number

We've already been over this. Sony paid for exclusive advertising with Madden this year.

Dude, it's Tmac... he delivers in these threads.

There are Madden 11 commercials that only show 360 slim. Here's one I see from time to time: http://www.youtube.com/watch?v=zCVDeE26lxM

 

[duk]

Can we finally give MS it's due praise for doing well this gen?

 

[Rad-]

Can we finally give MS it's due praise for doing well this gen?

Never!!

 

[Metal Gear?!]

Yeah but its Halo. As far as mature goes, I still have no idea why that franchise continually gets rated that way. There is nothing in there that a PG-13 movie could not get away with. GTA is another story.

It seems that if you leave blood decals on the environment you get an M. Simple as that. Blood hit splashes are treated more leniently now but decals are still a no-no.

 

[farnham]

That's true, but at the same time their loyal base was still only good enough for a distant second-place in America. And they had several advantages that they will be unlikely to have next time around:

1) Early launch allowed them to gain an early lead.

2) Sony shooting their foot off.

3) The Wii not being on par graphics-wise meant they had no competition for the dudebro market.

4) Willingness to lose billions to pay for exclusives and high-powered hardware.

LIVE is still Microsoft's advantage, I feel like how Nintendo and Sony respond to it next generation will determine Microsoft's future in gaming.

:lol :lol :lol

 

[jvm]

VG247 was truly citing MS PR. I got the full thing.

As the summer comes to a close, the Xbox team is heads down on getting ready for the biggest launches of the year, “Halo: Reach,” “Fable III,” and Kinect for Xbox 360, so we’ll keep our NPD summary brief this month.

Net-net, for the third month in a row, Xbox 360 led the console sales charts with 357,000 consoles sold, an increase of 66 percent compared to last August, and besting the nearest competitor by more than 100,000 units. Overall, the increase in console sales contributed to $279 million in total spend at retail on Xbox 360 hardware, software and accessories in August. Games for Xbox 360 continue to drive the industry, and in August, five of the top ten console games were on Xbox 360, including “Madden NFL 11” (921,000 units), “Mafia II” (122,000 units), “Call of Duty: Modern Warfare 2” (101,000 units), “NCAA Football 11” (87,000 units), and “Red Dead Redemption” (75,000 units). In addition, more people are buying games for Xbox 360 than any other platform, illustrating an industry-leading software attach rate of 8.9.

Next week, Microsoft will launch what is expected to be the biggest game of the year, “Halo:Reach,” with “Fable III” coming later this fall, followed by the U.S. launch of Kinect for Xbox 360 on November 4, 2010 – just in time for holiday. While the next few months will be busy – preparing for holiday sales, meeting retail demand, and driving incentives – the strong momentum for Xbox 360 is poised to continue through the holidays and beyond.

 

[Kenka]

So a more complete table would be :



1. Madden NFL 11 (360) - 920,800
2. Madden NFL 11 (PS3) – 893,600
3. Super Mario Galaxy 2 – 124,600
4. Mafia II (360) – 121,600
5. New Super Mario Bros. – 110,400
6. New Super Mario Bros. Wii
7. Mafia II (PS3)
8. Call of Duty: Modern Warfare 2 (360) - 101,000
9. NCAA Football 11 (360) - 87,000
10. Wii Fit Plus
11. Just Dance
12. Red Dead Redemption (360) - 75,000
13. Pokemon SoulSilver - < 75,000
14. Madden NFL 11
15. NCAA Football 11 (PS3)
16. Wipeout: The Game
17. Mario Kart Wii
18. Dragon Quest IX
19. Call of Duty: Modern Warfare 2 (PS3)
20. Mario Kart DS

 

[charlequin]

Yes, I'm not sure if I was clear enough. I'm not saying that their business is hurting, just that they would stop spending as much if that were the case.

But that misstates the dynamic at play completely. Microsoft's core business, despite seeming public-facing problems like the bungled Vista launch, is ludicrously strong. It generates an outrageous amount of profit consistently every year. It is responsible for keeping Microsoft's finances so rock-solid even as they throw nearly endless amounts of money into pits like WinMo 6, Zune, or the first Xbox.

If Microsoft's core business were weak, that'd represent even more reason to strengthen the Xbox division now that it's showing some evidence of being able to be profitable. This is kind of more like the Sony situation -- none of their individual lines of business have been consistently successful all the time, but many of them have been very successful some of the time -- so it's worthwhile to see through a slump in the gaming department because turning it around could lead it back to a point where it's one of the biggest profit generators for the entire company.

