The Next-gen Situation discussion *spawn

[steviep]

I obviously wasn't talking the rumours

But in your proposed scenarios, you still have developers like Crytek and Epic whining at you to do more more more. To some extent at least, their whining has worked in the past, and in a more recent example.

 

[DoctorFouad]

I don't want to get too sidetracked with this (and banned in the process) but I'll say this as it relates to nextgen machines:

Perception of DC when it was released was that PS2 was significantly more powerful, and worth the wait.

I repeat again, the dreamcast has been released in november 1998, no one was talking about ps2 at that time.

Timing killed the dreamcast, it was ahead of its time, but too late to combat PS1 (final fantasy 8, metal gear solid, gran turismo1...all those games have been released in parallal with the dreamcast), and too early to combat ps2 (at the time ps2 was released, the dreamcast was almost obsolete from a technical point of view, CD vs DVD, half the amount of RAM, a weak CPU compared to the EE, and an outdated GPU),

Microsoft also made a huge strategic timing error not releasing their next gen console this fall 2012 with kinect and Halo4. a lot of hardcore gamers are desperate for next gen consoles with more RAM and true 1080p and high rez textures. Microsoft missed a huge opportunity to beat sony and nintendo....they simply gave sony a second chance....

 

[TheChefO]

Revenue for what exactly?

Approximately half for xblg, and the other half for online zune purchases/rentals etc.

See the original Bloomberg report I linked to on the previous page.

 

[TheChefO]

No, see, when 360 launched, the XBox org was a "strategic bet" (Microsoft dumps tons of money into strategic bets - not all of them pan out). Now it's a profit center. It would be infeasible to reduce year over year profit growth. So selling hugely underpriced hardware now is going to be a tough sell.

I get that, but this is also the only sector which MS is heavily invested in hardware...

Different rules for different sectors.

But I wasn't referring to ancillary revenue. I was referring to direct hardware profits. The 360 launched with a roadmap to profitability using process shrinks and volume discounts. It's successor won't be so lucky. Process shrinks are getting harder to execute and energy efficiency is not linear with process size (much more leakage at smaller sizes).

Ancillary profits are a direct result of hardware. Diminish the userbase (via weak hardware), and the xblg, zune, and (future) ad revenue is diminished proportionally as well.

Future process shrinks are sure to be difficult, but they will come. intel's entire business is currently dependent on it, and their stock price says don't bet against it.

Also, the customer focus has changed. People spend more time on 360 now consuming media than playing games...

Pardon, but this is hogwash. This fact may be true now, but it doesn't erase the fact that games are the reason the console is in the livingroom in the first place. If non-gaming features are the draw to buy the new box, why not just keep the old box which has no difficulty in providing these same services?

Or for those not in the fold yet, just buy a brand new xb360 (or ps3) for cheap and call it a day.

This concept of non-games-features-first is a recipe for disaster and will simply even the playing-field of those looking for those features and steer them into the arms of ipad, iphone, android, kindle fire, etc.

If the rumors have any truth in them, both sides are aiming a lot lower this next generation that the previous.

And will leave the barn door open for a mass exodus.

So I was not saying MS is not currently making money on it's games business, I was just pointing out that your original statement overlooked the fact that the company may not be as willing to dump money into the ecosystem as it was last time around.

This may be true, but they do so at their own peril.

They have significantly MORE to lose now than they did in 2005.

As I showed above, there is significantly more to be made online than on hardware.

 

[steviep]

How is it a recipe for disaster? The 360 took off to the heavens sales-wise when the mass market adopted it for those types of features (along with a certain peripheral that's going to be in the box with its successors launch).

You do realize who you're talking to, right? lol
He's saying that looking at hardware more conducive to both typical "hardcore" gamers and those outside that demographic right out of the gate could be worth a bit of concession of that "superbox" idea.

 

[TheChefO]

How is it a recipe for disaster?

Because those are "side" features. They are the, "but wait, there's more" part of the sales pitch. There's nothing wrong with wanting to improve those features and offer more, but those aren't the defining features which cause a purchase.

The main reason for consoles to be purchased is for games. The fact that the console can also do additional things is icing on the cake, but nobody buys birthday icing ...

Improved game-interface and game-world are the reasons for consumers to buy a new games console.

Otherwise, keep the old xb360/ps3 and keep plugging away.


This concept of a platform which is conducive to both hardcore and casuals is a valid and strong one. One which I've advocated for many times over the years.

casuals = xb360+kinect
hardcore = xb720

Both of which connect to xblive.

