[Rangers]

Originally Posted by Fox5

Nintendo, Sega, Sony, and Atari did not take 10 years or 2 console generations to become profitable.
The Xbox was an admitted mistake in economics, but with the 360, MS had the chance to fix the problems. They had the chance to design a system and price it appropriately so it wouldn't bleed money, and they have Xbox Live which is pretty much pure profit, and yet they won't even recover the costs of just the 360 hardware on its own until 2008? That better include all the R&D and marketing dollars as well; the original Xbox was also predicted to be profitable within 3 years of launch.

Umm, are you aware Sony lost 369 million this same quarter that ms lost 96? Although as always, it's difficult to seperate exact gaming figures. (Sony's number is fairly pure though).

It definitly looks to me like the 360 is already losing much less than Xbox. I mean at this pace, they will lose only <400m for the whole year. With Xbox1 they lost about a billion per year.

What people are ignoring is that the Sony/ms model has ALWAYS involved losses the first 1-2 years. So why would you expect 360 to already be profitable? It is less than one year in.

BTW, I def do not believe Xbox live is pure profit. I believe it was a pretty big expense establishing the server rooms at one point, that's past but I often shudder to think the bw they run through (many freedemos are 1GB, and downloaded by how many??). I have no idea but I bet it's closer to a break even proposition, with potential for mild future profitability.

The 2008 number could be because face it, the 360 may be close to break even now, but there is a spring 2007 price drop looming that will likely set it back again. If it's a hefty $100 drop, it will sting a bit at first. But also pay dividends with added install base.

I guess they key point of this post is, 360 is losing much less than Xbox was at the same point. That's a fact. So how can the new business model be failing?
________
NotThatShy

[Acert93]

Originally Posted by Rangers

I guess they key point of this post is, 360 is losing much less than Xbox was at the same point. That's a fact. So how can the new business model be failing?

And MS has done a LOT to ensure that throughout the generation their cost continue to drop while making moves to maximize the install base (thus more software sales). Some well known points that I and others have brought up before:

- eDRAM. MS could have gone with a 256bit bus, but the problem is pads shrink slower, cutting into die reduction costs. MS could have gone with split pools (2x 128bit busses) like Sony, but then you have the cost of an extra memory controller and logic to exchange data, and the additional complexity for developers. Also DRAM does not drop in price as quickly as chips. The eDRAM move is one way to shift expense, and in the long run should be a very minimal expense (NEC has 55nm slated for 2007). Basically MS bought a lot of bandwidth that, unlike better/faster DRAM, will reduce in price faster than a comparable DRAM solution. In contrast with the Xbox1, it had an UMA like the 360, of course they had 2x the memory as the competitors and less bandwidth which was a hinderance. This time they went 1:1 in memory size configuration and removed one of the bigger bottlenecks of the Xbox1 and DRAM in general (bandwidth).

- Xenon and Xenos. MS really made a mistake with the deals last time around. This time around they licensed the IPs (up front design fees + software royalties) and are contracting with semiconductor manufacturers (Charter and TSMC) directly. They also had the chips designed with future cost reduction in mind. e.g. Xenon will be on the 65nm process ~15 months after launch. MS will probably get 2x or more CPUs per wafer. Down the road they are setting themselves up for a "slim" version. MS has a real plan for yearly cost reductions, something they didn't have last time, and they also have avoided the costly chip-deals they had with NV and Intel.

