4 ms·

The XBox 360 may be a great machine and have great software (I have friends that have worked on it) but from a business perspective it is a disaster. It is pre

by jbeda 17y ago

The XBox 360 may be a great machine and have great software (I have friends that have worked on it) but from a business perspective it is a disaster. It is pretty clear that Microsoft will never make up for the billions that were sunk into the original XBox and the 360. I know that the old Microsoft Bag Holder blog (which seems to have disappeared) ran the numbers. Once you add the RROD issues and the fact that the Wii is kicking the Xbox's butt from a marketshare/penetration perspective it is hard to say that the XBox is a slam dunk success.

snprbob86 17y ago
Maybe you haven't heard, but we've been profitable for 5 quarters. The org is well on it's way towards climbing out of the hole it dug. I think getting the foot into the living room was well with the price of admission. Well, except maybe that $1B RRoD loss...
- jacquesm 17y ago
  5 quarters of profitability on an 8 year run leaves a pretty big hole to be plugged (and doesn't say how profitable). And do you mean profitable including the start up losses or profitable for those quarters only? Wherever I go I see WIIs, Xboxes not so much any more. They're still being sold in record numbers but WII outsells xbox by a comfortable margin.
  - bad_user 17y ago
    I own a Wii and I hate it. That controller is cool but once you get used to it the games themselves are pretty lame. And you can't use Wii for pretty much anything else. Surely you could "buy" a browser with Wii-points (if they haven't made it free already). But the web-browsing experience is also pretty lame. And you can't use it to watch movies. So I bought a Wii because it was cheaper at the time (not anymore). But you won't catch me buying any games for it. I just borrowed some games I didn't like and now it's just sitting there ... and from time to time when a friend comes I just take out the free "Wii Sports" that came bundled with it. If Wii really outsels Xbox it doesn't say much because they target different markets.
    - jacquesm 17y ago
      For many people it's a 'one or the other' even though they're technically different target markets. WII hit the sweet spot and sold an enormous number of units in a very short time, and for a very large number of those one xbox less was sold.
    - root 17y ago
      When the kids got a Wii I bought some Wii points just to get the browser. I used it once. An app that requires me to sit pretty much exactly in front of the tv to be able to control it just isn't all that useful to me.
  - snprbob86 17y ago
    Per quarter profitable. MSFT is public so you can see the PnL sheets online. Xbox will be in the "Entertainment and Devices" division which also includes Microsoft Hardware and, oddly, Mac Office (maybe not still). I don't know the exact numbers, but my understanding is that we are projected to be out of the $6B hole within a few years. As for the Wii, it's a great product, but it is fundamentally a differet market and business model. Nintendo makes money on hardware sales. They have a low attach rate of primarily 1st party games. Microsoft makes money on royalties. Xbox had an unprecidented high attach rate with significant 3rd party profit sharing. Xbox LIVE is also a hearty subscription business.
    - jacquesm 17y ago
      So, overall as of this writing it still is a net loss, but it is quite impressive if they planned to take a loss for more than a decade to come out on top. I agree that nintendo has a different business model, but I think there is significant overlap between the markets, in other words I would expect xbox sales and wii sales to be competing at least in part for the same dollars. Or is it a documented fact that those that own a wii buy xboxes later on ?
      - Tuna-Fish 17y ago
        Bill Gates once boasted that he could run Microsoft for a decade with no income whatsoever. So, yeah, long times until returns is normal with them. Actually, I wouldn't wonder at all if they just did the math, projected that the entire project will be a net loss, and did it anyway. Just how do you account for strengthening DirectX and helping keep windows entrenched on the desktop with Games for Windows?
        jacquesm 17y ago
        That's funny, if that is true then that is really proof positive they lost their way. If you are thinking in terms of making products at a loss just for the heck of it then you are no longer competitive, you're already on the way down, it's just that the ground is still a long way off. I doubt that's their real perspective. But the eagerness with which a 6 billion loss and a 7 year losing streak gets polished away with 'in a few years we'll be in the black' is quite amazing. I wouldn't be too proud of that. The way these things get spun we'll probably never know the truth though. Nobody seems to like to admit to failure, even when it is blatantly obvious to the rest of the world. Zune anyone ?
- jsz0 17y ago
  They're going to need more than 5 quarters to call it a success. The console business is very fluid and dynamic due to the gigantic reset button of new hardware platforms every 5-7 years. The 360 hasn't been a run away success -- in fact it may turn out to be the weakest selling console of the big three when all is said and done due to Sony's big advantage in worldwide sales. The 360 has been very successful in the US, not as successful as the Wii, but as you said profitable at least. The big question for Microsoft is what happens in the next generation of hardware. They will be presumably taking another round of losses when they launch the successor to the 360 over the next couple of years. I'm not quite sure where they payoff is here for Microsoft. They need a big smashing success to get ahead of the game or they will be on the treadmill of the console industry indefinitely. Big loss, some profit, big loss, some profit...
  - snprbob86 17y ago
    It's probably going to be more than 5-7 years this time around. Neither Sony nor Microsoft want to go through another round of big losses any time soon. I have no inside knowledge of our next console plans, but I can tell you that it certainly feels like Natal is that next "console" for us as far as investments go. Sony has publicly said that they intend the PS3 to last a full decade or more. Furthermore, graphical capabilities have just gotten to a point where the game developers are begging the hardware producers to stop for a while. They simply can't afford the art costs to do anything higher definition than they already are. Sure, the devs would like some extra CPU cycles. And the designers would love a faster medium to remove loading restrictions. And the list of wants and asks will never be satisfied. But making AAA games cost boatloads of money. Every new console is a new burden on developers and they have spoken, loudly.

