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Microsoft's Latest Video Game Gamble

Business Week says, "Investors think Microsoft would do better if it just exited consumer businesses".

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dizzleK3055d ago

i'm approving this because it's legit business news from a legit business site, not some flamebait.

CoffeewithChess3055d ago

To think the original source may actually get credit on N4G...

mikeslemonade3055d ago (Edited 3055d ago )

The zealots seem to forget this side of the business. They seem to think that xbox live is so profitable, the software sales are so good, and the install base is pretty good. The truth is Microsoft still hasn't turned a profit from the xbox brand. Correct me if i'm wrong but according to this article microsoft has made $49 billion, but they spent $57.6 billion, so they are at a $8.6 billion lost.

According to this number the zealots claiming that the 360 is doing better than the xbox 1 are wrong. The xbox 1 was at a $4 billion lost. That would put the 360 at a $4.6 billion lost right now.

Zealots need to understand that Microsoft has no incentive to continue the xbox brand because it's hurting them. The PlayStation brand has helped Sony before; even though PS3 right now still at a lost they have been successful more than half of the time with PS1 and PS2. Sony has an incentive to keep the PlayStation brand alive long term.

SOAD3055d ago (Edited 3055d ago )

Correct me if I'm wrong but aren't you just another zealot?

Isn't it likely that your bias against the 360 would affect the information your mind retains?

And if both Microsoft and Sony have lost at least 4 billion this gen on their console business, why would Sony's past success have any part to play in their current position?

If both companies are both just about equal in marketshare and losses, why would you still count Microsoft out for next generation?

Also, if you're going to count something as irrelevant as Sony's past successes why don't you also include Microsoft's success with their OS platforms?

Edit: Also, investors are only pissed because they want to see their stock rise in value. If Microsoft is making heavy investments in order to receive larger returns later then that's up to Microsoft. The investors are constantly looking at their papers and stock tickers, hoping to see their stock go up a point or two.

The positive spin for MS would be that they aren't just looking after their shareholders. But others can definitely find a negative spin to this.

yewles13055d ago

"Correct me if I'm wrong but aren't you just another zealot?"

I sense a school shooting in the making...

Dr-ZOOM3055d ago

@SOAD

Bubbles :D

Mike does what he does because he's insecure

anh_duong3055d ago (Edited 3055d ago )

i think ms need to focus more on portable gaming.. and mobile devices..

we had a huge reshuffle at ms because of the poor performance of zune and windows mobile devices.. the team had missed out on the smartphone goldrush (to be fair, before anyone accuses me of being a fanboy, sony also missed out on it)..

ms was so focused on winning the console war it neglected winning the war in mobile devices - the real megagrowth area..

for example apple from being nowhere in smartphones a couple of years ago now generate more revenue from the iphone than its mac business.. infact apple sold almost 3 times as many iphones as mac!!

http://news.cnet.com/8301-1...

and the iphone is the main reason why apple just overtook microsoft in market value..

the future of the gaming industry is portable devices that also have tv connectivity.. people will take portable games consoles to their friends houses, games will be always 'on' (live 3G or wifi) etc etc...

this is my belief - of course many will disagrees (alot of disagrees in fact) - but this is where i truly think the future of gaming lies..

now i am in two minds on whether to buy an ipad or wait for a windows 7 pad (such as the eeepad coming out next year)

SWORDF1SH3055d ago

Sony's PS3 has pushed Blu-Ray. One of the reasons why their console section is in the red. The high development cost to make the console to include the Blu-Ray drive, and lose money on each console sold, was the winning solution to the HD-DVD/Blu-Ray wars.

Just saying thats the main reason why the PS3 is in the red to profit other sections of Sony.

Skip_Bayless3055d ago (Edited 3055d ago )

"Correct me if I'm wrong but aren't you just another zealot?"

Yes, nowhere did I say I wasn't a zealot of the PS3. And Saying 360 zealot is like saying 360 fanboy which would be too offensive. (And yes this is my dual account, and how do people expect me to respond if i have one bubble)

"Isn't it likely that your bias against the 360 would affect the information your mind retains?"

Isn't it likely that your bias against the PS3 to come here to defend against my statement.

"And if both Microsoft and Sony have lost at least 4 billion this gen on their console business, why would Sony's past success have any part to play in their current position?"

Because when you talk about past, you also talk about trends. History repeats itself. If a particular company keeps operating a loss then chances than most likely it will keep doing that. Sony's past performance have proven that they are expeirenced in the video game industry and are able to make a profit.

"If both companies are both just about equal in marketshare and losses, why would you still count Microsoft out for next generation?"