That's how you capture multiple ends of the spectrum. Not with a subpar spec that does nothing to excite the hardcore fanbase.

 

[Acert93]

But I wasn't referring to ancillary revenue. I was referring to direct hardware profits. The 360 launched with a roadmap to profitability using process shrinks and volume discounts. It's successor won't be so lucky. Process shrinks are getting harder to execute and energy efficiency is not linear with process size (much more leakage at smaller sizes).

Agreed. In the same vein there are innumerably new revenue streams that have presented themselves since the Xbox 360 launched and are on the horizon. And don't think this goes unnoticed. My wife, a non-gamer, takes a perverse joy in habitually pointing out, "The Xbox has ads? Don't you pay for Live? The PC never had ads and it was free." "Why is your game so laggy? You pay for Xbox Live and we have FiOS. Oh yeah, no dedicated servers. You pay for Live why again?"

Hint: When Netflix got the bright idea to raise prices and split off the DVD business she promptly was on Netflix.com filling out the cancellation of service form. Which leads to...

Also, the customer focus has changed. People spend more time on 360 now consuming media than playing games. Sure, games are good, but what keeps that ancillary revenue coming in now is evenly split. You don't need a monster, power hungry, money losing superbox to provide streaming movies, and the games will adapt to the resources they have. A modest increase could be workable. Quadruple the memory, and even with no changes in CPU and GPU, the games would be significantly better.

I don't think that is true. But first and foremost: let's not pretend that the Xbox is the only venue to get these streaming services. PCs, Macs, set top boxes, integrated Internet TVs, etc are all competing. Streaming on the Xbox 360 is a byproduct of gaming being the primary motivation for purchase in most cases; Streaming on the Xbox (over another device) is an issue of convenience.

Which leads to the "focus." There was a time when Netflix was the major time-use of our Xbox--but don't mistake that as the primary use or cause for purchase. Primary purpose was clearly Dad's gaming box, followed by family gaming, with media (DVDs, streaming) a distant perk that was only sub-planting *other devices* that formerly served that role. If Netflix had dropped their Xbox extender, meh, we would have used Netflix on another device.

If the Xbox 3 is a meandering gaming-box it won't be a very appealing streaming platform at $199 or more (I would think more seeing as MS has fallen in love with keeping a tight line on $199 for 7 year old hardware that launched at $299). And MS of course will have to find a way to convince the early adopters who give a platform legitimacy and momentum that their cries of, "Wii-rio0off" are all wrong. Not impossible (see: Wii) but core gamers will be asking: Why? If the upsell is, "Use your media on it!" The retort will be, "And why not my Xbox 360/PS3? Or iPad? Or PC?"

Before MS begins chasing the rabbit hole on platform use a distinction between motivation for purchase and use pattern should be distinguished. And while I can totally see people's video time outstripping gaming based on just average consumer activity I have a hard time blindly swallowing the idea that the majority of Xbox's are being purchased with the primary goal of such, especially when much cheaper (even free) devices are available and the competitors gaming platforms offer the same services.

A modest increase could be workable. Quadruple the memory, and even with no changes in CPU and GPU, the games would be significantly better.

No one would argue that technically an Xbox 360 w/ 2GB of memory would not produce better software. But that isn't the problem; the problem is converting customers over to the idea that the new platform and everything it entails (up front platform costs, new premium game costs, exorbitant MS's peripheral pricing, etc) is worthy of the investment. An "Xbox 3" which follows the Wii route over more memory and overclocked old chips, from an early adopter gamer perspective, is worthless. There *is not upsell*. So when Madden 15 is on both boxs I would communicate to EA, "Hey, I am still buying the OLD version because the new platform wasn't worthy of my investment."

If the rumors have any truth in them, both sides are aiming a lot lower this next generation that the previous.

I full expect such from Sony seeing them bleeding red. That opens the door for MS to follow suit due to lack of competitive pressure. I will note that it is interesting how MS has pretty much neutralized the PC as a competing platform through their handling of Windows as a gaming platform. It is a crying shame that MS, with their long seated dominance in that arena, could not hobble together a Steam-like concept on the PC.

And that may be the MS bet. They don't need a great machine. The WiiU is what it is (or more bluntly, is not) and Sony is aiming for something modest. In a traditional cycle the fear would be, "Chase the new consumer while forsaking the core is a losing strategy."

I am certain there are marketing folks telling Steve, "Look, the core gamer has no where to go. As long as we have parity with Sony the core gamer has no choice. So the focus needs to be elsewhere."

