Microsoft takes a $177M loss in 3 months on the Xbox

Discussion in 'Console Technology' started by Nite_Hawk, Nov 15, 2002.

  1. Guest

    Guest Guest

    Playstation is Sony only IT success.
    The rest like VAIO, PDA, Tablet PC, TiVo Box, Laptops have seen only limited success.

    MS on the other hand.... :lol:
    Playstation will be doom if Sony does go on with the full IT in a box setup for PS3. MS has too much expertise, experience and funds for Sony to even compete. :oops:
     
  2. cybamerc

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    PiNkY:

    > I think Johnny is not too wrong here.

    Of course he is. Johnny lives in a fantasy world where M$ can do no wrong eventhough the facts at hand go against every, and I use this term loosely, "argument" he puts forth.

    > The 177 Mio losses correspond to a quarter of drastic price cuts on the
    > hardware.

    Only in Europe. The US price drop happened the previous quarter. The real hurting will commence the current quarter (Q2) with the Sega bundle, Xbox Live and increased Christmas sales further reducing the Xbox' chances of ever becoming profitable.

    > The same happend to Sony with PS2 in their first year (within a then
    > less competitive market)

    Sony lost a lot of money on the production of the PS2. Part of that certainly comes from having to set up its own fabs (GS was fabbed at Sony's own production facility and EE at a joint venture-fab with Toshiba). M$ had the entire production of the Xbox outsourced from the beginning. They are two entirely different situations.

    And why even bother comparing M$ to the market leader whose success was practically guaranteed? Why not compare to Nintendo (which Xbox fanboys do on all other accounts - Sony is clearly aiming too high) who managed to laucnh two gaming platforms, experience decreased software sales and yet still managed to end the year with a record income?


    BenSkywalker:

    > (already considerably larger then the PC OS market in terms of dollar
    > value).

    Yes, but with considerably lower profit margins and many more companies that make up the market.

    > MS doesn't need to be the market leader to have a very profitable
    > console, they simply need a solid user base which they are on track to
    > reach

    No what they need is stop throwing money after the consumers. Of course that will never happen because M$ knows what the reaction from the consumers will be.

    > Calling the XBox bad business implies that MS is being stupid.

    Perhaps in your mind. The Xbox is bad business, the numbers don't lie. However, everyone knows that M$ had to react to the threat that consoles, and in particularly Sony, pose to its business. So as bad business as the Xbox may be it is also neccesarry business. M$ is not stupid but applauding them for what they have achieved in the market is ridiculous.


    chap:

    > Playstation will be doom if Sony does go on with the full IT in a box
    > setup for PS3. MS has too much expertise, experience and funds for
    > Sony to even compete.

    I think it's the other way around and M$ clearly has similar concerns.
     
  3. Guest

    Guest Guest

    XBL is up and running now and it can only improve with time.
    Sony Online is still a mystery.
    Next generation when online factor starts to kick in, MS is way more prepared than Sony. :oops:
     
  4. BenSkywalker

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    Randy-

    And why exactly wouldn't they be? I've not seen a single explenation as to why MS isn't on course to turn a profit.

    Customers? You think I care if MS makes money on the XBox? Why would I? If I was an investor in MS, which I am not, then I would be interested.

    I'm waiting to here the explenation why.

    Marconelly!

    Adjusting for the overall market growth the XBox still comes out ahead, far ahead actually.

    I thought we were talking about the business end? Given that they are exceeding the target tie in ratio(of any console ever at comparable life cycle points for that matter) that is the relevant factor.

    Magnum-

    For games they would need to sell about 200Million games to recover their total $2Billion investment in launching the XBox(even advertising is an investment). With their current tie in rate they are around 30Million titles sold, give or take. 1/7th of the way there within a year(and the, by far, slowest year of a typical console life cycle).

    Looking at the October sales charts we see 58.8% of games revenue from western developers(26.7% Japanese- they only list the top ten publishers). Japanese developers are becoming less and less relevant in the western, larger, markets.