The problem for Microsoft is instead that their core business is so successful that making a minuscule profit on a side business like entertainment is effectively costing them money -- they'd make much more closing up shop there and reinvesting that money and effort back into their core business, or another side business with a greater strategic relevance to the company's future.

 

[Sydle]

That's true, but at the same time their loyal base was still only good enough for a distant second-place in America. And they had several advantages that they will be unlikely to have next time around:

1) Early launch allowed them to gain an early lead.

2) Sony shooting their foot off.

3) The Wii not being on par graphics-wise meant they had no competition for the dudebro market.

4) Willingness to lose billions to pay for exclusives and high-powered hardware.

LIVE is still Microsoft's advantage, I feel like how Nintendo and Sony respond to it next generation will determine Microsoft's future in gaming.

The majority of gamers are fickle and couldn't care less about the brand. I wish I could find that poll from last gen where PS2 gamers were asked if they had an original Playstation. Around 60% of them were new to the brand, and this was only two to three years into the PS2's lifecycle. Also take into account that all Xbox gamers had to come from somewhere. There is very little loyalty in the business.

The tide has shifted in the favor of Western development or global development, which makes things much easier for Microsoft to continue courting developers' interests even as they're developing the 360's successor. It and first mover's advantage worked out incredibly well for them, so I would be surprised if they didn't do it all over again.

Nintendo just blasted away their rivals with underpowered hardware relative to the competition in both the console and portable spaces. What makes you think they're interested in getting back in the horsepower race?

Sony also lost billions on the Playstation 3 and a shit ton of market share, so there's no telling how much money they will throw at the next one just to say they have cutting-edge technology, especially when Nintendo proved it does't necessarily matter. In any case, Kinect's outcome will heavily influence what happens with Microsoft in a couple of years. Who is to say that Sony or Microsoft are interested in the horsepower race any more? When has the most powerful console "won" a generation?

LIVE will not be single handedly responsible for Microsoft's success ever. It's part of it, but the most highly weighted factor will always be the software. Microsoft knows that and that is why they will continue courting developers and paying for exclusives.

 

[FrankT]

VG247 was truly citing MS PR. I got the full thing.

Hmm, not sure how Pachter fumbled here then.

Yes, I'm not sure if I was clear enough. I'm not saying that their business is hurting, just that they would stop spending as much if that were the case. According to the quote wrowa posted, some investors are allegedly impatient despite their record-breaking incomes.

Spending hasn't stopped. It's not just about Reach's marketing budget, R&D for Kinect must have cost them a lot, and the same could be said for its promotion, both the bits we've already seen (Cirque du Soleil, anyone?) and what is yet to come this holiday.

Yea there is pretty much nothing conservative they have done on the marketing side this year and perhaps that is one reason they have performed the best ever this year in the US. The only thing I don't see from them at this point is dropping tons of money into big core projects save 3, but then again we do not know too much about 2011 yet so we shall see. Not having a Bungie Halo or a Gears in the holiday window should be interesting for next years core platform software. Coming off the best year ever from a fiscal stand point there is no question they will want to build on that in the years to come as the base continues to grow, but they have to balance that with the core projects and Kinect. The money they have thrown into Kinect so far has to be pretty big yet it doesn’t seem to have dented the growth in the division in the last year in net profit.

 

[Opiate]

What Charlequin is describing is known as opportunity cost.

A Security Guard may find it worth his time to moonlight as a Janitor if he needs the extra money. A Doctor almost certainly would not find it worth his time, because the disparity in pay between Doctor -> Janitor is so large that the amount of "extra" money he would bring in would be so small that he'd be better off spending his time doing something else. He could take on additional shifts as a Doctor, for example.

That is the situation with Sony and Microsoft. And yes, I did just compare Sony to a Security Guard and Microsoft to a Doctor. If you'd looked at their balance sheets over the last decade, you can see why.

I'm not necessarily suggesting that Microsoft will pull out of the business, by the way. I'm just pointing out why this specific issue (i.e. that gaming is not very profitable for anyone but Nintendo) is something that would bother Microsoft more than it would bother Sony: Microsoft has a lot of other really valuable, profitable things they could sink their money in to instead. Sony really doesn't.

 

[FrankT]

What Charlequin is describing is known as opportunity cost.

