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

[aaaaa00]

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!

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

Ok, I was just being facetious.

To provide a completely silly and arbitrary definition, a "real computer" is one that runs all the apps I require (thus the definition is different for everyone). IE, ICQ, MSNM, Souce Insight, my compilers, VS.NET, Word, Outlook, WMP, Winamp, Quicktime, etc, etc, etc.

Anything that can't run everything I need, isn't a "real computer" to me, as it can't replace my computer.

(Yes, I said this was a silly and arbitrary definition, and I'm aware of the real definition which all computing devices meet. )

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.

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...

Actually, to tell the truth, Airboard to me looks more like a Mira-type device than a TabletPC -- not really a stand-alone replacement for a full PC, but more like a mobile wireless display, and in that respect, it's actually cool IMO.

As for tablet-style PCs, yeah, there have been machines with this form factor for a long time, though they've always been niche in the past.

MS already tried making an OS for a tablet-style PC over a decade ago. Anyone remember PenWindows? WinPad?

TabletPC is the latest attempt at pushing this mainstream, and the first with any possibility of success.

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

They generally have PCMCIA slots, Firewire and/or USB ports, so just plug in a TV tuner and you're set -- that's if you actually care about live TV (I don't).

Because its just a Windows PC under it all, it plays back anything a normal laptop can: DivX, WMV, MOV, MPEG2s, VOBs, DVDs, MP3s, WMAs, Oggs, etc. all work just fine because Quicktime, WMP, Real, Winamp, all run just fine.

At home, I have a setup where I have a media server with a big disk array, where I spool all the incoming television onto it with a couple PCs with capture cards. Sort of like a distributed TiVo if you like.

This server also stores my music collection, and if I get around to ripping my DVDs, my movie collection too.

The content is served out to a bunch of PCs hooked to various things like a plasma display, etc (in the future, I expect other non-PC endpoints to show up -- the PS2 Qcast thing is one example).

Everything goes over an Ethernet network. There's wireless distribution via 802.11b to mobile devices like a laptop or a PDA (ipaq) on top of that.

So, if you have a setup like mine at home (and I really think this is the way things will end up going in the future), a Tablet PC fits in perfectly as a mobile endpoint that can pull down content from the media server and play it anywhere I want -- not to mention it suffices for web browsing and running anything else I may need.

 

[Guest]

One thing i hate about Sony is their lack of focus.
They see something remotely interesting and they would grab that idea/technology and when they see another interesting concept, they would grab that too.

That is why you can see so many different Sony products and standards. Even their Playstation line is not getting the full support it deserves.

I hope for their sake, they would concentrate strongly on the PS3 and take things from there. If they are spreading themselves too thin, they will be defenseless when face with a full frontal assault by MS.

 

[Magnum PI]

i fear for sony, they seem soooo vulnerable against the xbox..

 

[JF_Aidan_Pryde]

chap,
By your rationale, Sony should have never moved away from TV and walkman. Moving to Playstation was a bad idea because it lost focus..

are you scared of the ps or something?

 

[cybamerc]

chap:

> One thing i hate about Sony is their lack of focus.

Lack of focus? How are they any less focused than, say, MS?

> They see something remotely interesting and they would grab that
> idea/technology

I think you have them confused with M$. Sony is an innovator while M$ is the leech that benifits from other ppl's hard work

 

[BenSkywalker]

Vince-

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.

Last year at this point there were a lot of people that were stating MS would be a quick flash and exit in the console market, that they would have trouble moving more then a couple of million units and that they didn't have what it took to land a decent library. Most of that talk has gone, they have gained a lot of respect. When you start with none, it doesn't take much to make gains

As far as last generation hardware selling almost on pace with next gen, the SNES slaughtered the PSX at first(along with the Genesis for that matter).

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.

How many million units do they have to reach before you think otherwise? Twenty million? Thirty? Fifty?

Marconelly!-

That's quite dubious as we don't exactly know how much the market increased.

Do you think sales tracking is something new....? We do know how much the market has increased, dating back to the days of Pong sales have been tracked in the video gaming segment(in other words, it always has been). Vince would have been on me like flys on sh!t if I said that and it wasn't true

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.