- Software. When the Xbox1 launched there were a LOT of questions about MS as a gaming company. Could they be trusted? The Xbox1 was the "Halo Machine". I don't think that could be said today about the 360. MS has aquired a number of developers (I doubt we will see any $300M aquisitions like we did with Rare, so there is nearly 10% of their losses right there) and partnered with others (Bioware, Mistwalkers, Epic, etc) to develop new IPs for the MGS brand and have developed competitive franchises in major genres (e.g. Forza Motorsport is a viable alternative that some people actually prefer). MS has become a viable alternative for mainstream gaming and developer support is very strong. Just look at the titles being released on the PS3 this fall -- many are cross platform. Obviously part of this is due to MS's early launch strategy, but it is also because the MS platform is viable and provides developers the ability to maximize profits, as well as offering a bridge for PC developers into the more lucrative console market. The Xbox 360, 12 months since launch, has an attach rate of 5 software titles per console. Strong software titles mean more royalties for MS and more Publisher support. It is a VITAL aspect of long-term profits. In 2008 when Gears of War 2 is coming out along with Bango and whatever else and there is a back library of games like Halo 3, Mass Effect, Forza Motorsport 2, Bioshock, Spliner Cell 5, Assassin's Creed, GTA4, etc MS will be making significant money from software, both 1st party and through 3rd party royalties. Software drives a platform and MS's offering with the X360 is much better than what the Xbox1 showed early on.

- Live. First savings is Live is already established (I heard that nearly 1B of last gens expenses were Live rollout). Another is that Live has gotten through the rough spots (see: EA not supporting online play with Madden). More importantly Live is the "standard" and a major selling point this time around, but more subtly Live is doing what it should be: A) It drives exposure through trailers and demos, especially important for smaller studios with nice apps that often fall through the cracks and for highlighting the BIG shows and releases, B) it has created a real alternative route for publishers to make money after the initial sale through expansions and microtransactions, and C) the arcade where new, smaller games can do well that would NOT sell well/get shelf space through traditional avenues and also gives publishers the ability to resell old classics. Live is all about giving gamers features they want -- while at the same time opening up alternative revenue streams not available in the past. Win-Win (if not abused). Live is absolutely essential to the Xbox brand as a differentiation point and one of the few "we currently lead in this market" bulletpoints, and is being leveraged in other spaces now as well and is the cornerstone to "Live Anywhere". From the MS perspective Live is huge, and it has opened up new ways to communicate with their customers, provide extra services, and further maximize profits--especially for publishers. Even if MS loses on Live, it is central to gaining overall profits.

- HDD optional / 360 Core. This is a big one; last time MS was chasing Sony. Lead time, developer support, and retail price. MS has flipped that paradigm. And while the Xbox1 had a standard HDD, MS has gone 2 SKU. This means their $399 console (with HDD) can reduce a major component cost and hit the $199 faster. This opens the door for more consumers (with viable upgrade path), and more customers means more software sales. And it also means removing a major "manditory/standard" cost in the Xbox1. Now MS is losing less on HDD models than non-HDD models. I think this is the very point where Sony tossed in the towel on cost. I don't think bare SKU v. bare SKU Sony would have been able to play the MS drop game (who wants to lose Billions other than Billy?) So they knew they would have to win on features, so went HDD standard. Considering the PS2 with less hardware outside MS at the same price last gen, maybe not so bad of a move. But for MS it was vital to control this cost because it killed them last time. They charge a premium to cover the cost of the HDD while keeping a cheaper SKU which will allow them tor each more markets--win-win situation in MS perspective, especially since almost anyone/everyone online will opt to get the HDD (I still think Live should require the HDD).

So the bulletpoints for those who hate my longer posts (i.e. how MS has improved their position in the market & removed many of the cash drains from last gen):

* Met competitors, instead of exceeding them, in memory footprint
* eDRAM as a bandwidth solution versus DRAM which would have been more expensive/slower reducing
* Better CPU/GPU plan for licensing and cost reduction
* Standard HDD removed; ability to reach more markets based on price
* Major entrance/setup fees like developer aquisition (e.g. Rare) and services (e.g. Live) out of the way
* Early launch has resulted in stronger position in regards to install base and publisher support
* The Xbox brand and software is much stronger and recognized this time around and seen as a quality platform and seems to be generating brisk software sales
* Established Live as a servive platform that promotes return business and sales
* Xbox 360 won't die after 4 years but should be a stable (but diminishing) source of income after Xbox 3 launches

