Microsoft lowering royalty fees

[jvd]

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.

So where did sony get the money to develop and release the playstation ?

They got it from other devisions in thier company and continued to untill the psone was profitable .

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.

And what would that be ?

If i own a resturant and then decide to sell ice cream there and can offer the ice cream cheaper because of the resturant , what would u as an ice cream shop owner have his lawyers do ?

Not only that but if these actions weren't taken on nintendo and then sony before microsoft did this kind of thing , why would they be taken on ms ?

 

[gurgi]

If i own a resturant and then decide to sell ice cream there and can offer the ice cream cheaper because of the resturant , what would u as an ice cream shop owner have his lawyers do ?

From what little I know of the law, and how things were explained to me, is this. If I sell bathtubs, and have a chain of bathtub stores in Oregon and Washington, I cannot use Oregon revenues to undercut the pricing of a competitor in Washington in order to drive him out of the market.

I guess a similar idea is being applied here. Not sure how the competition laws really apply specifically, as I was merely a 3rd party to the conversation.

 

[jvd]

From what little I know of the law, and how things were explained to me, is this. If I sell bathtubs, and have a chain of bathtub stores in Oregon and Washington, I cannot use Oregon revenues to undercut the pricing of a competitor in Washington in order to drive him out of the market.

That doesn't make much sense to me . As long as its the same company you should be able to use themoney made in oregon to launch the stores in washington and stay price competive through the use of that money .


once again though , this is exactly what sony did with the psone . In sonys case it wasn't just money , they also were able to get tech that directly related to the console industry from the rest of the company

 

[gurgi]

From what little I know of the law, and how things were explained to me, is this. If I sell bathtubs, and have a chain of bathtub stores in Oregon and Washington, I cannot use Oregon revenues to undercut the pricing of a competitor in Washington in order to drive him out of the market.

That doesn't make much sense to me . As long as its the same company you should be able to use themoney made in oregon to launch the stores in washington and stay price competive through the use of that money

Not afaik. Otherwise larger companies could offer products for pennies until thier competition goes out of business, then jack up the price and move to a new market.

There are all kinds of laws governing competition that I really had no clue about. Heh, I still really don't have a clue about any of it. Interesting stuff though.

 

[Acert93]

If i own a resturant and then decide to sell ice cream there and can offer the ice cream cheaper because of the resturant , what would u as an ice cream shop owner have his lawyers do ?

From what little I know of the law, and how things were explained to me, is this. If I sell bathtubs, and have a chain of bathtub stores in Oregon and Washington, I cannot use Oregon revenues to undercut the pricing of a competitor in Washington in order to drive him out of the market.

I guess a similar idea is being applied here. Not sure how the competition laws really apply specifically, as I was merely a 3rd party to the conversation.

That is exactly what Sony did with the PS when they took money from their other businesses to not only launch a new console, but to also offer developers big money to get exclusives. Nothing wrong with that.

If it is wrong for MS to remove licensing fees for certain big name games, how is this any different from Sony paying companies?

 

[gurgi]

I dunno how international stuff would apply. And I think it would be a civil matter, so it would require somebody to go up against MS. I'm not even sure if the argument is especially valid.

Either way, I'm going to stop playing devil's advocate because people can't tell the difference.

 

[jvd]

Not afaik. Otherwise larger companies could offer products for pennies until thier competition goes out of business, then jack up the price and move to a new market.

This is what walmart has been doing . They are able to sell toys at half the price of places like toys r us because of the grocierys and high ticket items like tvs and home appliances .

There has been no law suits or anything of that kind


Its busniess thats all

 

[gurgi]

Not afaik. Otherwise larger companies could offer products for pennies until thier competition goes out of business, then jack up the price and move to a new market.

This is what walmart has been doing . They are able to sell toys at half the price of places like toys r us because of the grocierys and high ticket items like tvs and home appliances .

There has been no law suits or anything of that kind


Its busniess thats all

Walmart is able to sell things on the cheap because of chinese sweat shops. They still have to make a profit at thier individual stores. I think it's somewhat reletive too, because you have to have the funds to start a new Walmart. Which is also relevant here because Xbox is a new brand.

