BenSkywalker
Regular
If you are running a business and have so much capital at your disposal that your focus is not on generating profit but merely on establishing market leverage and driving out competitors, is that really aneconomically viable practice?
In the abstract sense I agree with that, but it isn't quite so simple. First off, MS is looking to have a record year for profit this year, the XBox isn't hurting their bottom line very much at the moment. Even assuming that it was, the console market last year was ~$20Billion on a global basis. A viable question is if it is worth it to lose a few billion short term for a shot at taking a good chunk of one of the largest and fastest growing technology sectors. It is within the realm of possibility, however unlikely, that everyone could stop buying XBoxs and the entire venture would turn out to be a rather sizeable net loss for them. I think the more likely scenario is that they will continually inch forward in market share in Europe and, although slower still, Japan with them continuing to make strong gains in the US market.
MS has comitted to $3Billion in write offs for the XBox by '04. If they reach an installed base of 25Million(which is likely quite a bit lower then what it will be) with a tie in of 6(again, likely quite conservative) by that point they would have made back $1.5Billion if all of their titles were third party(which we know they are not) and that is assuming they don't make a cent on Live!. Going in to next generation they would have proven that they are a player and will be ready to launch a console along side Sony which will take out two major obstacles they had this generation.
Long term I think they are making good business decissions in terms looking at their own market, which is facing very slow growth ATM, and their share holders. This gen is likely to see ~200Million units installed base. If MS can grab 20% of that, which I think most people would agree is reasonable, they could break even on the XBox while building a considerable amount of market and mind share. Long term it is likely money very well spent.
Our economy has ballooned to enormous prportions because people are spending money they don't have. Everyone is moving faster and faster towards a big brick wall.
The statistics you quoted are a bit misleading as they don't take into account assets which offset the overwhelming majority of the debt figure(actually, taken as a whole assets win by a huge margin). As of right now I'm "in debt" due to my mortgage although I'm actually ahead of the curve a bit right now which is likely the case with a large portion of the population.