And I have no doubt that there is a strong undercurrent of bean counters and folks in emerging industries trying to push the focus elsewhere as core gaming is a slow-growing base that, unless something significant occurs, has no real alternative. Shifting funds over to media contracts and Kinect-2 to capture Wii users is a better use of unit dollars than trying to appease hard core gamers.

 

[function]

Approximately half for xblg, and the other half for online zune purchases/rentals etc.

See the original Bloomberg report I linked to on the previous page.

But how are you getting $50 revenue per person per year? By "per person" do you mean per-Live member, per-Live Gold member, per-console or something else?

You're offsetting $50 "per person" per year against every individual console, so it looks like you mean " $50 per console per year". What I'm asking is where are you getting this figure from?

Following on from that, how are you getting from $50 revenue to having $50 income to offset against previous hardware losses?

The Bloomberg article you linked to doesn't appear to support the idea of $50 per Xbox per year from Live income (far from it infact).

 

[steviep]

Nobody's saying using the exact same chips as the predecessor a la Gamecube->Wii. Unless I'm misunderstanding, bkillian is saying that the console makers are looking into making less of an insane superbox and doing a less crazy jump that they did in 2005/6.

 

[Rangers]

Also, the customer focus has changed. People spend more time on 360 now consuming media than playing games. Sure, games are good, but what keeps that ancillary revenue coming in now is evenly split. You don't need a monster, power hungry, money losing superbox to provide streaming movies, and the games will adapt to the resources they have. A modest increase could be workable. Quadruple the memory, and even with no changes in CPU and GPU, the games would be significantly better.:

The PS4 is actually used more for netflix than the 360 according to studires, so i would think that would be Sony's focus more than MS. The 360 has always been known for gaming, since content is walled off Via XBL gold. Sony can reach more the mass market with a lower powered gaming/movie box, and Sony actually owns a huge movie studio so their interest their is about 100X microsoft's.

 

[Shifty Geezer]

If they introduce xb720 to a thud as everyone looks at the spec/games and see that they can get the same on a pc by swapping in a $100 apu, how many people will be chomping at the bit to pay MS $200+ for that console?

About as many as if the same console was launched at $400 last year and will be price reduced to $200 in 2013 (okay, that's some pretty aggressive price dropping ).

This has been a long generation. There is plenty of scope for a console to be launched kinda midway through the next-generation from where it would normally have started. If next-gen had started with a $400 machine in 2011, what would it's specs be? That's the machine that could be on sale in 2013/2014 for $200, and it would still be the fabulous improvement over this gen that it was in 2010, only more people can afford to buy it now. Introducing that same box at the lower pricepoint isn't the usual for consoles, which normally launch at the top of the tech tree, but the whole business is changing and it may be identified that it's better to run your business that way. This has only been possible to consider because this gen was so long and technology has consolidated into standards.

I know they will get some fools to jump in, but a small percentage of their core base will ... Remember, MS built their brand and reputation as a high-end console for hardcore gamers.

And then changed it to a brand for families. If next-gen they can change their brand to "everyone except hardcore gamers" and lose all their hardcore gamers and yet increase their sales 300% buy selling to an untouched audience, shouldn't they do that?

In other words, if 200Million people globally were interested in weak/cheap hardware, they would have already bought a cheap xb360 ... or ps3.

That assumes a new £200 won't be any better or different to the existing ones. There are many ways to differentiate and offer a better, more compelling experience that will sell a new box to customers who currently aren't interested.

Ok let's evaluate potential profit generated by hardware and compare to loss leader:

Profitable from day 1:

bom    msrp    consoles/yr    console profit/yr
100    120    10,000,000    200,000,000
100    120    10,000,000    200,000,000
100    130    10,000,000    300,000,000
100    150    10,000,000    500,000,000
100    180    10,000,000    800,000,000
100    200    10,000,000    1,000,000,000
150    250    10,000,000    1,000,000,000
200    300    10,000,000    1,000,000,000

I think this is a good illustration of best case scenario.