I don't think MS shareholders are planning on losing money this time around though heh.

 

[Entropy]

The basic problem is that Microsoft has an effective OS/software monopoly. If they had been under competitive pressure there, they wouldn't be able to make their enormous profits, nor be able to leverage those profits to attack other markets by accepting huge losses in those markets.

What Microsoft is doing is no different than when a state-owned company is operated at a loss while continously having those losses covered by tax money. (In fact to some extent this is exactly what is happening, since a lot of the money Microsoft makes is license fees paid by taxes.)

 

[Teasy]

They got it from other devisions in thier company and continued to untill the psone was profitable.

Yeah but the PS1 was actually profitable though so you can't really compared PS1 to XBox. Moving into a new market and using money from another market to do it is fine. There is no other way to do it after all. But using money from another market to continually and heavily subsidise a loss making product isn't quite the same thing, its basically destroyer pricing. ATM both Nintendo and Sony are still managing to make a profit alongside MS. So we haven't seen much of a fuss made about it yet. But if Nintendo and Sony start to really get the squeeze put on them by these loss making tactics then I think we'll see some court cases apearing.

 

[jvd]

Yeah but the PS1 was actually profitable though so you can't really compared PS1 to XBox

why because one took off right away ?

I don't think you will see any courts gets involved because if ms starts to make a profit and sony starts to loose money then sony would be doing the exact same thing as you guys are complaing that ms is doing

 

[Inane_Dork]

I'm not sure why it matters if MS has been channeling money into the Xbox from other sources. As a gamer, I couldn't care less. If it means that the Xbox is a superior platform, that's all I care about. If it means the Xbox is still behind, then that's all I care about.

I don't know where all this MS hate has come from, but it's better left in the off topic forums, not here.

 

[Entropy]

I'm not sure why it matters if MS has been channeling money into the Xbox from other sources. As a gamer, I couldn't care less.

As a tax payer, you might care more.
As someone working at a place that has to lay off people to cut costs, while still paying hefty license fees to Microsoft, you might care more.
As .... the list goes on. Does it get clearer now?

 

[Riddlewire]

I don't know where all this MS hate has come from

You're kidding, right?
You've been posting here for several months. Surely this isn't the first time you're aware of the population breakdown of these forums.
I'd say it's close to this:
Sony fanboys: 80%
Microsoft fanboys: 5%
Nintendo fanboys: 4%
Everybody else: 11%

 

[Teasy]

why because one took off right away ?

The reasoning for the two (PS1 and XBox) not being comparable is neither here nor there. Either way what Sony did with PS1 and what MS did with XBox are two different things. Even if the intention may have been the same.

I don't think you will see any courts gets involved because if ms starts to make a profit and sony starts to loose money then sony would be doing the exact same thing as you guys are complaing that ms is doing

Well yeah no court case would happen against MS in that situation, but that's one massive if isn't it? The situation I was talking about was MS doing what they've done this gen but more effectively (maybe losing the money on exclusive games rather then hardware) and in turn making Sony/Nintendo unprofitable. BTW I'm not really complaining about anything ATM. Just giving my opinion on the differences in the ways Sony and MS have done things in the console market and how MS's actions could be seen as unfair or even illegal in many markets. Of course neither company is fair at heart, no company is..

 

[Acert93]

So we haven't seen much of a fuss made about it yet. But if Nintendo and Sony start to really get the squeeze put on them by these loss making tactics then I think we'll see some court cases apearing.

Teasy, but there is no ground for a court battle. Remember, a lot of MS losses this gen were due to poor HW licensing and the HD. With a CPU and GPU they own the rights to, and manufacturing it themselves through contracts with fabs, they are totally side stepping the Intel/nVidia issues. Reportedly they have dropped the HD.

