Microsoft lowering royalty fees

[Shifty Geezer]

MS are slashing the royalties for devs on Xenon.

This morning we were simultaneously shocked and impressed to learn that the house that Gates built has been courting next-gen capable developers and publishers to exclusively create content for Xbox 360, by massively knocking down the cost of the company's per-disk publishing royalty, with one anonymous senior publishing source stating "for a select few there is no per disk royalty". Stunning if true.

If our sources our indeed correct (and these particular ones usually are), this could mean that the financially fortunate company will again operate (for an unknown time) at a financial loss, with the assumed reward being an increased market share through exclusive hosting of as much of the top Next Gen content around as possible. This would also prove to be a double-edged sword, as it would likely limit Japanese rival Sony's options for its upcoming PS3 console.

As MS don't seem to care about making a profit too much, could this be a better move than losses on hardware? By attracting more devs, will they have the glut of the game library and the wider software appeal? How likely is this to work?

 

[ERP]

Re: Microsoft *cheating* there way to the top again?

MS are slashing the royalties for devs on Xenon.

This morning we were simultaneously shocked and impressed to learn that the house that Gates built has been courting next-gen capable developers and publishers to exclusively create content for Xbox 360, by massively knocking down the cost of the company's per-disk publishing royalty, with one anonymous senior publishing source stating "for a select few there is no per disk royalty". Stunning if true.

If our sources our indeed correct (and these particular ones usually are), this could mean that the financially fortunate company will again operate (for an unknown time) at a financial loss, with the assumed reward being an increased market share through exclusive hosting of as much of the top Next Gen content around as possible. This would also prove to be a double-edged sword, as it would likely limit Japanese rival Sony's options for its upcoming PS3 console.

As MS don't seem to care about making a profit too much, could this be a better move than losses on hardware? By attracting more devs, will they have the glut of the game library and the wider software appeal? How likely is this to work?

It's been speculated for years that Sony has been significantly reducing the per disc cost for various key publishers.

 

[EndR]

Link?
Source?
April fools?

(edit: Sorry, I saw CnVG now.. must get my eyes checked.. first thing on monday)

 

[Teasy]

Well MS paid certain third parties for exclusive games this generation. So I'm not sure this is all that different to what they did with XBox.

 

[Nite_Hawk]

I don't think cheating is really the right word to use here, even if they are doing this. On the other hand, I don't know how legal it is exactly. It would be interesting to see if there are any ristrictions microsoft faces using these kinds of tactics given thier status as a monopoly.

On the other hand, I imagine EA or any other major software vendor is going to be watching MS like a hawk over something like this. It's in their best interest that MS and sony have about equal power and are fighting to offer them the lowest royalty fees. If either of them becomes too powerful and crushes the other the remaining will jack up thier dev prices.

Nite_Hawk

 

[Pozer]

Nintendo, SOny, and MS all paid for exclusives this generation. MS is just changing the way they are paying for them. Instead of check they're getting direct deposit. Was it "cheating" when Sony paid Rockstar? What about namco for SC3? Was nintendo cheating when they paid capcom for resident evil?

I don't understand the point of this thread other than to bash MS for something all 3 do.

 

[nelg]

If that is cheating then so is the whole income model.

 

[gurgi]

Some people view MS as 'cheating' because they use dollars from another market to compete in this one. If they continue to take a loss with Xbox, I guess this could be considered cheating, though no more than any other Xbox expenditure.

 

[Acert93]

Microsoft *cheating* there way to the top again?

Always nice to see an individual's unsaid biases come out.

Seriesously, HOW is this cheating? There is no rule saying exactly how a company has to run--or even their revenue model. As much as you know their new HW may not lose as much money and maybe they plan to recoup millions in micro transactions, LIVE! subscriptions, and MMO fees. And maybe if the install base is 2x as large, and they have 2x as many developers, they could easily cut fees. Cutting fees can merely be the result of other revenue streams and/or a new tactic.

Now a hypothetical quesiton: Some of you treat the Xbox as a third rate console. If that is the case should they not also charge third rate pricing? So if Sony is the "premium" and has 4x as many consoles installed, would it not make sense for MS to license at 1/3 or 1/4 of what Sony charges? In many other industries, when your quality is not as good (remember, Xbox is 3rd rate now), you charge less.

And the part about waiving fees is not unheard of--not when companies like Sony, Nintendo, and MS have long been paying 3rd parties to make exclusives this gen. If MS wants to help *key* developers maximize their profits with exclusives then they have every right to. If they are in some way cheating then Sony has been cheating since the PS.

This very well could be an Apirl fools, but I cannot for the life of me understand HOW this is cheating. We know that MS biggest losses have come from HW sales, so if that has changed next gen (every indication says YES) maybe this is a strategic move to be more competitive.

 

[jvd]

Whats the problem ?