A Security Guard may find it worth his time to moonlight as a Janitor if he needs the extra money. A Doctor almost certainly would not find it worth his time, because the disparity in pay between Doctor -> Janitor is so large that the amount of "extra" money he would bring in would be so small that he'd be better off spending his time doing something else. He could take on additional shifts as a Doctor, for example.

That is the situation with Sony and Microsoft. And yes, I did just compare Sony to a Security Guard and Microsoft to a Doctor. If you'd looked at their balance sheets over the last decade, you can see why.

I'm not necessarily suggesting that Microsoft will pull out of the business, by the way. I'm just pointing out why this specific issue (i.e. that gaming is not very profitable for anyone but Nintendo) is something that would bother Microsoft more than it would bother Sony: Microsoft has a lot of other really valuable, profitable things they could sink their money in to instead. Sony really doesn't.

Right and many have called for this shift for quite some time. In fact some said DOA at the start this gen so no point at all(just like Xbox). Yet MS continues to talk about another 5 years over and over again while now really reaping in the profits for the division. Again they are starting to approach exactly the kind of profits PS2 saw so it would look pretty silly to simply drop that middle of the bucket when in all likelihood if they keep this approach those profits will go up over time while the base continues to grow versus throwing more money on the PC side. I don't expect MS to jump in first next time either and I do think there is possibility they drop it altogether next time albeit slim. When ya got Ballmer out their pimping Kinect all year they are dead set on the future of the division.

 

[REMEMBER CITADEL]

The problem for Microsoft is instead that their core business is so successful that making a minuscule profit on a side business like entertainment is effectively costing them money -- they'd make much more closing up shop there and reinvesting that money and effort back into their core business, or another side business with a greater strategic relevance to the company's future.

The thing is, this is a side business with a great strategic relevance to the company's future and has been ever since Sony started talking about a single box in your living room used for entertainment, but also for checking your e-mail, browsing the internet and even handling your finances.

Since then, other projects have emerged from Microsoft's gaming side of the business that might also have great importance on the (home) PC side - Live and Kinect. I'm sure it's not going to stop there.

 

[jcm]

Right and many have called for this shift for quite some time. In fact some said DOA at the start this gen so no point at all(just like Xbox). Yet MS continues to talk about another 5 years over and over again while now really reaping in the profits for the division. Again they are starting to approach exactly the kind of profits PS2 saw so it would look pretty silly to simply drop that middle of the bucket when in all likelihood if they keep this approach those profits will go up over time while the base continues to grow versus throwing more money on the PC side. I don't expect MS to jump in first next time either and I do think there is possibility they drop it altogether next time albeit slim. When ya got Ballmer out their pimping Kinect all year they are dead set on the future of the division.

So they're about $5B on the hole now on gaming. Maybe next gen they finally recoup their startup costs. That's 15 years. Meanwhile, Apple has a huge head start with iPad and iPhone, which is a business that should have been Microsoft's, and would have had a healthy symbiosis with the core cash cows.

I don't think they'll leave gaming, because Ballmer is very stubborn and MS is very rich. But I don't see how one can argue that Xbox was a wise use of capital, and I don't see how staying in the business makes any sense for MS.

The thing is, this is a side business with a great strategic relevance to the company's future and has been ever since Sony started talking about a single box in your living room used for entertainment, but also for checking your e-mail, browsing the internet and even handling your finances.

But Sony's talk was fantasy. No one is using a PS3 or PS4 to check email ar handle finances. Sony was dumb, and MS wasn't smart enough to see that and chased them off the cliff.

 

[REMEMBER CITADEL]

Meanwhile, Apple has a huge head start with iPad and iPhone, which is a business that should have been Microsoft's, and would have had a healthy symbiosis with the core cash cows.

It's not like they haven't been trying on both those fronts for years now...

 

[Draft]

I don't think they'll leave gaming, because Ballmer is very stubborn and MS is very rich. But I don't see how one can argue that Xbox was a wise use of capital, and I don't see how staying in the business makes any sense for MS.

Leaving the console business isn't going to magically recover all the money they've already burned. If the Xbox is making profit, they'll keep supporting it.

That is, unless there is some corporate "vision" restructuring that puts the ax to profitable enterprises for no discernible reason (see Flight Simulator and Age of Empires.)

