4 ms·

The original purpose of the XBox was to kill the profit margins on Sony's cash cow, the playstation. It succeeded in that, and Sony is no longer threatening Mic

The original purpose of the XBox was to kill the profit margins on Sony's cash cow, the playstation. It succeeded in that, and Sony is no longer threatening Microsoft across a range of areas. What areas are those and why do we we think that spending billions with a "b" on Xbox to kill Sony's profits was a more effective defence of those areas than spending those same or fewer billions with a "b" making those areas more competitive? And more importantly, are any of these areas Sony threatened actual cash cow businesses like Windows or Office?

kenjackson 16y ago
It was really one area. The TV in the living room. MS feared that Sony would end up winning that with the PlayStation and then use their consumer electronics arm to have an integration stranglehold on the living room. You have to remember that this started back in 2000 (or so). Nobody had a clear vision of Netflix or Roku or Hulu. I don't think they ever worried that Sony would take Office, but I think the fear was that they would move computing to appliances and take Windows revenue... now that fear is the iPad will do it.
- btilly 16y ago
  It started a bit earlier than that. Sony's WebTV came out in 1996. Which fed perfectly into Microsoft's paranoia that the web was about to make Windows irrelevant.
  - kenjackson 16y ago
    Absolutely. I meant XBox planning proper, but you're right, this paranoia goes back as MS also had WebTV in the 90s as well (I don't recall Sony's, but I'm not surprised that they had one).
    - AaronI 16y ago
      Sony's WebTV was a set-top box (Phillips produced them as well) for WebTV Networks, Inc. Microsoft later bought WebTV Networks in '98.
btilly 16y ago
And more importantly, are any of these areas Sony threatened actual cash cow businesses like Windows or Office? Yes. Microsoft thought that Windows in the consumer marketplace was threatened. Here was the theory that both companies had then (and maybe still have). A digital convergence between media and computers is inevitable. Whoever controls that platform will see a large growth in business. Whichever gets replaced will see a large drop in business. One of the keys to winding up in control of that platform was to get richer content for your platform. The key to that was to deliver a DRM system that Hollywood liked. With that in mind take another look at Sony's WebTV, Microsoft's Media Center, the Blu-ray vs HD DVD war, and moves towards DRM from both companies over the last decade. The battle so far has been a draw. WebTV failed to dent the PC market place. Blu-ray won. Consumers don't like DRM, but a certain amount of it has been shoved down our throats anyways. Incidentally I believe that Sony still thinks this could happen, and this is one reason that they are involved in the Google TV platform.
- raganwald 16y ago
  It is not obvious to me that spending billions on Xbox to suck the wind out of Sony's sails is superior to investing in Windows itself as a means of protecting Windows in the consumer marketplace. You're describing spending billions of dollars to become the dominant player in an uncertain business in the hope that someday down the road you will be able to recoup all your billions by enjoying a monopoly position. But (a) they have spent years on this and are only fighting to a draw, and (b) it's not clear that by the time one of them "wins" that the business will work the same way for media that it did for PC software or operating systems. They are trying to replicate the business model for Windows, and failing, while meanwhile companies like Apple, Amazon, and Google are bringing entirely new business models to the marketplace. As Mitch Hedberg would put it, that's a double-whammy.
  - btilly 16y ago
    In business the right course is often not obvious, and the merits of different approaches can be heavily debated. In the case of the Xbox, Microsoft did both. It spent money developing the Xbox. It spent money investing in Windows. It also took lessons from the Xbox to make Windows itself a better gaming platform. And finally the cost of the Xbox approach was not as much as you'd think, because the division stood to recoup much of its costs. How much did this cost Microsoft in the end? Less than you'd think, given the article. While it is true that costs were measured in billions and profits in millions, those costs were fixed development costs in the low billions, and profits recently have been quarterly profits in the hundreds of millions. I believe that at this point, over all generations of the Xbox, Microsoft is in the black. (But if they had invested their money differently, they could be further in the black.) So what was the result in the end? I think they sliced something like a quarter off of Sony's profit margin. Almost for free. And Sony failed to execute on their strategy of having TVs replace PCs in the home. Whatever you think of the merits of the strategy, Microsoft clearly thinks it works. They have used it repeatedly. For example look at Bing. And I wonder whether Google TV is an attempt to return the favor.