Xbox and Xbox 360 comparisons are pretty superficial in regards to "profitability" discussions. Yes, the X360 is losing money now. That was always to be expected. But just a LITTLE digging clearly shows that it would be near impossible for the X360 to have the losses Xbox1 had. X360 is superiourly designed hardware in regards to cost reduction, they don't have to chase Sony downward this time around, they are established to have a much broader software portfolio, don't appear to be making huge investments like Rare and Live, and so forth. They have corrected almost every issue the Xbox1 had in regards to profits and have made significant headway on both Exclusive Titles and on 3rd party support. They still may lose money, but 4B in losses? I think they may about break even over 6 years... mind you the Xbox 360 should be longer lasting and not cut off like the Xbox1 because the 360 should be cheaper to make and be bringing in profits at the end of the life cycle ala Playstations. They may very well even fall short of the 45-55M range some projected (and even recently some were looking at 360 market share leadership into 2010), but I think MS from a software perspective is much improved over last gen + has a better plan for cost control and market placement. If they don't exceed 25M in 4 years I would be shocked.

MS is not losing $4B this gen. At the end of 2011 my bet is they will be in the black for the Xbox 360 generation... but not by much. MS will be writing the Xbox1 off as a learning experience and entry fee.

[-tkf-]

Originally Posted by Rangers

Umm, are you aware Sony lost 369 million this same quarter that ms lost 96? Although as always, it's difficult to seperate exact gaming figures. (Sony's number is fairly pure though).

Considering that the PS3 isn´t out yet and those 396 (if they are pure) would include PS3 "trouble" it´s expected i guess. However, the 360 is almost a year old, has no competition and should be selling well (alot better that it does though) and it still bleeds them. Of course when it comes to Microsoft bleed is more like dripping and how much money they burn doesn´t matter, imagine that.

http://news.bbc.co.uk/2/hi/business/6089752.stm

3.8 Billion dollars in just one quarter, thanks to their monopoly the outcome of this "battle" is written on the wall Microsoft can not be beaten. Why anyone would support their efforts is beyond me.

[Acert93]

TOKYO, April 27 (Reuters) - Sony Corp said on Thursday that it expected its game division to post a loss of about 100 billion yen in the current business year, hit by start-up costs for its PlayStation 3 game machine. That's about one billion dollars Sony is looking to lose to launch the PS3.

Just a reminder that Sony, like MS, expected to lose significant money on their console at first. $900M is a lot of money, and I believe Sony's fiscal year ends at the end of March 2007 (XBD?). And that is with a $499/$599 price tag. Losing money on the first couple years, to provide better hardware to lengthen the gen/profit window, is not uncommon. MS and Sony are really taking it to the edge, but it is not unknown as 2007 will see significant cost reductions from both and possibly some retail price reductions.

[RobertR1]

Acert,

The production issues and such will likely push the PS3's BOM higher than expected. Without a lot of consoles on the shelves, the software sales and accessories attachment rate will also be low.

One mistake I think Sony did was bundle everything in. Accessories have huge mark ups and are profitable (desirable ones atleast) and you can recoup a lot of the console losses off that. The MS approach of you pick and choose what you want is good for the consumer and obviously good for them.

Sony's fiscal year number should be quite interesting.

[onanie]

Originally Posted by RobertR1

Acert,

The production issues and such will likely push the PS3's BOM higher than expected. Without a lot of consoles on the shelves, the software sales and accessories attachment rate will also be low.

One mistake I think Sony did was bundle everything in. Accessories have huge mark ups and are profitable (desirable ones atleast) and you can recoup a lot of the console losses off that. The MS approach of you pick and choose what you want is good for the consumer and obviously good for them.

Sony's fiscal year number should be quite interesting.

What exactly is "accessory" in the PS3 packages? If you prefer, you could always get the "core" version.

[Acert93]

Originally Posted by onanie

What exactly is "accessory" in the PS3 packages? If you prefer, you could always get the "core" version.

Sony has made money off of memory cards in the past and the HDD eats into that (ask MS). Other examples being WiFi, Wireless Controller, Media readers, and so forth. Basically everything on Sony's retail PR sheet about the extra value in the PS3. Not that Sony is wrong on some of these (I like some of them and nice to have them "in the case"), but they can cut into peripheral / accessory revenue.