Figure that a title has to turn $1Million to cover port costs(which is likely extremely high in the case of either the XB or GC). That means that about 33K units have to move, they hit 100K and they are likely quite profitable. Installed base most certainly matters. If the market alone assures ports MS can line up the exclusives from their war chest.

Magnum-

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..

Japanese developers importance has been on a steady decline outside of Japan for quite some time now. This holds true for both Europe and the US. Who do you think is more important, Capcom or Take2?

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

Archie already pointed out that they were, are you aware that Nintendo has been in business for over 100 years?

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..

They are both tech based companies. Sony took the same business model with first the PSX and then the PS2. To date, it has proven to work quite well.

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

At one point MS was licensing a BASIC based 'OS' to Apple for their Apple][ computers(Woz's version wasn't fully functional while MS's was). MS wasn't a noone prior to the IBM deal.

Cybermac-

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.

I have to ask, do you honestly see this as a two console race(between MS and Nintendo)? Those that are devoutly behind their respective platform of choice already own their console. The battle now is for those that are not staunch supporters of a particular platform. Every potential PS2 buyer is a potential Box/Cube buyer and vice versa. The type of us that own mutliple next gen consoles aren't large in numbers. The real battle is overall marketshare, not who is ahead between MS/Nintendo.

The Cube is significantly stronger as a platform then the N64 was at comparable life cycle points as is the XBox. The real battle is gaining an acceptable installed base for your platform, absolute numbers is what matters. It would be better for MS to trail Nintendo by 1000K every single month if Nintendo was trailing Sony by 100K a month then to have MS ahead of Nintendo by 200K a month and behind Sony by 500K. It's absolutes that matter, marketshare and installed base.

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.

I'm sure Vince knows of a few links covering the launch of the PS2. It didn't need any software at launch. It had hardware and hype, two things the came from cash.

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.

And this brings us to the true core of the disagreement. What in particular do you think MS is doing that is not worth the money they are spending? I'll go on record right now stating that the bundle deal is going to pay MS long term dividends. The increase in sales they will see, nabbing potential sales from the other two, is going to be worth the short term loss they are going to take from it. This is how I look at most of their business choices revolving XBox. The only element that I don't see working in to the black at all this generation is Live!, although that is clearly a long term investment.

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.

As there are in terms of PCs. The money is made on licensing fees which go to one of three companies. Licensing fees is how MS makes their money on the PC side too.

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

For the launch year they lost close to $500Million dollars, and that wasn't taking the entire fab cost into account(as they wisely chose to spread it out). Likely if you added up the cost of the fab and the marketing/launch budget Sony likely laid well over $1Billion out to get the PS2 off the ground. Launching a console isn't cheap. MS may have spent the most money to do it, but they are by no means the first company to take a loss to get a new platform off the ground.

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

No business is absolutely certain. Apple could come out with a x86 compatible OSX version that ran all Windows apps tomorrow and halve MS's marketshare in a year. Taking the risk, strategy and cost into consideration looking long term the XBox business sounds quite solid to me.

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

There is a huge gap between being impressed and finding something stupid. They are performing roughly how I expected them to in pretty much every market after one year. I don't find it impressive, more like on the right track as opposed to the train wreck many seem to like to believe.

 

[Vince]

Ben -

Last year at this point there were a lot of people that were stating MS would be a quick flash and exit in the console market, that they would have trouble moving more then a couple of million units and that they didn't have what it took to land a decent library. Most of that talk has gone, they have gained a lot of respect. When you start with none, it doesn't take much to make gains

Ben, nice lengthy reply, but I totally disagree about this issue of respect. Edge Magazine had a piece on the XBox recently with many industry opinions stated, and they said the following:

"More to the point, there's still a feeling among massmarket consumers that the Xbox has as much credibility as the present Conservative Party. "First impressions last," cautions an anonymous producer at a large UK developer. "The public, at least in Europe, see the Xbox as an over-sized, over-priced Yank tank of a machine that is failing to generate any interest in the Japanese whatsoever, and is therefore in no way cool. In this brand-driven market, you have to be cool, and Xbox has already blown its image. Clawing it back is going to be a long, expensive climb."