Hmm, now did i say Microsoft was out of the next generation. I said Sony has incentive to keep SCE and Microsoft has no incentive to keep xbox going. I never said what time Microsoft would specfically boot the xbox brand. Me personally I think there will be a next xbox next generation. All i'm saying is the xbox brand isn't as healthy as the "zealots" perceive it to be.

"Also, if you're going to count something as irrelevant as Sony's past successes why don't you also include Microsoft's success with their OS platforms?"

What does OS platforms have anything to do directly with the gaming industry? Microsoft Gaming Studios is one division, Windows is one division, and the appliance/accessories are one division. The whole point of the article is that MGS is lacking and investors think they should boot the xbox brand.

"Edit: Also, investors are only pissed because they want to see their stock rise in value. If Microsoft is making heavy investments in order to receive larger returns later then that's up to Microsoft. The investors are constantly looking at their papers and stock tickers, hoping to see their stock go up a point or two.

The positive spin for MS would be that they aren't just looking after their shareholders. But others can definitely find a negative spin to this."

Yes, but at what cost. Xbox came out in 2001 and still not profitable. Microsoft can keep waiting, but apparently this battle has taken a long time. Sony and Nintendo offer stiff competition.

Conloles3055d ago

As the old saying goes, takes spending money to make money.

gobluth3055d ago

Oh, nice. He responded with an alternate account. I hope the modders see this. If you realize that you only have one bubble, then maybe you should try to learn from that instead of just getting another account. Stop being a fanboy. I know, it's like asking a racist to stop being a racist but I have to give it a shot.

karl3055d ago

this new bubble system s*cks...

i dont really know he got to one bubble but now even if u make reasonable comments like his... getting your bubbles back just doesnt seem like a possibility..

ONTOPIC>...

MS needs to step their game up.. but im hoping to see their next xbox... maybe ill buy that one

Spydr073055d ago

@Gobluth

You don't need to be a fanboy to lose bubbles. All you have to do is upset a fanboy to do that. Something completely factual could be posted and hurt an immature fanboy's feelings and they'll eat your bubbles. Tone and diction in writing also contribute...

For instance, I'll post something completely factual and bet I get disagrees (probably with no response because people are gutless). Here goes...

Ok, I took the time to collect various data that's regularly argued about when it comes to fanboys and their consoles.

PS3

2007 3
2008 6
2009 12
2010 4

Total Games: 555
Total months on market: 30
Total years: 4
Total AAA titles: 25
Total titles scoring 80+: 146

25/4 = 6.3 AAA titles/year

146/30 = 4.9 80+ titles/month

146/4 = 36.5 80+ titles/year

555/29 = 1 AAA per 22.2 games made

555/146 = 1 80+ per 3.8 games made

XBOX 360

2006 3
2007 8
2008 7
2009 7
2010 4

Total Games: 886
Total months on market: 42
Total years: 5
Total AAA titles: 29
Total titles scoring 80+: 175

29/5 = 5.8 AAA titles/year

175/42 = 4.2 80+ titles/month

175/5 = 35 80+ titles/year

886/29 = 1 AAA per 30.6 games made

886/175 = 1 80+ per 5.1 games made

Wii

2006 1
2007 3
2008 4
2009 1
2010 1

Total Games: 622
Total months on market: 42
Total years: 5
Total AAA titles: 10
Total titles scoring 80+: 73

10/5 = 2 AAA titles/year

73/42 = 1.7 80+ titles/month

73/5 = 14.6 80+ titles/year

622/10 = 1 AAA per 62.2 games made

622/73 = 1 80+ per 8.5 games made

So, off of that data, one would conclude that the PS3 makes the highest ratio of good games of all the consoles. The Wii is, well, I had no idea it was that bad. The 360 lags behind the PS3 not only in ratio of quality games, but in quality games per a given amount of time. The data cannot be spun.

However, regardless of the data it's obvious that if you choose to only own one HD console, you miss out on a LOT of goodies (like half).

Everything I posted is fact, but it'll get disagrees because I hurt a fanboy's feelings. They may even try to eat my bubbles.

Everything Mike posted was pretty much fact (in first post). MS have lost buckets of money on the total XBOX endeavor. They've lost horribly on 2 consoles in a row. From a business perspective they don't have too much incentive (tho I wouldn't say none) to continue. How many companies other than MS could afford to lose billions from venturing into a new market 2x in a row?

Note: I omitted each console's launch entry month (Nov) from the #s because it was a partial for all and it won't change the order of things anyway. Console's launch data is from Wikipedia, all other data (total # games, scores, etc) is from Metacritic.

mikeslemonade3054d ago

Hey I actually got a bubble back from these very article posts.

Spydr073053d ago

Probably from me. You're welcome. ;)

+ Show (10) more repliesLast reply 3053d ago
Anon19743055d ago (Edited 3055d ago )

Usually when I discuss the business side of the 360 I'm debubbled for my trouble and inundated with hate mail, but here's another article backing up exactly what I've pointed out in the past.