kenjackson 16y ago

It was really one area. The TV in the living room. MS feared that Sony would end up winning that with the PlayStation and then use their consumer electronics arm to have an integration stranglehold on the living room. You have to remember that this started back in 2000 (or so). Nobody had a clear vision of Netflix or Roku or Hulu. I don't think they ever worried that Sony would take Office, but I think the fear was that they would move computing to appliances and take Windows revenue... now that fear is the iPad will do it.

btilly 16y ago
It started a bit earlier than that. Sony's WebTV came out in 1996. Which fed perfectly into Microsoft's paranoia that the web was about to make Windows irrelevant.
- kenjackson 16y ago
  Absolutely. I meant XBox planning proper, but you're right, this paranoia goes back as MS also had WebTV in the 90s as well (I don't recall Sony's, but I'm not surprised that they had one).
  - AaronI 16y ago
    Sony's WebTV was a set-top box (Phillips produced them as well) for WebTV Networks, Inc. Microsoft later bought WebTV Networks in '98.

btilly 16y ago

And more importantly, are any of these areas Sony threatened actual cash cow businesses like Windows or Office? Yes. Microsoft thought that Windows in the consumer marketplace was threatened. Here was the theory that both companies had then (and maybe still have). A digital convergence between media and computers is inevitable. Whoever controls that platform will see a large growth in business. Whichever gets replaced will see a large drop in business. One of the keys to winding up in control of that platform was to get richer content for your platform. The key to that was to deliver a DRM system that Hollywood liked. With that in mind take another look at Sony's WebTV, Microsoft's Media Center, the Blu-ray vs HD DVD war, and moves towards DRM from both companies over the last decade. The battle so far has been a draw. WebTV failed to dent the PC market place. Blu-ray won. Consumers don't like DRM, but a certain amount of it has been shoved down our throats anyways. Incidentally I believe that Sony still thinks this could happen, and this is one reason that they are involved in the Google TV platform.

raganwald 16y ago
It is not obvious to me that spending billions on Xbox to suck the wind out of Sony's sails is superior to investing in Windows itself as a means of protecting Windows in the consumer marketplace. You're describing spending billions of dollars to become the dominant player in an uncertain business in the hope that someday down the road you will be able to recoup all your billions by enjoying a monopoly position. But (a) they have spent years on this and are only fighting to a draw, and (b) it's not clear that by the time one of them "wins" that the business will work the same way for media that it did for PC software or operating systems. They are trying to replicate the business model for Windows, and failing, while meanwhile companies like Apple, Amazon, and Google are bringing entirely new business models to the marketplace. As Mitch Hedberg would put it, that's a double-whammy.
- btilly 16y ago
  In business the right course is often not obvious, and the merits of different approaches can be heavily debated. In the case of the Xbox, Microsoft did both. It spent money developing the Xbox. It spent money investing in Windows. It also took lessons from the Xbox to make Windows itself a better gaming platform. And finally the cost of the Xbox approach was not as much as you'd think, because the division stood to recoup much of its costs. How much did this cost Microsoft in the end? Less than you'd think, given the article. While it is true that costs were measured in billions and profits in millions, those costs were fixed development costs in the low billions, and profits recently have been quarterly profits in the hundreds of millions. I believe that at this point, over all generations of the Xbox, Microsoft is in the black. (But if they had invested their money differently, they could be further in the black.) So what was the result in the end? I think they sliced something like a quarter off of Sony's profit margin. Almost for free. And Sony failed to execute on their strategy of having TVs replace PCs in the home. Whatever you think of the merits of the strategy, Microsoft clearly thinks it works. They have used it repeatedly. For example look at Bing. And I wonder whether Google TV is an attempt to return the favor.