    The Cube's been kicking the XBox's ass on that end for quite a while now. We can see from the sales charts how much that really matters.

    Cybermac-

    And where is Nintendo now in the sales charts? Sony lost money and kicked ass, Nintendo made money and got its ass kicked. It isn't coincidental. What would have happened if Nintendo took that $900Million and utilized it to secure exclusive rights to GTA through '04, DQ/DW, StarOcean and Madden(@$225Million a pop it would have made it well worth the developers time). What would Nintendo's marketshare look like right now? Nintendo was a giant corporation when MS was a couple of guys slapping code together in a single room. MS's business model has proven over the last two and a half decades to be vastly superior in the long run then the overly conservative approach Nintendo takes. Their refusal to spend the cash to destroy the SNES CDROM drive is what blew them out of the water last generation.

    Many more companies? I'm counting three set top console platforms, I can't count all OSs with both hands.

    Like Sony does, and like MS does in the other markets it competes in? I suppose when you continue to manage to rack up a ~90% marketshare you might be inclined to think your tactics work. When you go from a ~90% marketshare to less then 20%, I would think you would realize your methods aren't working.

    Perhaps I should just let you argue with yourself over this one. The XBox is a good business model for MS long term, that is what I have been saying all along(and you imply that you agree while arguing the point.....?).

    Applauding them, what do you mean?
     
  5. zidane1strife

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    Heh, as each gen passes and sony is more succesful, they'll invest far more(more earnings as videogames business grows), and take bigger losses on the h/w... if MS is not succesful for one or two gen.. How long can they last if they seek to continue this battle? Take 3-4B$$$ loss a year... Take 5-6B$$$ loss... Go all out and take 40-80B$$$ loss... how long can they keep at it, if they seek to compete with nintendo and sony as both increase marketing, h/w budget? Surely they can't go on indefinitely if they see no hopes for success....
     
  6. Fafalada

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    It probably weighs 5 times less too. :p
    Besides, unless I misread something, Airboard is said to be some kind of a portable network PC, not a Laptop reject :)

    Oh, before I forget, Chap...
    Sony only recently started producing their own PDAs (after they licensed PalmOS and all), and in about a year they've pushed the Palm technology on level of current PocketPCs, (still harboring that sorry Palm OS though, unfortunately) and are also apparently not selling bad so far.
    Considering Palms have been all but dead in terms of tech progress in last few years, I wouldn't be surprised if in a few years when Palm is gone, what will be left of it will be exclusively under a Sony label.
     
  7. PiNkY

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    BTW, a bit off topic. By browsing their (BBCs) related links, I found a report from March 13, 2002 stating that within 2 Years Europe will be the biggest market for video game sw and was at that date roughly > 1,5 times the japanese market and 4/5 the north american market (US & Can).

    http://newsvote.bbc.co.uk/1/hi/entertainment/new_media/1871571.stm

    Should that be true the business impact for XBOX in regard to its bad performance in Japan seems a bit overrated to me.
     
  8. JF_Aidan_Pryde

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    What Fa is refering to is the Sony Clie.
    Mp3 player, built in camera/keyboard, Sony high price and very gadgetry.

    And Sony is really stringing its products well with the memory stick. Memory Stick + Cell could work wonders in terms of chain reaction purchases.
     
  9. zurich

    zurich Kendoka
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    From what I understood, Sony's VAIO PCs are the #1 selling computer brand in Japan...
     
  10. Vince

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    Yeah, why do you even pay attention to senior chap?


    Moving on to more serious conversation:

    Um, see Ben, thats the thing. You don't get respect by being the first one to sell 10 consoles. You get it by selling almost a 100Million and continuing to sell almost on parity with the competing next generation platforms.

    Just stating that their beating the PSX or PS2 or whatever system within in it's first year and gets 'respect' for it is... well... shallow. I'm not stating that the XBox is going to die or any-such-thing, but what you said above is wrong. I seriously (99.99%) beleive that the XBox (1 - console itself, not brand) has no future, especially one like Sony's first console had.
     