Investors don't have infinite patience. As the article states, the EDD division has lost 8.6 billion dollars since Microsoft entered the gaming space. I was on a conference call a couple of years ago with analysts discussing Microsoft's financials. In it they discussed exactly what the article mentions here, that Microsoft should consider exiting the gaming hardware side of things altogether and focus on their main strength - software - just like IBM did.

What's funny is you can't even discuss the business side of the 360 on these forums without receiving multiple PM's accusing you of sucking various Sony appendages.

Gamers who have an interest in the industry should be talking about the 360's performance and what it means long term as it has the ability to impact all gamers and ultimately change the gaming landscape. Natal is a huge gamble for Microsoft. If it doesn't pan out, what then?

This question shouldn't be taboo in these forums. Anyone have any intelligent comments on the matter, thoughts on what Microsoft can do to boost the 360's slowing sales and falling software revenue or ideas on what will happen if Natal doesn't pan out for them?

Edit below: A bit off topic, but yeah, Sony also invested heavily in both the PS2 and now the PS3. The games division had returned to profitability back in 2008, but then the recession hit and the US and Euro fell some 25% against the yen and has yet to fully recover. All Japanese electronics makers who sell to the west were taking a beating on the foreign exchange. It's hard to tell when the PS2 started making money because the games division wasn't separate until about 1995. By that time they were flush with cash.

CoffeewithChess3055d ago (Edited 3055d ago )

Hasn't Sony's gaming division also had continuous losses though?

I don't know at what point Sony's has seen a profit, was it with the PS2 later in its life-cycle?

*Edit: Can the two "disagrees" please provide links? I've just heard so many times, that because Sony sold the PS2 and now the PS3 at losses in the beginning, and the hardware problems with the PS2 initially, that they have always run a loss in their gaming division.

Anon19743055d ago (Edited 3055d ago )

I wasn't one of the disagrees, but here you go.

http://www.sony.net/SonyInf...

Sony's financial data. Looks like Sony's game division took a loss the first year the PS2 was released, then didn't see a loss until they started investing in the PS3's development. Since the PS3 has been released the games division has seen 5 profitable quarters (about a third of the time it's been out), but like I mentioned above both Sony and analysts alike have attributed that to the appreciation of the yen versus the US$ and Euro. Not much you can do about that. And last August, Ken confirmed that the PS3 had been profitable as a platform for sometime.

madpuppy3055d ago (Edited 3055d ago )

Is that the Playstation brand actually does more for the company than the obvious sales of playstation hardware and games. It is also an avenue to push other technologies/products that Sony sells. The PS2 was not also a pretty good gaming machine but it pushed the dvd format and sales. The PS3 was used as the hammer that smashed HD-DVD leaving Blu-ray the only disc based high-def format. and until just recently was considered the best blu-ray player on the market, now superseded by the latest OPPO model.

Microsoft doesn't really have that strong a strategy concerning the Xbox brand. they are pushing Digital downloads of games and movies, not something that will directly effect their other divisions. The 360 doesn't help push Office or sales of Win7. I heard they were going to use XBL to sell music for the zune brand but, it looks like that never happened.

There is just more value in the PS brand for Sony then there is with the Xbox brand for MS.

If you really want to disagree, by all means do so. but, at least man up and reply to why you disagree with me.

Neonvapor3055d ago

That darkride is a good question. Would they try to have a successor to Natal on the next X-Box? Would they follow suit with a tangible motion controller similar to the Wii and Move? Or is this it for X-Box? What other options are there that would be realistic? Just being the one console that only has a controller and no motion controller?
Video games are always moving forward and evolving. The big three all brought and are continuing to bring something to the table that will forever change and push gaming forward. To keep it simple Wii-motion control and making the industry bigger through appealing to casuals. X-Box-Online and making gaming more social. PS3-Hardware (blu-ray and standard hard drive) and firmware updates, seeing where PS3 is going, it will not be the same PS3 at the end of it's life as it was when it first started. These things are going to have to be standard next gen for a console to really succeed, at least in my eyes.
I guess what I am getting at is Natal is a big gamble. They are trying to be different like the Wii was and make lightning strike twice in the same generation. If it pays off, great gaming moves forward. If it doesn't, maybe it is time for Microsoft to see that they left their foot print on the industry but count their loses and bow out. Or do they launch the next X-Box? But launching the X-Box brings me back to my initial questions. P.S. darkride bubbles.

zaphod7773055d ago

And also for Sony the PS3 helped win the Blueray HD DVD war so it was well worth it for them. Plus they have a 10 year life cycle for the PS3 so it still has plenty of time to turn a profit.