[onanie]

Originally Posted by Acert93

Sony has made money off of memory cards in the past and the HDD eats into that (ask MS). Other examples being WiFi, Wireless Controller, Media readers, and so forth. Basically everything on Sony's retail PR sheet about the extra value in the PS3. Not that Sony is wrong on some of these (I like some of them and nice to have them "in the case"), but they can cut into peripheral / accessory revenue.

HDD presence is mandatory for PS3, and so is Blu-ray. As I suggested to RobertR1, he could buy the cheaper core sku if he so wishes (though he has already made up his mind), which does not include Wifi or Media Readers. As such, where is Sony's mistake, going back to the original argument?

[Skrying]

Originally Posted by onanie

HDD presence is mandatory for PS3, and so is Blu-ray. As I suggested to RobertR1, he could buy the cheaper core sku if he so wishes (though he has already made up his mind), which does not include Wifi or Media Readers. As such, where is Sony's mistake, going back to the original argument?

You're looking at it from the wrong view. From a business point of view Sony isnt potetinally maxing out the profit they could be making.

[Acert93]

Originally Posted by onanie

HDD presence is mandatory for PS3, and so is Blu-ray. As I suggested to RobertR1, he could buy the cheaper core sku if he so wishes (though he has already made up his mind), which does not include Wifi or Media Readers. As such, where is Sony's mistake, going back to the original argument?

The manditory HDD is a mistake in his opinion. Standard HDD means NO memory card sales = lost revenue. Revenue the PS2/PS1 had to offset some console hardware costs.

To illustrate (fictional pricing):

PS2 Hardware Cost: $329.
PS2 Retail Price: $299.
Console Loss: $30

Memory Card Cost: $40.
Memory Card Retail Price: $10.
Accessory Profit: $30

i.e. you offset some hardware expenses with peripherals and accessories which traditionally have had larger margins. Now look a the PS3 in a similar situation:

PS3 Hardware Cost: $329.
PS3 Retail Price: $299.
Console Loss: $30

Memory Card Cost: $0.
Memory Card Retail Price: $0.
Accessory Profit: $0.

That is $30 you traditionally gained through memory cards (which my guess had an attach rate HIGHER than 1 per console) that will not be recouped on the PS3 because its functionality is now made redundant by the standard HDD.

Whether a mistake or not, it does displace some past revenue Sony has to recoup. Part of this is they are targetting the PS3 as a feature-rich platform (you pay more for more) and they are also hoping things like microtransactions offset such decisions. Time will only tell if they made the right moves.

[onanie]

Originally Posted by Skrying

You're looking at it from the wrong view. From a business point of view Sony isnt potetinally maxing out the profit they could be making.

No, it isn't that I'm looking at it the wrong way. Perhaps I'm more forgiving to Sony, but I can almost palpate the hate that it receives from a few individuals. Sony, it seems, can do no right. Sony charges for those "accessories", they're cow-milking cheapskates. Sony includes those "accessories", they are making a mistake.

The other aspect of my argument is that those "accessories" are mandatory for their idea of a gaming console - it can't be a mistake for including them, let alone "business" reasons.

[onanie]

Originally Posted by Acert93

The manditory HDD is a mistake in his opinion. Standard HDD means NO memory card sales = lost revenue. Revenue the PS2/PS1 had to offset some console hardware costs.

Whether a mistake or not, it does displace some past revenue Sony has to recoup. Part of this is they are targetting the PS3 as a feature-rich platform (you pay more for more) and they are also hoping things like microtransactions offset such decisions. Time will only tell if they made the right moves.

It isn't an "accessory" if it is mandatory. As such, including a mandatory "accessory" is as natural as sex - make no mistake about it . There is no lost revenue if the PS3 is released in the form that it's intended to be - one can imagine that Sony has prepared to profit from PS3 in their own way.

If I may ask, did you buy a core 360? Have you ever bought a Microsoft memory card?

Whether mandating a HDD is a good idea is beyond the scope of this thread, partly because it has been debated before, endlessly.