  11. Vince

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    OT: Is Palm's OS5 that bad? I really don't know much of it.
     
  12. marconelly!

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    So those few hundred thousand people playing on it are also mystery? Maybe if you cover your ears and start shouting, they will all disappear.

    That's quite dubious as we don't exactly know how much the market increased. Besides, it's just pointless comparing the past with the present as the competition, mindshare, money losses (and pretty much everything else) are completely different.

    I thought you were talking about comparative success over the life cycle, you mentioned it yourself, and that is what I was referring to.

    They lowered their goals quite a but and still underachieved, it's undeniable (let's not even go into now anecdotal comments made by some of the Microsoft's execs claiming how it would be 'cool' if they sell 100 million Xboxes during it's life cycle). Software tie-in is very good, but in the present condition that doesn't mean much to a developer, if the software on PS2 sells much better due to a larger user base.
     
  13. Fafalada

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    Vince,
    my bad, I forgot the new Clie was on OS5. From what I know it's pretty good, but Palm has been running a little late with it...
     
  14. Magnum PI

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    but how many of these games did MS sell full price ?

    they gave many games: for the european gamers who bought the xbox at its first price, later another operation were gamers were given two games for free when they bought a console and a gamepad...

    japanese developper are not only important because of their market share, but only on a psychological level.
    for a lot of people console gaming is a japanese speciality. if major japan developpers end their xbox support, in the mind of most of the gamers (especially in europe) the xbox will become the 3DO of our times..

    yes, as you can see it in the european charts, and even more in the japanese ones. ;)
     
  15. Magnum PI

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    nintendo wasn't a giant corporation in the 70's...

    and you just can't compare nintendo and MS like that, there is too much difference between these company... this makes no sense..
    like comparing macdonalds and McDonnell Douglas..

    first, IBM didn't come to nintendo and ask them to licence them a crappy OS for the PC..
     
  16. cybamerc

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    BenSkywalker:

    > And where is Nintendo now in the sales charts?

    I'm not denying that Nintendo is having a hard time. After a surprisingly solid launch in Europe (I pretty much expected Europe to be a lost cause from day 1) the tables have now turned. Nintendo had a long post-launch software draught and while the Xbox didn't see significantly more releases it was quicker to pick up the pace. Numerous price drops, the availability of mod chips and the Cube missing out on a few "mature" titles has really helped the Xbox here.

    The US is a bit different as the Xbox has pretty much outsold the Cube consistently in that region. It'll be interesting to see if Nintendo can manage to close the gap.

    Still, as poorly as Nintendo is doing they're still #2 worldwide. Nintendo was on a roll for a while but it's luck has seemingly turned. The same can happen to M$. 2003 will be an interesting year.

    > Sony lost money and kicked ass, Nintendo made money and got its ass
    > kicked.

    I don't see any basis for comparison. The PS2 started off well on a wave of hype but didn't really take off till its second year when the software started coming out. There was little doubt that the PS2 would become a success though. The hype was there and so was the support. Nintendo isn't really getting its ass kicked anymore than it did the last gen. The difference is that they have a new competitor with significantly more money to spend. But Nintendo can't outspend M$ and while I don't necessarilly agree with everything they do there can be little doubt that any battle that comes down to who can afford to loose the most money, M$ will win.

    > Many more companies? I'm counting three set top console platforms, I
    > can't count all OSs with both hands.

    There may only be three viable platforms but hardware sales don't make up the entire console market. If you're gonna compare the size of both markets you need to include the hundreds of developers working on software for these platforms. In comparison M$ pretty much owns the OS market, both in terms of market share and, especially, revenue. The console market is much, much more diverse

    > Like Sony does, and like MS does in the other markets it competes in?

    How is Sony throwing money after consumers? They've been making a profit on PS2 hardware for quite a while.

    > The XBox is a good business model for MS long term

    Necessary business model, it's success is not guaranteed. The implications of the Xbox failing could be quite severe, though.

    > Applauding them, what do you mean?

    You seem to be impressed with what they've achieved.
     
