Microsoft lowering royalty fees
- Thread starter Shifty Geezer
- Start date
jvd
Any company putting a product into a new market has to finance that product with money from outside of that market. So its really not something that can be used to qualify two situations as being the same. The difference between PS1 and XBox is that PS1 suceeded and XBox failed yes (relatively anyway). But that doesn't change the fact that Sony only initially supported PS1 with external funds were as MS continued to do so through XBox's entire life, to the tune of close to 4 billion dollars. Even Sony couldn't have done that.. As I said regardless of why the two situations are different, they are different.
Did Sony's games division do that by just being able to lose more money then Sega though? Thats what I'm talking about. Also I'm not trying to make judgements on who is good and who is bad here or crying about Microsoft's strategy. I just said earlier that no company is moral or fair. I'm just giving an opinion that if MS continues to lose piles of cash from there OS market next gen to subsidise XBox 2 and starts to hurt Sony and Nintendo's bottom line seriously then I believe we may start to see court cases.
Any company putting a product into a new market has to finance that product with money from outside of that market. So its really not something that can be used to qualify two situations as being the same. The difference between PS1 and XBox is that PS1 suceeded and XBox failed yes (relatively anyway). But that doesn't change the fact that Sony only initially supported PS1 with external funds were as MS continued to do so through XBox's entire life, to the tune of close to 4 billion dollars. Even Sony couldn't have done that.. As I said regardless of why the two situations are different, they are different.
Did Sony's games division do that by just being able to lose more money then Sega though? Thats what I'm talking about. Also I'm not trying to make judgements on who is good and who is bad here or crying about Microsoft's strategy. I just said earlier that no company is moral or fair. I'm just giving an opinion that if MS continues to lose piles of cash from there OS market next gen to subsidise XBox 2 and starts to hurt Sony and Nintendo's bottom line seriously then I believe we may start to see court cases.
gurgi said:
I disagree.
First MS was successful to a degree. They are strong in their core market--the US--and appear to be in position to get even stronger. MS was able to outsell Nintendo with basically no sales in Japan. MS has also started to turn a small profit with the Xbox. The fact is most of their losses are HW related.
As for the startup company, it all depends on financing. Do you know how much money Amazon.com lost and for how many years. Hundreds of millions. INSANE money. But they were in it for the long haul. Same with the hosting companies I was telling you about. They sink $100M into a data center, have 24-7 live tech support, hundreds of thousands of monthly bandwidth costs--and then pay $100-$200 a CLIENT for how much?
$7.95/mo
And how can they do this? The oppurtunity to be a long term competitor, gain an eventual profit, and to get their foot in the door for future emerging technologies and markets. I know all of this first hand BTW. It is simply how business is run--if you are not aiming to be huge, but have not found a niche, your competitors are going to outspend you and are going to run you out of business.
MS is simply taking a different plan of attack (subsidizing revenue through other channels, cutting HW costs, and reducing the cost on developers while finding other methods (like LIVE and micro transactions) to cover costs). If MS custs licensing in half, but the install base doubles due to 2x the game support they lose nothing. And if no more killer HW loses this gen could be great for MS. And the goal is obviously long term--MS is looking at the future, and not being in the living room is more costly than getting in.
The big if, like Teasy said, is if MS continues to operate at a huge loss. But with a better HW design, broader 3rd party support due to better licensing deals, and therefore more 1st party sales (remember, Rare has basically made squat for MS so far) I think we can see the very modest profits MS saw in the end of 2004 turn into a trend by 2007. Obviously their PC ties with Intel and nVidia did them no favors this gen, and we can blame their PC ties as part of the reason they lost so much money. MS learned their lesson; now the question is how are they going to get better support to make more money. Obviously they are finding ways.
Shifty Geezer said:
Ooh! I bet Bungie doesn't have to pay licensing fees?
And I think it would be hilarious if Microsoft extended the offer to Nintendo. BTW, Microsoft doesn't charge royalties on the PC, maybe they're trying to create a friendly, more open console, ala 3do or atari 2600?
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Shifty Geezer said:
I believe Sony did this with the PSP to compete with the DS. I could be wrong.
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Qroach said:
I agree that that's a very good strategy, but seeing how today is April 1, I'm not sure how trustworthy this info is. Hopefully, we will know something after.
Entropy said:
The logic here is not right. What one person or even groups of people getting laid off has to do with licensing fees is missing here. You could then sue the electric company and the water company too. they have provided a monopolized resource upon the government must utilize to operate.