[Acert93]

Originally Posted by onanie

No, it isn't that I'm looking at it the wrong way. Perhaps I'm more forgiving to Sony, but I can almost palpate the hate that it receives from a few individuals. Sony, it seems, can do no right.

You are allowing your attachments to override the dialogue. Focus on points, not people or perceived biases. Some people here are totally unreasonable. Either ignore them or give a resounding reply and allow substance to drowned out their trolling.

Sony charges for those "accessories", they're cow-milking cheapskates. Sony includes those "accessories", they are making a mistake.

Sky is right, you are looking at the wrong place. This is a business thread, and quite frankly from a business perspective and profits IF Sony can are "cow-milking cheapskates" BUT it makes a profit because consumers feel the cost is a win for compelling features/products then Sony has made the right move -- regardless of how jaded fans feel. See: WoW, which I refuse to play, yet 6M disagree.

In a business thread, "milking customers" who come back for more is GOOD. Note my Live comments above--offer a "service" that is equally a platform to advance new revenue channels. Nasty, evil play for big corporation to make even MORE money?

YES! But if consumers like what they get, then so what?

The other aspect of my argument is that those "accessories" are mandatory for their idea of a gaming console - it can't be a mistake for including them, let alone "business" reasons.

The HDD was a great feature for games on the Xbox1, but it was a mistake for MS.

Something can be good for gamers, but bad for MS/Sony. Another example is Xbox1s being used as media centers (good for consumers) but sold at a loss to MS (bad for MS).

The key is being able to flick off the "game platform preference" switch in your mind and look at the market on different levels and from multiple angles.

Why a standard HDD could be a mistake in some peeps opinions are all in the Xbox1:

1. Higher product cost.
2. Slower cost reduction (and the HDD becomes a bigger % down the road due to its low scaling).
3. Subplants profitable memory card sales.
4. Higher unit cost retards market penetration (universally true unless the feature is a killer component to a massive cross section of the industry).

Ways for Sony to offset this:

1. Find new peripherals to sell at high margins.
2. Make the HDD pay for itself: Microtransactions, Expansions, Arcade Games, extra services, etc
3. Make the HDD a marketing tool to increase sales: Demos, Trailers, Free Content, etc

The question is whether the later can offset the former. Some people think yes, others no. IMO, suggested way back in Spring 2005, is "online" consoles should have a HDD standard, whereas "offline" consoles it is less of an issue, where a MS Core SKU strategy makes some sense (although it seems a standard HDD for Sony is also a partial concession to wanting to lower load times). There is always the hope a standard HDD will create a situation where a new gameplay style can be created that needs one, but no PS3 game or Xbox1/360 or most PC games demonstrate such, and thus far MS's HDD plan has showed a huge penetration rate meaning it may not have been necessary for such (critical mass for software sales requiring such a device).

I am not saying a HDD standard was a mistake, only that it can be seen as such from a business perspective. And there is living proof that a standard HDD can cost Sony a ton by subplanted revenue and additional hardware costs all gen.

[onanie]

In response to the individual who repped me with this comment "Come now, I am certain you can see the line of arguement that making a HDD standard costs more + displaces profits of Mem Cards. Duh it isn't an accessory! But it could be", instead of bringing out in the open here, I would say this.

It cannot be an accessory for what Sony envisions as their gaming console. If we want to make it purely a business argument, then one should hope that the potential for enhanced gameplay (more likely if the "accessory" is universally present for game developers to take advantage of) would attract more gamers. It is a conscious business decision. Not a mistake (until the results are seen, I agree).

[Acert93]

Originally Posted by onanie

It isn't an "accessory" if it is mandatory.

BUT, and for the last time:

It displaces an "accessory" in Sony's past revenue model.

This is income that must be regained somewhere -- either in the cost of the cost or through other avenues.

There is no lost revenue if the PS3 is released in the form that it's intended to be - one can imagine that Sony has prepared to profit from PS3 in their own way.

When/if investors start seeing lower profits in comparison to similar PS2 sales due to the contrast in standard HDD (more hardware costs for Sony) and lost renenue from memory cards (high levels of markup) I am sure they would disagree.