As for the news, MS is reducing licensing fees. Nothing inately wrong with this. If they a) sell 2x as many consoles and developers sell 2x as many games EVERYONE is happy. And this does not even begin to count the extra sales on 1st party software to a larger install base. b) Alternative revenue streams. Live!. MMOs. Micro Transactions. MS has clearly laid out a plan to earn revenue through other areas.

As for paying for exclusives, look what Sony did to Nintendo. Sony got a ton of exclusives for the PS and it hurt the N64. Where did Sony get all that money at launch, when they were losing money, to buy these exclusives? Exactly. If we are going to suggest MS doing well by getting exclusives gives Sony room to sue MS, then the reverse is true: Nintendo should sue Sony. They leveraged outside income to obtain exclusives that made their loss leader more attractive, which in the long run resulted in Sony overtaking the market. All I can say to Sony fans is: Live by the Sword, Die by the Sword.

I really consider this "non news". Exclusives and licensing fees have always been a fact of the business--and every new competitor has done it. Undercutting your competitors is a fact of business (it does not always work... sometimes quality is much more important).

But missed in all this discussion is the fact MS may have alternative revenue plans AND a better financial model for the hardware itself. If MS plans on 80% of customers having Live!, and $80 a year that adds up to a lot of money. Throw in some $10/mo MMOs and Micro Transactions and who knows what else they may be able to substantially lower the cost of DEVELOPERS while actually making more money from alternative revenues streams and a larger install base.

Just as an aside note, in the web hosting industry many companies pay over $100 in advertising per client. I have seen referral credits close to a $100 for accounts that take 8 months to pay that back--and there is no guarantee these clients stay. Same companies were paying over $10 a click on Overture (GoTo... they formerly fed the top 3 listings in Google and MSN). These companies lost a TON of money. But they had outside revenue, squeezed out the small guys who could not offord insane advertising, and are now profitable.

It is just a fact of business to leverage your reserves from other areas, take a short to midterm loss, for the goal of a long term profit. It would be near sighted to ignore that MS is not the only one doing this. Sony themselves were in the same position--the only difference now is that they are the prey and not the hunter. And Nintendo is well known for their cut throat business practices in the 80s.

 

[Entropy]

So Hynix being economically supported by the Korean government is fine?

 

[jvd]

The reasoning for the two (PS1 and XBox) not being comparable is neither here nor there. Either way what Sony did with PS1 and what MS did with XBox are two different things. Even if the intention may have been the same.

I disagree.

Both companys used funds from other sectors to launch a product in a new field .

The diffrences are

1 was succesfull

the other wasn't


Those are the only diffrences . If anything as the market leader with most likely 80% of the market sony is the one that has to worry about being brought under anti trust laws and monoply laws. After all they can use thier power to get exlusives by throwing tiher weight around .

The situation I was talking about was MS doing what they've done this gen but more effectively (maybe losing the money on exclusive games rather then hardware) and in turn making Sony/Nintendo unprofitable.

Which is something sony and nintendo have done before


Sony has loosed money on hardware and by buying exclusive titles for thier hardware and in turn made sega unprofitable .

Why are we not up in arms about sony ?

Then in the ps2 generation sony lossed money in hardware and on exlusives to deliver the death blow to sega and to cause ms not to be profitable .

IF anything ms is following in the foot prints of those succesfull before them

 

[Acert93]

So Hynix being economically supported by the Korean government is fine?

We are not talking about Hynix or Airbus or any other issue. This is not even government related.

 

[Teasy]

Acert93

Teasy, but there is no ground for a court battle. Remember, a lot of MS losses this gen were due to poor HW licensing and the HD. With a CPU and GPU they own the rights to, and manufacturing it themselves through contracts with fabs, they are totally side stepping the Intel/nVidia issues. Reportedly they have dropped the HD.

That's to be determined next gen though, it hasn't all played out yet so we don't know what will happen. I have actually been one of the people of the opinion that next gen MS are looking to cut way back on costs. Some other people don't agree though. Remember though there was a "but" in my post, I did give a condition for there being possible court cases. That being if MS continue to lose big money and start to squeeze the profits of the other two console makers.