 

[Sydle]

Right and many have called for this shift for quite some time. In fact some said DOA at the start this gen so no point at all(just like Xbox). Yet MS continues to talk about another 5 years over and over again while now really reaping in the profits for the division. Again they are starting to approach exactly the kind of profits PS2 saw so it would look pretty silly to simply drop that middle of the bucket when in all likelihood if they keep this approach those profits will go up over time while the base continues to grow versus throwing more money on the PC side. I don't expect MS to jump in first next time either and I do think there is possibility they drop it altogether next time albeit slim. When ya got Ballmer out their pimping Kinect all year they are dead set on the future of the division.

I know GAF likes to think Microsoft is fumbling its way into luck that keeps buying them more time, but they've been saying they were committed to three consoles, or three generations since the original Xbox launched. In that time they've expressed long-term interest into broadening their reach (e.g., Rare, Kinect, Microsoft Casual Games, LIVE Arcade, Indie Games, Games for Windows, etc.).

They're not going to drop out of the video game industry, because it's a growing software market, but I can see their presence changing as technology develops. For example, I think they'll eventually drop out of the hardware side of things when LIVE, broadband penetration, and server-side processing are more mature. That's what I think LIVE Anywhere will become.

 

[Opiate]

Right and many have called for this shift for quite some time. In fact some said DOA at the start this gen so no point at all(just like Xbox). Yet MS continues to talk about another 5 years over and over again while now really reaping in the profits for the division. Again they are starting to approach exactly the kind of profits PS2 saw so it would look pretty silly to simply drop that middle of the bucket when in all likelihood if they keep this approach those profits will go up over time while the base continues to grow versus throwing more money on the PC side. I don't expect MS to jump in first next time either and I do think there is possibility they drop it altogether next time albeit slim. When ya got Ballmer out their pimping Kinect all year they are dead set on the future of the division.

They're dead set on the future of the Xbox 360. I don't think anyone is suggesting that Microsoft is going to leave the business during the profitable lifespan of the 360.

Start a new system and that's when bleeding money becomes a problem again. I think they won't leave, but not because of the Xbox 720 -- because of XBLive. That is an extremely successful product that has long term loyalty, which could transcend generations.

Again, I'm not really in agreeance with those that believe Microsoft is likely to leave the industry after this generation, if such people exist. I'm just pointing out that it's possible, and explaining why.

It's not like they haven't been trying on both those fronts for years now...

So try harder. Take the money being blown on the gaming division and invest more money and more talent in the divisions that have a legitimate chance to hit it big. The pot of gold at the end of the gaming rainbow is beginning to seem increasingly less realistic, as Apple and Google steal that pot right out from under Sony/Microsoft using different strategies in different sectors.

What I am arguing (and actually agree with): Microsoft bet on gaming to produce the convergence device of the future. It is now seeming increasingly less likely that such a convergence device is going to emerge out of gaming first: Apple and Google are both taking far more successful, profitable approaches.

So Microsoft guessed wrong. Is it worth pulling out now and chasing the real winners? I don't think so, personally. That opportunity is likely gone, and for now, the Xbox division is profitable.

Again, I'm mostly playing devil's advocate here: I'm not trying to suggest that what I'm saying is likely, just that it's possible, and explaining why. Microsoft isn't likely to divest soon because of Xbox Live. In my opinion.

 

[Mrbob]

Yeah I'm starting to believe the next xbox won't be here for awhile. Maybe around 2014 if we are lucky. What reason does MS have for a successor? X360 is selling the best it ever has and they are raking in massive profits at the same time. The longer MS waits, the better chance they have of making a console that is technologically superior and also not sold at a big loss. If it is 2014 MS can have a system out that will make the 360 look old (because it will be by then) and not have to take a big loss on every system sold, if at all.

 

[maeh2k]

The problem for Microsoft is instead that their core business is so successful that making a minuscule profit on a side business like entertainment is effectively costing them money -- they'd make much more closing up shop there and reinvesting that money and effort back into their core business, or another side business with a greater strategic relevance to the company's future.

I don't think one should make such a clear distinction between their core business and entertainment.

Sure, Microsoft, by comparison, doesn't make much money off of xbox, windows phone, bing, ... but it's still all linked together. Stuff like search is important for natural language stuff (which might become important for windows). On the Xbox you have things like kinect, which might at some point become relevant for using pcs.

They think that "three screens and a cloud" will become more and more important, so that's where they should be.