Uhhhh, in a hypothetical universe where changing the retail price has no effect on console sales. Here's another random-number chart to consider...

bom    msrp    consoles/yr    console profit/yr   avg content sales/yr   total profits/yr
100    120    30,000,000    600,000,000                  $100             3,600,000,000
100    130    20,000,000    600,000,000                  $100             2,600,000,000
100    150    15,000,000    750,000,000                  $100             2,250,000,000
100    180    12,000,000    960,000,000                  $100             2,160,000,000
100    200    10,000,000    1,000,000,000                $100             2,000,000,000
150    250    300,000       30,000,000                   $200                90,000,000
200    300    50,000        5,000,000                    $300                30,000,000

Factoring in increased demand and the high profitability of content sales, we see irrevocably that selling as cheap as possible to as many users as possible is what's needed. Note that to be fair, I've increased the content sales average for the hardcore gamer because they might buy more stuff, but on the flip side, in my completely made up universe, the other console launched earlier and cheaper and this console launched with a buggy OS that saw the lower-spec'd rival corner the market very quickly, and at >$200 there just isn't much interest in this console.

Of course, my evidence is all complete bollocks. I'm not trying to prove anything, other than that you can't apply rational, considered thinking to statistics and data to make sensible, reliable predictions when those stats and datapoints are completely made up and based on pure guesswork.

Like I say, you can draw up lots of charts for lots of scenarios. What about the console being more expensive, selling lots, but then not being able to be dropped in price and sitting up high for too long, such that its sales drop rapidly and there isn't the large install base consuming content? It'd be possible to draw up similar hypothetical considerations for this gen, for something like Wii. As there's no way of knowing what the consumer will do other than, if nothing changes (and things are changing all the time), they'll probably stick to existing patterns, we have very little data to base predictions on. Just making up your own really doesn't help with that...

 

[Gubbi]

Also, the customer focus has changed. People spend more time on 360 now consuming media than playing games. Sure, games are good, but what keeps that ancillary revenue coming in now is evenly split. You don't need a monster, power hungry, money losing superbox to provide streaming movies, and the games will adapt to the resources they have.

So you want people to ditch consoles and get an Apple TV, because that does all those things, interacts with tablets+phones and is integrated to the best online media store. Cheaper too.

A modest increase could be workable. Quadruple the memory, and even with no changes in CPU and GPU, the games would be significantly better.

No they won't. They will have slightly better textures and correspondingly longer load times, but they will still be sub-HD with post processing AA vaseline on top, they will still lack effects even low end PCs have.

If the rumors have any truth in them, both sides are aiming a lot lower this next generation that the previous.

I hope those rumours are planted to throw the competition off.

There is nothing stopping MS continuing selling the 360 as a media-centric box while launching a new console.

Cheers

 

[wco81]

You have to wonder if MS sees the console market as being as crucial as it did when it embarked on the Xbox design.

There was a lot of hype about the PS2, with talk of consoles encroaching on MS turf or strategic markets that they'd targeted.

Now they probably are more interested in mobile.

 

[Rangers]

Microsoft does some chest beating (seems appropriate here with some questioning 360's success or MS's commitment to the console market)

http://blogs.technet.com/b/microsoft_blog/archive/2012/05/29/xbox-beyond-the-box.aspx

Microsoft's CMO Yusuf Mehdi has posted on the official Microsoft blog via Technet the updated figures for Xbox 360 sales since the console's launch in 2005 as a part of the company's pre-E3 report.

According to Mehdi: "Since 2005 – when we launched Xbox 360 – we have sold 67 million consoles and have generated more than $56 billion at retail, and we’re still going strong in our seventh year. With 47% share of the current-generation console market, we are hitting our stride largely as a result of the success of Kinect for Xbox 360 (19 million sold ) and the flood of new entertainment options through Xbox LIVE (40 million members)."

Mehdi went on to point to the home entertainment integration of the Xbox 360 as one of the system's successes, adding "Sales for Xbox 360 in year five were greater than in year four, sales in year six were greater than in year five, and sales in year seven were greater than in year six."

As for what to expect for Microsoft's E3 press conference, Mehdi didn't provide many hints, simply stating: "We’ll unveil new games, show new ways to enjoy the entertainment you love and, as always, we’ll have a few surprises

Didn't seem worth a new thread but worth posting. A little odd they didn't save this for E3.

The discussion of the 47% share figure on GAF suggests they probably mean over the last year in the USA vs ps3 and wii .

 

[function]

No they won't. They will have slightly better textures and correspondingly longer load times

I disagree with this. You could quadruple the texture resolution (with room to spare) and that would stand out a frikkin mile. As a PC gamer I know for a fact this would be a huge improvement. Maybe we could have Mass Effect 1's "loading screen free" Normandy and Citadel back too (and holster animations) as you could pre-load much more of the environment outside of your immediate field of view.