  17. archie4oz

    archie4oz ea_spouse is H4WT!
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    And it's also pretty old (been around longer than a year)...

    Depending on you region you could say the same thing about Xbox Live. If one is to use the base region for it's start, then the PS2's BB Navigator is already on it's second revision (supports NetMD players and digital cameras now).

    Western market is rather vague. Also one month sales charts, while a certainly a valid source, leaves too many variables unaddressed. For one thing, software has short life cycles, with many new product introductions, and particular hit titles can grossly affect the breakdown for several months and can change on a monthly basis. Also the sales charts break sales down by publisher not developer, and doesn't specify whether a title was Japanese developed/released by a North American publisher, or vice versa.

    Destroy the SNES CDROM? I'd say it was more of a lack of vision of where the industry was going (and not realizing that somebody could come out of relatively nowhere and advance the timetable for certain technologies).

    Well I believe PalmOS has *finally* started supporting ARM, so that's at least good sign on the hardware side...

    It varies (at least on a monthly basis). Sony primarily competes in the consumer sector, whereas others (IBM, Fujitsu, and NEC) also have corporate business to benefit from, but overall, yeah they've been in the top 5 PC manufacturers there for the past couple of years. I believe that also is the case in the US, they've been in the top 10 for the past year, and now probably in the top 5 due to attrition and consolidation of other manufacturers.

    Actually it was, just not with the global visibility it gained in the 80's

    I don't know about 'respect', but there far fewer obstacles in Microsoft's way than there was for Sony. Microsoft didn't have to convince developers that the time for 3D content was now, or convince the entire market about the benefits of repeat production with CD's vs. single production runs and wholesale distribution of masked ROMs.

    Not to mention the viability of the amusement/arcade industry is heavily dependent of Japanese developers. They'll also play a big role in growing markets like Korea, Taiwan, and China as it grows and opens up.
     
  18. aaaaa00

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    Pfft. Airboard looks to me to be more like a Mira reject, not even a laptop reject. ;)

    http://www.pencomputing.com/frames/mira_table5.html

    4.6 lbs. The thing weighs more than the a similar TabletPC with a 12.1" screen, has the same battery life, and doesn't even have a real computer in it. And it's 2" thick!

    http://cdgenp01.csd.toshiba.com/content/product/pdf_files/detailed_specs/portege_3500.pdf

    The Portege 3500 has a keyboard and pen, 12" screen, weighs 4.1 lbs, has a 1.33 ghz CPU, is half as thick, AND runs everything your normal PC can run.

    Does cost more though. :D

    TabletPC has been years in the coming. I saw limited production working prototypes at MS years ago that look pretty much like what you see today (they were custom built by Flextronics or Acer, I forget who exactly) -- most of the delay has been convincing their OEM partners to mass-produce.

    The beauty of TabletPC is that if you look at it, it's really just a small set of features added onto a normal notebook (the EM digitizer is the biggest cost) -- the rest is just software.

    I expect that in a few years, all notebooks will basically be TabletPCs, IE they will all have the additional features that TabletPC specs as the cost of implementation comes down, and people realize how damn useful it is to be able to draw and point at things directly on the screen.

    You can build TabletPCs in the normal notebook form factor, or if you want to be more radical, you can make the true tablet form factor machines.

    Just take a look at the Compaq one if you want to see some pretty cool physical design.

    http://www.smb.compaq.com/dstore/html/interactive/tc1000/tc1000.html
     
  19. zurich

    zurich Kendoka
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    Vince,

    ???
     
  20. archie4oz

    archie4oz ea_spouse is H4WT!
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    What's a "real" computer? AFAIK, the only "fake" computers that I'm aware of those cardboard thingies in model homes...

    No kidding... Tablet style Sharp and Fujitsu have been making tablet based PCs for years. The only difference here is that Microsoft *finally* making an OS targetted at that segment... Really kinda interesting since Airboards started showing up a year and half ago...

    BTW, how's the TV tuner support in Tablet PC? (honestly dunno)...
     
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