Besides, the battle for the TV is just starting with Apple TV and Google TV launching, while MS already has millions of boxes in place that can similarly stream on demand content.

 

[apana]

I dont want Microsoft to leave the gaming industry, but I am a little pissed off that they sort of killed banjo and kazooie. I'm guessing any future console that they make will start off at 300$ and make them a small profit from the get go. I remember watching some interviews with Microsoft execs during E3 and they were acting pretty strange, I think the higher ups must be putting a lot of pressure on them. They probably know that they wont be bailed out if they make any major mistakes.

 

[Opiate]

What you should compare Microsoft's losses to is to Apple and Google. That's what most seem to agree were Microsoft's closest opportunities, if they had invested more talent and money in mobile/tablet/music devices instead of gaming. Instead of losing ~5 billion dollars over the last 10 years, they could have made tens of billions.

What you should compare Sony's losses to are TVs/Cameras/Sound systems, which are their closest opportunities. Unfortunately, those divisions are also fairly unprofitable, so Sony might have made a couple of billion more instead of losing ~2 billion in the last decade.

Microsoft's opportunity cost for their investment was much higher. Sony may have lost some edge in their other divisions (which is quite true, they have), but Microsoft lost out on a much bigger, far more profitable market.

At this point, though, I think the time has passed. The relatively negative analyst projections surrounding Microsoft as a whole don't arise because they're likely to start losing money soon, but because most seem to think that their chances at explosive growth are now over. Apple and Google found the explosive growth, not them. So if those chances are indeed passed, then it makes sense for Microsoft to continue investing in marginally profitable divisions like the Xbox one, because the opportunity costs for Microsoft are no longer akin to Google/Apple.

 

[GhaleonEB]

What Charlequin is describing is known as opportunity cost.

A Security Guard may find it worth his time to moonlight as a Janitor if he needs the extra money. A Doctor almost certainly would not find it worth his time, because the disparity in pay between Doctor -> Janitor is so large that the amount of "extra" money he would bring in would be so small that he'd be better off spending his time doing something else. He could take on additional shifts as a Doctor, for example.

That is the situation with Sony and Microsoft. And yes, I did just compare Sony to a Security Guard and Microsoft to a Doctor. If you'd looked at their balance sheets over the last decade, you can see why.

I'm not necessarily suggesting that Microsoft will pull out of the business, by the way. I'm just pointing out why this specific issue (i.e. that gaming is not very profitable for anyone but Nintendo) is something that would bother Microsoft more than it would bother Sony: Microsoft has a lot of other really valuable, profitable things they could sink their money in to instead. Sony really doesn't.

The missing element from this analysis is whether Microsoft can actually make a better return by investing the same resources into their core business. They expanded into console gaming for two reasons: the coming convergence between computing and home electronics (in full force now), and because they had generated enormous caches of idle resources. They have enough cash generated from their core businesses that they needed alternative markets to expand into. So for them it's not a question of whether to invest in one area or the other, but to leave the resources idle, return them to the shareholders (something they did with the massive cash dividend a few years ago), or expand into new markets. Microsoft is big enough that they're doing all three.

 

[REMEMBER CITADEL]

That is, unless there is some corporate "vision" restructuring that puts the ax to profitable enterprises for no discernible reason (see Flight Simulator and Age of Empires.)

I don't think the reasons for those cuts are that hard to figure out. They obviously came to the conclusion that contracting independent studios for future titles in those franchises made more financial sense than keeping the studios on the constant payroll. Age of Empires and Flight Simulator games might have been profitable, but I'd wager that they haven't been bringing in a lot of cash for years now - certainly not much compared to the likes of Halo, Gears, Fable and perhaps even Forza. It's like what charlequin was talking about, why not invest that money into projects/studios that will make them bigger returns?

But Sony's talk was fantasy. No one is using a PS3 or PS4 to check email ar handle finances.

Sure, it didn't happen, and we could speculate whether Microsoft's entrance into the console business threw a wrench in Sony's plans or not. However, the potential danger is still there, maybe not from Sony, but some other company. We are definitely moving towards a more services-oriented environment, as opposed to the old local software-oriented paradigm. Put your device and/or your service into enough homes, and a range of opportunities arise.

 

[Bizzyb]

You are making yourself look like a fool. Please, just stop.

Nintendo never made THAT Huge of a leap. Granted SNES --> N64 was Big

and N64 --> GCN was also big, but Nintendo has never leap more than One Generations worth of tech.