"I don't believe that anyone here seriously believes that Microsoft will ever present a serious challenge to Sony. What is far more likely is that as the PC market shrinks, and GameCube corners the kids' market, Xbox will be a stable second or joint-second contender. With Sony visibly growing the size of the market, everybody will do well, but it doesn't take a genius to figure that Sony will be the leader by a wide margin for years to come. Xbox 2, frankly, would have to come with a free X-Wing to seriously challenge the Sony dominance." -- Simon Cox, editor, 'Xbox Nation' (US)

"After securing around 80 developers, including Tecmo, Sega, Capcom, Koei, Namco and From Software, there's been some fallout in recent months. CESA, (the Computer Entertainment Software Association) believes that of those 80 developers, only 50 remain committed to the Xbox. But more significant is Konami's decision to pull out of Xbox development. Although Metal Gear Solid Substance is still being considered for a Japanese release, it will be the last Konami title on the console."

""Microsoft should stop, look and listen, because all I see right now are Americans making games for America - and that won't win the battle for Xbox 1, 2 or even 3." -- Anonymous



Um, respect from whom may I ask, you? Seriously, they have alot of uphill battles to be fought - they have barely even started. Talk about respect when they've done something significant - outside of PR and a 'revolutionary' HDD.

 

[Magnum PI]

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..

Japanese developers importance has been on a steady decline outside of Japan for quite some time now. This holds true for both Europe and the US. Who do you think is more important, Capcom or Take2?

well, as the xbox doesn't have take2 in its portfolio this is a rather inappropriate question..

especially if it is known to have some simillarities with the PC, a console have to distinguish itself from the PC. lots of console gamers couldn't care less about the PC and PC gaming.

and what is the best way to do so ? major japanese developpers..

even when they are not buying a majority of japanese-developped games, gamers can't take seriously a console lacking serious japanese support.

believe it or not, it can seriously hurt the credibility of a console towards console gamers. 3doize or amstradize a console...

i must say that i mostly know console gamers from my region.. perhaps american console gamers are different, i dunno...

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

Archie already pointed out that they were, are you aware that Nintendo has been in business for over 100 years?

if we want to discuss this issue further we would firstly have to define what is a giant corporation..
and i don't think being business for over 100 years have something to do with being a giant corporation.. the place i go to buy my meat is in business for more than 100 years old, but it's a small shop..

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..

They are both tech based companies. Sony took the same business model with first the PSX and then the PS2. To date, it has proven to work quite well.

nintendo is not a tech based company. it's a games based company.
and i don't understand you.. you want to explain you can compare nintendo and MS because of sony ?? you are confusing !

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

At one point MS was licensing a BASIC based 'OS' to Apple for their Apple][ computers(Woz's version wasn't fully functional while MS's was). MS wasn't a noone prior to the IBM deal.

before they got the IBM deal, they were just a company among others..
and i guess you think that the IBM deal didn't help MS at all ?

 

[cybamerc]

BenSkywalker:

> The real battle is overall marketshare, not who is ahead between
> MS/Nintendo.

Sony pretty much already had this gen tied up. That's not to say that the situation can't change but I find it unlikely. Personally I find the "battle" between M$ and Nintendo somewhat more interesting because the PS2 would be a success even if it stopped selling today.

> I'll go on record right now stating that the bundle deal is going to pay
> MS long term dividends.

What kind of time schedule are we looking at? 1 year, 2 year, an entire generation?

Nintendo can't afford to lose billions of dollars on the off chance that it might pay off. For every dollar Nintendo spends, M$ can spend ten.

 

[BenSkywalker]

Vince-

They have earned the respect of a lot of consumers. The quote you pull up is interesting, odd that they are still landing so many titles given the entire world is against them isn't it Seriously though, I can pull up quotes from Japanese developers stating that Sony's hardware is designed to break to force people to buy new ones. You can find comments slamming Nintendo too. Doesn't mean that they all haven't earned a bit of respect in the industry.

Magnum-

well, as the xbox doesn't have take2 in its portfolio this is a rather inappropriate question..

http://www.take2games.com/index.php?p=games&platform=XBox

What exactly do you mean?

especially if it is known to have some simillarities with the PC, a console have to distinguish itself from the PC. lots of console gamers couldn't care less about the PC and PC gaming.