But it is a business decision. Sony feels that removing the profits from the Mem card accessory, by adding a standard HDD, is a good business decision in the long run. But there is no question that Sony has removed a former revenue channel by eliminating the need for the accessory.

They are essentially BUYING every customer a memory card.

If I may ask, did you buy a core 360? Have you ever bought a Microsoft memory card?

I don't own an Xbox 360 or Xbox1. But every console I have owned since the advent of memory cards (N64, PS1, SS, GCN, DC) had a memory card which I dutifully purchased. If my memory serves right, I have bought 8 memory cards on those 5 consoles.

Whether mandating a HDD is a good idea is beyond the scope of this thread, partly because it has been debated before, endlessly.

From the perspective of Business and Console Profitability, and how current revenue models by Sony/MS compare and specifically how things have changed on the MS end this gen from last gen (and how we can guage those moves based by the precidents set by Sony, Nintendo, Sega, etc) is well within game of the thread.

Whether it was a good move for Sony or not is kind of off topic (hence I have avoided getting into whether it was good for them or not) BUT the topic of "are losses typical?" came up, in which case market standards and history is pulled in, as well in this case there is a close similarity in the Xbox1/PS2, but only flip flopped this time in regards to certain design/business decisions.

Again, nothing to get worked up about, especially the "Sony cannot do anything right" rhetoric you are seeing in some others. Are some like that? Yeah, but if we just focus on the topic at hand and facts, even if viewed differently, then the thread can be beneficial for dialogue.

[onanie]

Acert, I appreciate your argument.

Fundamentally, RobertR1 calls "it" a mistake. I call "it" a conscious business decision. Please do not take my argument off on a tangent.

Perhaps there is a living proof of a mistake, but the two circumstances are not identical, with many factors involved. Sony would have considered these factors and felt its own circumstance to be unique. It's current decision isn't a mistake until there is a result for all to see.

[RobertR1]

Originally Posted by onanie

Acert, I appreciate your argument.

Fundamentally, RobertR1 calls "it" a mistake. I call "it" a conscious business decision. Please do not take my argument off on a tangent.

Perhaps there is a living proof of a mistake, but the two circumstances are not identical, with many factors involved. Sony would have considered these factors and felt its own circumstance to be unique. It's current decision isn't a mistake until there is a result for all to see.

It's a "mistake" since it cuts back on their revenue model. It's not a "mistake" to the consumer. It's great for us that we get everything bundled but if I was a shareholder and seeing how popular accessories were in the past, I'd frown at the fact that easy and proven revenue generators are being bundled into a package that will be sold at a loss for a very long time.

Seeing your posts on here and avsforum, I have no intention of debating this with you. It'd be a waste of time.

[Shifty Geezer]

Originally Posted by onanie

Sony, it seems, can do no right. Sony charges for those "accessories", they're cow-milking cheapskates. Sony includes those "accessories", they are making a mistake.

That's the nature of choices, but the response you get from people will vary from thread to thread. In a thread about Sony making/losing money, giving people more for their money is a 'mistake' in that it reduces quite a bit of earning potential*. Whereas in a thread on features, you'll get people saying 'woohoo, look at all the lovely extras!' You have to tune in to the discussion at hand to appreciate the context of comments! In similar vein, in an old XB360 thread I was saying MS should have charged more to begin with to make more money. Of course as a consumer I like cheap, but when talking about how MS should max out their money making, pricing lower than the market is willing to pay can be seen as a 'mistake.'

* Regards including the HDD, I don't think it can be classed as a mistake as it enables and encourages downloads. From day one there's interesting freebies to get people online. Then over the years you sell everyone loads of stuff. The profit is going to be far higher than that which could be made selling an optional HDD with its markup, and adds considerably to the PS3's overall feature-set as a distinguishing aspect that helps promote the premium pricetag. Sony have sacrificed a lot of proprietary earnings potential to make a more broadly appealing device that's much more user friendly, and I think the benefit to their image will have a positive effect worth the expense.