THey are adjusting thier royalty lvls to get more developers . If you could publish your game on the xenon for half the cost or whatever it would turn out to be it may make you jump and go there . In addition if this causes alot of devs to publish thier games on the xenon , sony would have to lower thier royaltys which means a slower recouping of the money spent on the ps3 .

Its a smart move isn't cheating at all , unless you consider sony cheating for the last two generations by paying developers for exclusive games

 

[London Geezer]

What's inherently bad about this? Surely lower royalties is good news for everyone?

 

[Pozer]

Some people view MS as 'cheating' because they use dollars from another market to compete in this one. If they continue to take a loss with Xbox, I guess this could be considered cheating, though no more than any other Xbox expenditure.

Do you mean like how Nintendo used money from making trading cards to cheat the market from Atari? Or did you mean how Sony used money from electrical appliances to Cheat the market from Nintendo?

 

[TexT]

Some people view MS as 'cheating' because they use dollars from another market to compete in this one. If they continue to take a loss with Xbox, I guess this could be considered cheating, though no more than any other Xbox expenditure.

Sony doesn't use funds from its other divisions?

 

[gurgi]

Some people view MS as 'cheating' because they use dollars from another market to compete in this one. If they continue to take a loss with Xbox, I guess this could be considered cheating, though no more than any other Xbox expenditure.

Do you mean like how Nintendo used money from making trading cards to cheat the market from Atari? Or did you mean how Sony used money from electrical appliances to Cheat the market from Nintendo?

I don't know the financial specifics of how Nintendo or Sony launched thier first products, nor how many generations they took a loss in order to compete, but I would assume they were profitable at some point.

But yes, that would be the argument.

 

[jvd]

Its a bad arguement .

Sony looses money to compete . The ps2 lost alot of money at launch and for the first 2 years to put out the hardware they did . After a point they made money back from the royalitys of games .


Ms put out the xbox and due to nvidia and bad negotiations are still loosing money and they aren't making enough in royaltys to pay it back.

The same thing could have happened to sony .

However in the psone era they spent money to get developers to exclusivly publish on the psone and not on the rival systems .

Its what happens , it happens in every busniess . You want someone to buy your product you wine and dine them , offer them a discount or whatever you have to do to get more people buying your poduct .


Lower publishing costs = More games on xenon = more xeonon systems sold = more games able to be sold = more money for ms

Its a smart move

 

[Acert93]

I don't know the financial specifics of how Nintendo or Sony launched thier first products, nor how many generations they took a loss in order to compete, but I would assume they were profitable at some point.

But yes, that would be the argument.

That arguement ignores a ton of other relevant info. Basically, since you think MS has come into the market unfairly everything they do is unfair. But this "announcement" ignores that this could actually be much more profitable for MS in the long run.

1.) MS has made a quarterly profit on Xbox. So that "some point" has already came.

2.) Sony has had losses with the PS brand a couple times and had to use their VAST resources. Every company does this when you are talking the scale of production and transistion. 5 year life cycles, where the first 2 years have meager sales, and the last year your software looks outdated, is just a brutal industry.

3.) This is about the X2. If MS has found other ways to make money (Live! subscriptions, MMO fees, micro transactions, cheaper HW that will go down in price unlike Xbox

4.) MS is only lower costs for most developers. That means more developers will be interested in making games, and more sales will then offset the reduced fees.

5.) A larger install base ultimately means more profits.

6.) Exclusives, where the company pays another to make a game (instead of the reverse) are common in the industry.

7.) MS may lose a lot less, in the long run, with X2 so they may be able to cut pricing in other areas because they expect to a) sell more units and b) have a larger install base which means c) more 3rd party sales and d) their own games will sell 2-3x as many copies.

When you talk about the huge Xbox losses you have to remember they made design mistakes. Those same issues may, or may not, apply to the next gen. Superimposing their Xbox loses on every other generation ignores this. It also ignores the Rare purchase (Nintendo did not want them anymore) and other startup fees. But the announcement is not cheating, just a different business model.

 

[Qroach]

The title of this thread is pretty shifty there geezer.

btw, this is nothing new and occured this generation with Sony as well as MS.

 

[gurgi]

Sony looses money to compete . The ps2 lost alot of money at launch and for the first 2 years to put out the hardware they did . After a point they made money back from the royalitys of games.

I think you missed the distinction between taking a hit on hardware you earn back later and completely subsidizing a console with dollars from another market.

I'm not sure where I stand on the issue, but I know if our competitors could offer our market cheaper prices than us because they make a lot of money in another market, our lawyers would have something to say about it.

Basically, since you think MS has come into the market unfairly everything they do is unfair

I think what?

 

[ims]

"think you missed the distinction between taking a hit on hardware you earn back later and completely subsidizing a console with dollars from another market"



gurgi I think the IGN forums are a better place for you to post for sure.
People might not laugh at you over there...................

 

[gurgi]

Just explaining the rational. Didn't mean to hurt anyone's feelings for sure.