by jbeda 17y ago

snprbob86 17y ago

Maybe you haven't heard, but we've been profitable for 5 quarters. The org is well on it's way towards climbing out of the hole it dug. I think getting the foot into the living room was well with the price of admission. Well, except maybe that $1B RRoD loss...

jacquesm 17y ago
5 quarters of profitability on an 8 year run leaves a pretty big hole to be plugged (and doesn't say how profitable). And do you mean profitable including the start up losses or profitable for those quarters only? Wherever I go I see WIIs, Xboxes not so much any more. They're still being sold in record numbers but WII outsells xbox by a comfortable margin.
- bad_user 17y ago
  I own a Wii and I hate it. That controller is cool but once you get used to it the games themselves are pretty lame. And you can't use Wii for pretty much anything else. Surely you could "buy" a browser with Wii-points (if they haven't made it free already). But the web-browsing experience is also pretty lame. And you can't use it to watch movies. So I bought a Wii because it was cheaper at the time (not anymore). But you won't catch me buying any games for it. I just borrowed some games I didn't like and now it's just sitting there ... and from time to time when a friend comes I just take out the free "Wii Sports" that came bundled with it. If Wii really outsels Xbox it doesn't say much because they target different markets.
  - jacquesm 17y ago
    For many people it's a 'one or the other' even though they're technically different target markets. WII hit the sweet spot and sold an enormous number of units in a very short time, and for a very large number of those one xbox less was sold.
  - root 17y ago
    When the kids got a Wii I bought some Wii points just to get the browser. I used it once. An app that requires me to sit pretty much exactly in front of the tv to be able to control it just isn't all that useful to me.
- snprbob86 17y ago
  Per quarter profitable. MSFT is public so you can see the PnL sheets online. Xbox will be in the "Entertainment and Devices" division which also includes Microsoft Hardware and, oddly, Mac Office (maybe not still). I don't know the exact numbers, but my understanding is that we are projected to be out of the $6B hole within a few years. As for the Wii, it's a great product, but it is fundamentally a differet market and business model. Nintendo makes money on hardware sales. They have a low attach rate of primarily 1st party games. Microsoft makes money on royalties. Xbox had an unprecidented high attach rate with significant 3rd party profit sharing. Xbox LIVE is also a hearty subscription business.
  - jacquesm 17y ago
    So, overall as of this writing it still is a net loss, but it is quite impressive if they planned to take a loss for more than a decade to come out on top. I agree that nintendo has a different business model, but I think there is significant overlap between the markets, in other words I would expect xbox sales and wii sales to be competing at least in part for the same dollars. Or is it a documented fact that those that own a wii buy xboxes later on ?
    - Tuna-Fish 17y ago
      Bill Gates once boasted that he could run Microsoft for a decade with no income whatsoever. So, yeah, long times until returns is normal with them. Actually, I wouldn't wonder at all if they just did the math, projected that the entire project will be a net loss, and did it anyway. Just how do you account for strengthening DirectX and helping keep windows entrenched on the desktop with Games for Windows?
      - jacquesm 17y ago
        That's funny, if that is true then that is really proof positive they lost their way. If you are thinking in terms of making products at a loss just for the heck of it then you are no longer competitive, you're already on the way down, it's just that the ground is still a long way off. I doubt that's their real perspective. But the eagerness with which a 6 billion loss and a 7 year losing streak gets polished away with 'in a few years we'll be in the black' is quite amazing. I wouldn't be too proud of that. The way these things get spun we'll probably never know the truth though. Nobody seems to like to admit to failure, even when it is blatantly obvious to the rest of the world. Zune anyone ?
jsz0 17y ago
They're going to need more than 5 quarters to call it a success. The console business is very fluid and dynamic due to the gigantic reset button of new hardware platforms every 5-7 years. The 360 hasn't been a run away success -- in fact it may turn out to be the weakest selling console of the big three when all is said and done due to Sony's big advantage in worldwide sales. The 360 has been very successful in the US, not as successful as the Wii, but as you said profitable at least. The big question for Microsoft is what happens in the next generation of hardware. They will be presumably taking another round of losses when they launch the successor to the 360 over the next couple of years. I'm not quite sure where they payoff is here for Microsoft. They need a big smashing success to get ahead of the game or they will be on the treadmill of the console industry indefinitely. Big loss, some profit, big loss, some profit...
- snprbob86 17y ago
  It's probably going to be more than 5-7 years this time around. Neither Sony nor Microsoft want to go through another round of big losses any time soon. I have no inside knowledge of our next console plans, but I can tell you that it certainly feels like Natal is that next "console" for us as far as investments go. Sony has publicly said that they intend the PS3 to last a full decade or more. Furthermore, graphical capabilities have just gotten to a point where the game developers are begging the hardware producers to stop for a while. They simply can't afford the art costs to do anything higher definition than they already are. Sure, the devs would like some extra CPU cycles. And the designers would love a faster medium to remove loading restrictions. And the list of wants and asks will never be satisfied. But making AAA games cost boatloads of money. Every new console is a new burden on developers and they have spoken, loudly.