[onanie]

Originally Posted by RobertR1

It's a "mistake" since it cuts back on their revenue model. It's not a "mistake" to the consumer. It's great for us that we get everything bundled but if I was a shareholder and seeing how popular accessories were in the past, I'd frown at the fact that easy and proven revenue generators are being bundled into a package that will be sold at a loss for a very long time.

Perhaps it cuts back on the traditional revenue model, but the overall intention is to generate more in the end, as Shifty has so eloquently reiterated. It is not a mistake, in my opinion, and at least I have explained my position.

[ninzel]

Originally Posted by Fox5

Does that include recovering all the losses from Xbox 1?

I have no idea.

[Arwin]

Originally Posted by Acert93

The HDD was a great feature for games on the Xbox1, but it was a mistake for MS.

We don't even know that for sure. They *felt* it was a mistake, because it prevented them from pricing the Xbox more agressively against the PS2, as the HDD's price became stuck at $50 and couldn't be scaled down. They have concluded that the Xbox would have been more successful if they could have scaled their pricing levels better. But the truth is, I think they only reason why the Xbox was as successful as it was, is because it had the built in HDD. Case in point is that Halo 2 is its biggest and most defining success. It used the HDD extensively. Live was a great success. They couldn't have pulled it off nearly as well without the HDD - where to store the new car-packs for PGR2, for instance? Or the E3 videos? People loved being able to have custom soundtracks, put their own mp3s on the HDD and hear them in the game. Could they have done it without a HDD? Would any game have supported it if the HDD was optional?

The HDD was an important part of how the Xbox differentiated itself from the PS2 enough to see some PS2 owners buy an Xbox once they got bored with the PS2. The Xbox biggest problem was having to fight against the Playsation 1, and coming late to the party.

While having carefully analysed the success of the Playstation 1 and the problems they faced while fighting the Playstation one, they decided that first of all, to stand a fighting chance, they had to release before the Playstation 3. This way, they felt they could make up some of the distance to the PS2 they faced in the previous generation, and if they managed to bring out sufficient consoles, it would be more attractive for publishers to bring their games to the 360 to expand the limited install base that exists on next-gen platforms in the early years. Though that's partly compensated by a game competing with less titles, and having a longer shelf time, it also allows developers to spread the risk - probably one of the two platforms is going to be successful, at least.

Coming first to market however wouldn't have helped them without the original Xbox, which because it did well enough in the U.S., Live was a critical success, and Microsoft proved its commitment with a very expensive investment.

However, this scenario also posed them two big problems: they can't know what Sony is going to do, and the HD DVD player wasn't ready in time. The latter they have found a so far fairly successful strategy for, and it may not hurt them if: a) multiplatform titles aren't going to make much use of BluRay's capacity; b) if exlusives on the PS3 aren't going to be able to show convincingly that BluRay really improves a game; c) if it helps them significantly in undercutting the PS3's price point.

If they had known that the PS3 would get the HDD default (revealed very late for a reason), they probably wouldn't have bothered with the Core unit at all. It's a risk, and it costs money, but it was completely necessary if you come to market first and need that flexibility. This they learnt partly from the PS2 - although it wasn't ideal, if HDD and network gaming had *really* hit it off on the Xbox or another platform, it could have been fatal not to have this option. Similarly, if the Wii turns out to be the 360's biggest competitor or of by a sudden surprise the PS3 had gone the cheapest console route and made everything option, that could have killed the 360. So no matter how much I think the HDD is going to be essential for the next-generation of console games, and even though it may turn out to be inconsequential after all, they made the right decision here. They were first to market, and they needed to be flexible.

I am not saying a HDD standard was a mistake, only that it can be seen as such from a business perspective. And there is living proof that a standard HDD can cost Sony a ton by subplanted revenue and additional hardware costs all gen.

Yes. And while I understand Microsoft's decision, as outlined above, I get somewhat agitated whenever I see someone assume that in something as fast developing as the console space, you think that realities of the past have any bearing on the future. The difference between each console generation is about 5 years, which is an enormous space of time in this sector. Even basic things like currency and inflation issues are often just simply glossed over, although the prices of handhelds and iPods are clear proof that inflation matters. The market for consoles has expanded enormously over the last 5 (and 10) years, online infrastructure is vastly different both in terms of penetration and speed (can you imagine people downloading 1gb+ game demos 5 years ago? Back then, we were still arguing whether DVDs weren't ridiculous overkill for console games, and now a downloadable demo doesn't even fit on a CD!)