Lots of console gamers couldn't care less about Vice City too Where are the PC comparisons coming from? Bungie, Rare and Sega don't exactly have me thinking 'PC'(and they seem to be the most note worthy developers for the platform).

even when they are not buying a majority of japanese-developped games, gamers can't take seriously a console lacking serious japanese support.

Some gamers sure. That certainly doesn't apply to all. Besides that, how exactly is MS missing out in a large fashion in terms of Japanese titles that the western world could stomach? Dating sims don't exactly tear up the charts here on the console front.

if we want to discuss this issue further we would firstly have to define what is a giant corporation..

How about a publicly traded corporation with numerous factories in numerous different markets? Nintendo was prior to entering in to the video game market(they did quite well with their trading cards, games and toys).

nintendo is not a tech based company. it's a games based company.

Video games are tech based. Even moreso, the people that develop and sell the platform are tech based. You think Archie, Q, ERP and Faf might know something about technology? You think they might use some of that where they work?

and i don't understand you.. you want to explain you can compare nintendo and MS because of sony ?? you are confusing !

Nintendo and Sony were both large corporations prior to entering the video game market that had to use cash to enter into it. Nintendo is actually the best example, they designed the Trojan Horse "ROB"(at a considerable cost, not to mention the marketing that revolved around it) to get their product on to the shelves of retailers that were burned in '84. Both Sony and Nintendo had obstacles to clear to enter in to the gaming market in a meaningful fashion and both of them used their respective cash reserves to get them into the market.

before they got the IBM deal, they were just a company among others..
and i guess you think that the IBM deal didn't help MS at all ?

MS is still a company amongst others, what are you trying to say?

Cybermac-

Sony pretty much already had this gen tied up.

They had what tied up? I know what you are trying to say, that they will remain the market leader. What does that amount to? The real question is what market share and installed base will they hit and what will their competitors make out with. If Sony manages 35% with Nintendo @34% and MS @31% it is much better for MS then having Sony @80%, MS @15% and Nin@5%.

Personally I find the "battle" between M$ and Nintendo somewhat more interesting because the PS2 would be a success even if it stopped selling today.

All three are pulling for sales from the same general target audience. There are very likely people deciding between a PS2 and XB that wouldn't consider a GC etc. The goal the companies are aiming towards is gaining the largest audience for their platform. Who finishes second is a very distant second to what level of penetration does each platform have. If Nintendo hits their ~50Million goal for the Cube I think they will be looking good no matter what 'place' they are in.

What kind of time schedule are we looking at? 1 year, 2 year, an entire generation?

Doesn't matter if it takes three generations(although I'm not stating I expect that, likely over the course of the next two years it will become a larger factor on the positive bottom line). If MS were in this for a quick trial run, which it seems many people honestly are confused enough to believe, then the line of thought of it being bad business might make sense. They are in it for the long haul, I can see a valid argument saying they aren't doing enough.

Nintendo can't afford to lose billions of dollars on the off chance that it might pay off. For every dollar Nintendo spends, M$ can spend ten.

So you look at the net gain that can be had by each move and factor it against the cost and risk. In this aspect, I think MS has been quite reasonable in their approach(besides a few big blunders not being agressive enough with their Jap and Euro launches).

 

[archie4oz]

Seriously though, I can pull up quotes from Japanese developers stating that Sony's hardware is designed to break to force people to buy new ones.

Actually you'll find one, by Shinji Mikami... He caught a lot of flak for that too...

Japanese developers importance has been on a steady decline outside of Japan for quite some time now. This holds true for both Europe and the US. Who do you think is more important, Capcom or Take2?

Capcom... They're more stable, with more consistent production, and they're actually a developer (meaning tangible assets). Take2 could just as easily be replace by Infogrames as a holding company for Take2's publishers (of which Rockstar is the most valuable and even they don't develop all the titles they publish). They were up against the ropes for a while in fact and had it not been for the success of the GTA3 (and now Vice City, and the relative success of Max Payne), they'd either be in trouble, or would have folded. Besides, not all of Take2's games are "western" developed games as you like to put it, some of their titles are Japanese developed titles... (just a few insignificant ones, but it does illustrate my point).