And in the context of a next gen system with four times the ram you presumably wouldn't be loading everything from a poxy 16MB/s (at best) DVD drive any more.

Quadrupling the ram could lead to some pretty fantastic improvements in textures and level structures for sure.

There is nothing stopping MS continuing selling the 360 as a media-centric box while launching a new console.

Aw come on. Why on earth would anyone want to buy the old one if the new one had an improved "casual friendly" Kinect 2 and was a better media system (7.1 audio, 1080p 60fps 3D, HD Skype, HD Skype overlay on a HD streaming TV app, Windows 8 tablet integration for menus, apps and games etc etc)? Do you think people are incapable of wanting these things because they aren't core-gamers?

"Never mind that Xbox 360 is vastly inferior to Xbox 3 for the things you can easily understand and know for sure that you'd like - you're Casual Media Kinect people so you should buy the old 360 anyway just because! (but please continue to be profit centres plz plz plz thnks!)"

 

[function]

Microsoft does some chest beating (seems appropriate here with some questioning 360's success or MS's commitment to the console market)

http://blogs.technet.com/b/microsoft_blog/archive/2012/05/29/xbox-beyond-the-box.aspx

Didn't seem worth a new thread but worth posting. A little odd they didn't save this for E3.

The discussion of the 47% share figure on GAF suggests they probably mean over the last year in the USA.

Year 5: 360S and Kinect.

I'll say it again - banking on another Kinect at year 5 and being able to shrink your loss making, big, noisy, bruiser of a core-gaming machine into another 360S seems risky this time round.

 

[Rangers]

I disagree with this. You could quadruple the texture resolution (with room to spare) and that would stand out a frikkin mile. As a PC gamer I know for a fact this would be a huge improvement. Maybe we could have Mass Effect 1's "loading screen free" Normandy and Citadel back too (and holster animations) as you could pre-load much more of the environment outside of your immediate field of view.

And in the context of a next gen system with four times the ram you presumably wouldn't be loading everything from a poxy 16MB/s (at best) DVD drive any more.

Quadrupling the ram could lead to some pretty fantastic improvements in textures and level structures for sure.



Aw come on. Why on earth would anyone want to buy the old one if the new one had an improved "casual friendly" Kinect 2 and was a better media system (7.1 audio, 1080p 60fps 3D, HD Skype, HD Skype overlay on a HD streaming TV app, Windows 8 tablet integration for menus, apps and games etc etc)? Do you think people are incapable of wanting these things because they aren't core-gamers?

"Never mind that Xbox 360 is vastly inferior to Xbox 3 for the things you can easily understand and know for sure that you'd like - you're Casual Media Kinect people so you should buy the old 360 anyway just because! (but please continue to be profit centres plz plz plz thnks!)"

Why on earth would you even consider this as a "next gen" system? You're seriously arguing they should just quadruple the RAM and call it a new console?

 

[Rangers]

Year 5: 360S and Kinect.

I'll say it again - banking on another Kinect at year 5 and being able to shrink your loss making, big, noisy, bruiser of a core-gaming machine into another 360S seems risky this time round.

So, do you think the same for all 3 next gen consoles or just xbox?

What's risky is making a low power machine that people dont want. You need the core gamers as your base.

What that chart shows is that 360, which did what you dont want hardware wise, has been a pretty hefty success. They'll likely be looking to ape that next gen. The only way you get high sales in year 5, 6, 7, is with a machine with hardware that stands the test of time.

360S was nothing special, all consoles make a slim version later on. It's just the natural way of things.

 

[steviep]

The only way you get high sales in year 5, 6, 7, is with a machine with software support.

Fixed that for you

 

[Gubbi]

I disagree with this. You could quadruple the texture resolution (with room to spare) and that would stand out a frikkin mile.
<snip>
Quadrupling the ram could lead to some pretty fantastic improvements in textures and level structures for sure.

<snip>
Aw come on. Why on earth would anyone want to buy the old one if the new one had an improved "casual friendly" Kinect 2 and was a better media system (7.1 audio, 1080p 60fps 3D, HD Skype, HD Skype overlay on a HD streaming TV app, Windows 8 tablet integration for menus, apps and games etc etc)? Do you think people are incapable of wanting these things because they aren't core-gamers?

Self contradiction here ??

The 360 with four times the ram will rock the world, but the old hardware won't do at all ??

All the features you list requires an upgraded HDMI implementation and some software, nothing else. There is nothing the 360 CPU+GPU can't handle there.

Cheers