There are more subtle differences as well, incidentally. The PS3's HDD can be plugged in and out. The PS3 has support for USB media (including HDDs), several types of memory cards (which are going to hit 32Gb relatively soon, and may eventually be cheaper), and so on. If it turns out they need to go cheaper, they can always with relative ease release a PS-Three that doesn't need some of these components and adds others. But they definitely made the right choice by, at launch, bringing the full system out there so that developers and content providers (which for a very important they themselves are) can make use of it.

The key, however, is going to be at which point consumers are going to be ready 'en masse' for the next generation. The early adopters generally want the latest and preferably most potent stuff. The mass will generally just want the next playstation, unless something else is significantly different and better.

Significantly different and better here means iPod vs walkman. It has to be both appealing, and offer something distincly new at the right time. I won't say the 360 can't do it. But right now, I'm not seeing it happen.

At the same time, I cannot tell the role price is going to play. I can't make a conclusive argument, but I do think that value is going to be important, and having performance and features built in from day one tends to help win the long term battle. The 360 is going to have to get it done before the PS3 gets to $300. Call it the 'Amiga' effect. And of course none of the unique stuff that the PS3 (or Wii) have should hit that iPod effect.

But much of this is speculation on my part, of course. We'll have to wait and see what happens.

[onanie]

Originally Posted by Arwin

We don't even know that for sure. They *felt* it was a mistake, because it prevented them from pricing the Xbox more agressively against the PS2, as the HDD's price became stuck at $50 and couldn't be scaled down

Indeed, I would add that Microsoft is still similarly "burdened" by the optional HDD in 360, if the premium SKU continues to be obvious choice over the core SKU, and if there is increasing number of developers utilising the HDD (for the obvious benefits).

[a688]

Originally Posted by onanie

Indeed, I would add that Microsoft is still similarly "burdened" by the optional HDD in 360, if the premium SKU continues to be obvious choice over the core SKU, and if there is increasing number of developers utilising the HDD (for the obvious benefits).

So how again is the optional HDD a "similar burden"?

If you already own a laptop hard drive, you can't purchase a PS3 w/o one because it needs to be included so you can actually use the system. Therefor, the madatory HDD in the PS3 is a burden because you cannot "remove" it from the default retail package.

If the HDD is optional from day one BUT damn near everybody like is, they can go out a buy a console w/ a HDD pre installed OR if they already have a hard drive they can use, they can purchase a CHEAPER (for the manufacturer at least) console w/o one.

All you are trying to do is make yourself feel better after somebody told you that the mandatory HDD in the PS3 IS a burden in regards to price reduction. You are trying to convince yourself and others that MS made the same mistake by going the opposite direction so you can justify Sony making a possibly large mistake that will affect the console later in its life. And no, like people argued last generation w/ the xbox (although PS3's drive is removable), its damn near impossible to start selling the system without a mandatory item.

[Platon]

Originally Posted by onanie

Indeed, I would add that Microsoft is still similarly "burdened" by the optional HDD in 360, if the premium SKU continues to be obvious choice over the core SKU, and if there is increasing number of developers utilising the HDD (for the obvious benefits).

Not really. Actually right now they loose less money on the premium than the core. This time the premium version (which would be analogous to the xbox1) does not need to go down to $200 or lower as xbox 1 did in order to compete with the PS2 pricing. ´That is what they have the core for...

[Arwin]

Originally Posted by a688

If the HDD is optional from day one BUT damn near everybody like is, they can go out a buy a console w/ a HDD pre installed OR if they already have a hard drive they can use, they can purchase a CHEAPER (for the manufacturer at least) console w/o one.

Is it confirmed that you can upgrade the Core with your own HDD yet? Because I hadn't heard of it before, but maybe I missed something?