MS Windows was chosen by the government for multiple reasons, (I take it you were talking about the US Government) as the standard operating system for conducting its general business operations. Just because MS benefits from that choice is neither illegal, immoral or negative in any way.
Need to nitpick that. No one goes to a publisher/studio, says "here's the cheque for the $x you would have made if you published for my competitor a, another cheque for $y you would have made if you published for my competitor b." The intelligence and thought-process of the idiot who does this qualifies him/her to be replaced by higher management with a bunch of monkeys - they think around the same levels and management only need to pay the monkeys with bananas.
MS isn't doing anything new. With just a bit of logical thinking, it's obvious that's one of the ways the console manufacturers have been securing exclusives since donkey years ago. In addition to such things as development funding, distribution support, waiving of certain fees(in this case - royalties), etc.
Keep in mind though the video game industry has a long history of a bigger company coming in and taking the market from previous big company. Atari swallowed Coleco, Nintendo swallowed Atari, Sega swallowed Nintendo (for awhile), Sony came in and swallowed Sega/Nintendo/3do all at once. Now MS is just trying to do the same. The same thing happened in the PC industry. Spectrum was swallowed by Atari, Atari was swallowed by Apple and Commodore, PC swallowed them all. (not completely accurate though but you get the idea) 
All these comments about anti-trust and "cheating" etc etc is BS.
How the hell does "big companies" enter new markets if they can´t take the resources gained from other markets? OMG, Samsung is teh cheating.. they are making mp3s, from all the money they get from mobilephones, LCD-tvs etc etc.. Apple and Jobs is crying.. (samsung dwarfes Apple financially)
Now regarding MS garguantuan loss that Xbox has made, you have to really think about it. The competition in this generation was WAY stronger than when Sony entered with PS1. The Playstation brand was much stronger this gen, than NIntendos brand was with N64.
MS entered a market that Sony totally dominated (and still does) and with a Nintendo that had some intentions on doing some aggressive moves. So ok, MS lossed a couple of billions on the whole xbox-project, but they did get a second place for it, they did established a brand and they created the best onlineservice for games on the videogame market...
I don´t think that MS spent more money than necessary on Xbox, just to show people that "hey, we are MS, we can spend more money than necessary, because we have it". It wasn´t like that...
And finally, if you think about the climate of this gen and what MS did do with Xbox, do you honestly think that an other company would have done it better? That another company would have established a strong new brand, would be in second place in market share and would create a strong online-services for games and that this company did it with LESS money than MS spent?
How the hell does "big companies" enter new markets if they can´t take the resources gained from other markets? OMG, Samsung is teh cheating.. they are making mp3s, from all the money they get from mobilephones, LCD-tvs etc etc.. Apple and Jobs is crying.. (samsung dwarfes Apple financially)
Now regarding MS garguantuan loss that Xbox has made, you have to really think about it. The competition in this generation was WAY stronger than when Sony entered with PS1. The Playstation brand was much stronger this gen, than NIntendos brand was with N64.
MS entered a market that Sony totally dominated (and still does) and with a Nintendo that had some intentions on doing some aggressive moves. So ok, MS lossed a couple of billions on the whole xbox-project, but they did get a second place for it, they did established a brand and they created the best onlineservice for games on the videogame market...
I don´t think that MS spent more money than necessary on Xbox, just to show people that "hey, we are MS, we can spend more money than necessary, because we have it". It wasn´t like that...
And finally, if you think about the climate of this gen and what MS did do with Xbox, do you honestly think that an other company would have done it better? That another company would have established a strong new brand, would be in second place in market share and would create a strong online-services for games and that this company did it with LESS money than MS spent?
Oops, I've started a fight! The 'cheating' in the title was *emphasized* as the only way I could think to show I wasn't being 100% serious, though it is a topic for discussion.
As far as I can see, Sony and Nintendo are dependant on making a profit from their gaming divisions to survive, which means they need the licensing fee income. MS don't, as they totally own the OS market and milk it for all it's worth, at a HUGE profitability that no other industry could attain. By waiving licensing fees, they have a chance to appeal to developers, encouraging Sony and Ninty to cut their licensing fees and 'starve them dry' (which is a mixed metaphor... :? )
It's it illegal? Dunno. Depends where in the world you are I guess. There are anticompetitve laws as MS knows, but then the US government quite happily uses money to subsidise farming to crush competing farmers in other countries - kinda hypocritical if they kick up a fuss over MS doing the same.