Some gamers sure. That certainly doesn't apply to all. Besides that, how exactly is MS missing out in a large fashion in terms of Japanese titles that the western world could stomach? Dating sims don't exactly tear up the charts here on the console front.

RPG's, a few critical racing titles, the best soccer title in Japan and Europe...

In this aspect, I think MS has been quite reasonable in their approach(besides a few big blunders not being agressive enough with their Jap and Euro launches).

I'm not sure how they could've been more aggressive though... I mean it's rather hard to make up for the lack of infrastructure, and taking the time to build it up more before launch probably would've been a bad idea...

 

[Teasy]

I'm not sure how they could've been more aggressive though

Really? You don't think MS could of.. oh I don't know, maybe not sold the XBox for the equivalent of $475 in Europe for the first 2 months?

 

[BenSkywalker]

Archie-

Actually you'll find one, by Shinji Mikami... He caught a lot of flak for that too...

He stated it, went on quite the rant based on everything I have read on the incident. I brought that up as an illustration that you can always find people who aren't fond of a particular platform, even one that is way out in front.

Capcom... They're more stable, with more consistent production, and they're actually a developer (meaning tangible assets). Take2 could just as easily be replace by Infogrames as a holding company for Take2's publishers (of which Rockstar is the most valuable and even they don't develop all the titles they publish).

Capcom doesn't have close to the same level of power in the west as T2. Besides GTA and Max Payne, they also are bringing SS and Mafia to the consoles. T2 owns dev houses, and those dev houses are pushing out some of(including the) biggest hits of this generation in the western markets.

RPG's, a few critical racing titles, the best soccer title in Japan and Europe...

Looking at the sales charts you aren't talking about major factors in the west(overall). Certainly they could flush out their library more, but the sales charts don't indicate that those are large factors in the western market.

I'm not sure how they could've been more aggressive though... I mean it's rather hard to make up for the lack of infrastructure, and taking the time to build it up more before launch probably would've been a bad idea...

As Darren mentioned, launching at close to $500 in some European areas was not even close to agressive enough. They needed to have the same price point or less then the PS2 and they failed to do that by a very large margin in some cases. MS's launch certainly would have been far bigger in Europe if they had launched in all areas at the same price point as the US.

 

[archie4oz]

Capcom doesn't have close to the same level of power in the west as T2. Besides GTA and Max Payne, they also are bringing SS and Mafia to the consoles. T2 owns dev houses, and those dev houses are pushing out some of(including the) biggest hits of this generation in the western markets.

Again, "west" is rather vague as tastes and what sells can vary quite distinctively across the region(s) I believe you're using as a basis.

Also, using Take2 as an example is somewhat problematic as it didn't develop or publish either GTA3, or Vice City, thus in certain statistics Rockstar is accredited and in others Take2 is (basically credit for being the holding company).

Also, depending on your timing and sample size, one can easily pull up sales charts for this generation where Capcom is well ahead of Take2... Like I said earlier, timing can be rather critical in evaluating sales (although I'm not going to discount the sales power of the GTA series).

Anyway, I'm not too sure how SS (Serious Sam I presume), and Mafia will do... Mafia might do decent, but Serious Sam being a PC shooter, doesn't bode well for it on the console... Of course with Capcom's upcoming strong GCN emphasis, one can certainly wonder about the sales potential...

As Darren mentioned, launching at close to $500 in some European areas was not even close to agressive enough. They needed to have the same price point or less then the PS2 and they failed to do that by a very large margin in some cases. MS's launch certainly would have been far bigger in Europe if they had launched in all areas at the same price point as the US.

Yeah, but 20/20 hindsight is a great thing. Going into it though one has to factor in exchange rates, production ramping (remember the Hugarian Flextronics plant hadn't fully spun up yet), tweak retailer discount levels according to local practice, factor in taxes... A lot of this is simple guestimation until you actually launch the system and get some feedback...

One can always look back and say MS coulda/shoulda... And while price was most certainly did play a factor, that just leaves us with one of megadrive's "what/if" scenarios. Sony could've easlily answered back with their own price reductions as well rendering MS's lauch with the same result we have today...