Is it fair? Some would say so, as all's fair in love, war, and business. It's nothing Sony and Nintendo wouldn't try if they could. Only they can't. No-one can, as no business has ever been as profitable as MS's software.
Don't Sony do it with their third party titles etc? I'd say not. Investing a small amount/taking an initial hit to help promote profitable growth is what business is all about. Running a large loss isn't anything any company does unless they've got MS's huge backing. But then, this whole XBox thing counts as a 'little' investment for future earnings I guess. Little by MS's account book.
Is it good for consumers? I think not. MS have trashed much competition through business practises, leaving us with crappy, bug-ridden, unstable OS's for the past decade. If they had won by producing the best software I wouldn't grumble.
As such I perceive it as mild 'cheating'. Like, if you could win the baseball World Series by bribing the judges, would that be fair, beating those teams that instead of having money to buy a victory, work at being good at baseball? Is it fair for MS to beat Sony and Nintendo by not being able to produce a well-conceived hardware that works on a standard sustainable model but instead plowing money in? Doesn't seem quite right to me. It's the same game but the MS is playing to different rules.
Will it work? Dunno. It'll certainly attract small developers, which is good. It won't take away the devs from Sony or Ninty either I guess. Okay, a publisher may make an extra $10 per DVD sold, but if there's millions of users of Nintendo and Sony consoles, there's still money to be made. Cross platform will still exist. And if Revolution outnumbers Xenon 5:1, it'll still be a more profitable platform to write to.
Personally I think the current licensing system poo. I think the console companies should make money on the games sold, not printed. Otherwise they keep out small developers without big publishers and hold back interesting diverse game development. More options to enable different devs to get on the scene is welcome. In this way MS could be doing a good thing. If it's just another back-door monopoly tactic though, I don't like it.
As far as I can see, Sony and Nintendo are dependant on making a profit from their gaming divisions to survive, which means they need the licensing fee income. MS don't, as they totally own the OS market and milk it for all it's worth, at a HUGE profitability that no other industry could attain. By waiving licensing fees, they have a chance to appeal to developers, encouraging Sony and Ninty to cut their licensing fees and 'starve them dry' (which is a mixed metaphor... :? )
It's it illegal? Dunno. Depends where in the world you are I guess. There are anticompetitve laws as MS knows, but then the US government quite happily uses money to subsidise farming to crush competing farmers in other countries - kinda hypocritical if they kick up a fuss over MS doing the same.
Is it fair? Some would say so, as all's fair in love, war, and business. It's nothing Sony and Nintendo wouldn't try if they could. Only they can't. No-one can, as no business has ever been as profitable as MS's software.
Don't Sony do it with their third party titles etc? I'd say not. Investing a small amount/taking an initial hit to help promote profitable growth is what business is all about. Running a large loss isn't anything any company does unless they've got MS's huge backing. But then, this whole XBox thing counts as a 'little' investment for future earnings I guess. Little by MS's account book.
Is it good for consumers? I think not. MS have trashed much competition through business practises, leaving us with crappy, bug-ridden, unstable OS's for the past decade. If they had won by producing the best software I wouldn't grumble.
As such I perceive it as mild 'cheating'. Like, if you could win the baseball World Series by bribing the judges, would that be fair, beating those teams that instead of having money to buy a victory, work at being good at baseball? Is it fair for MS to beat Sony and Nintendo by not being able to produce a well-conceived hardware that works on a standard sustainable model but instead plowing money in? Doesn't seem quite right to me. It's the same game but the MS is playing to different rules.
Will it work? Dunno. It'll certainly attract small developers, which is good. It won't take away the devs from Sony or Ninty either I guess. Okay, a publisher may make an extra $10 per DVD sold, but if there's millions of users of Nintendo and Sony consoles, there's still money to be made. Cross platform will still exist. And if Revolution outnumbers Xenon 5:1, it'll still be a more profitable platform to write to.
Personally I think the current licensing system poo. I think the console companies should make money on the games sold, not printed. Otherwise they keep out small developers without big publishers and hold back interesting diverse game development. More options to enable different devs to get on the scene is welcome. In this way MS could be doing a good thing. If it's just another back-door monopoly tactic though, I don't like it.
It's basically a lure for companies who currently have no interest in the Microsoft platform or who are bailing out of it. Game software vendors are there to maximize their profit, so as long as a platform can bring a reasonable amount of money they'll go for it even with royalties. Even if the royalty is set zero, games that don't sell can't collect money.