+ Show (2) more repliesLast reply 3055d ago
beardpapa3055d ago

how should MS stay afloat?

Give people a reason the 360 isn't just a multiplatform wannabe console.

I purchased an Xbox for its games. Great games. Games that defined the Xbox. These were Kotor, Halo, MechAssault, Midtown Madness (hell it was fun imo =P), fable, jade empire, pgr, phantom dust, etc.

The xbox had a mix of multiplat games too but there were exclusive games on the system that defined the console. They were different. They felt PC yet with a console touch. Pure action. Pure fun.

THe PS2 during the xbox generation? Back in that hayday, when I thought of PS2 I thought of RPGs, Metal Gear, and GT.

Now this generation is really out of the norm. Nintendo is doing great. They're sticking to their formula. But MS and Sony? Not so much. This generation is the generation of multiplatforms and what MS did in the beginning is biting themselves in the end.

Both MS and Sony have imo, forgotten what their console is all about and what their target demographic prefers. Instead of following the roots of the Xbox, the 360 is trying to take the demographic of the PS2 generation. Do what the PS2 did. In doing so created this massive pool of multiplat developers and the 360 is left without any 'real' exclusives.

The PS3 on the other hand is trying to get the action / shooter demographic that made the Xbox unique. Suddenly shooting games define the PS3 over rpgs, causing a confusion [I suppose] to loyal playstation followers and japanese developers. Granted, it's nice giving some variety to PS3 owners, but can you really tell me what genre defines the PS3? Fortunately for Sony, the playstation brand is strong.

So yes. How should MS stay float? I think both Sony and MS should think about what their console means to them and their followers instead of trying to copy each other, and now blindly going into a direction that makes Nintendo what Nintendo is to the masses.

RememberThe3573055d ago (Edited 3055d ago )

The fact is that profit margins are not going to be anywhere what they are with Windows. Microsoft is not at a tipping point and it does not NEED to leave the consumer electronics market. But if your investors are used to seeing a 70% profit margin and you give them a 10% profit margin they are not going to be happy.

Again this is bigger then the games. Shares of Microsoft have dropped 50% since 2000 and many of the people running MS have their fortunes in that company. They are not only feeling pressure from investors to get the stock price back up but they are also feeling it from themselves.

It seems to me that Microsoft needs to focus itself on what it wants to do. They need to find a solid foundation in the gaming industry then focus on the mobile phone market. Integrate everything and you have a strong network of products all making themselves money. But not everything at once. They are too spread out and it has coast them.

At the moment that is what Sony is trying to do. They are integrating the PS3 with Bravia TVs and they are soon to integrate their phone with the PlayStation Network. Sony is going to build all of their hardware to distribute all their software over the PSN. That has been the goal for many years now, and it is exactly the same thing MS needs to be doing with the Xbox.
http://techon.nikkeibp.co.j...

madpuppy3055d ago (Edited 3055d ago )

But, I disagree about confusing Japanese developers. A developer can make any game they want for the PS3 or any gaming hardware that is out there. after all, the PS3 is just an engine for a game to run on. If Japanese Developers are confused, then it is because they are second guessing themselves and their business strategy. I remember reading somewhere that Japanese developers are trying to break free from the mold of JRPG's and RTS games and focus on more western style games. Look at Quantum Theory for an example of the change in focus. it is, apparently a difficult road for them, trying to appeal to people with a different culture and mentality than their own.

The focus on "shooters" may have increased from the PS2 to the PS3 but, I attribute it to an industry shift in focus across the board, And not necessarily a "goal" that Sony and the Playstation Division have implemented directly.

scofios3054d ago (Edited 3054d ago )

@beardpapa
That's what i said on a similar news article to .
Xbox needs to have its own identity not trying to be a playstation , it need games to define the xbox brand , gears , halo , fable , alan wake , are a good start but they need more ip's , and not just go to third party's to get some dlc or paying a lot of cash to have an old ip that was relevant last gen on the ps2 .

LordMarius3055d ago (Edited 3055d ago )

kill the zune atleast, because we all know it's never going to gain ground, as for the 360, lets see how this rebranding goes first.

@below.
you mean the Zune marketplace?

Godmars2903055d ago

Thought they were merging it with XBL. Turning it into a cell phone service.

Omega43055d ago

The 360 makes large profits for MS so it isn't going anywhere.

If anything they should just dump the Zune cause they're not gonna beat Apple ever, same goes with the Windows phone, cause im sure the only thing keeping that division afloat is the 360. They should just use all that money from dropping those products to invest more in games.

Consoldtobots3055d ago

then again not even baby jesus coming down from heaven himself would convince you that the 360 has not been profitable for MS.

MASSIVE FACEPALM

Anon19743054d ago

I sure haven't seen anything to indicate these "large" profits. It's not in Micrsoft's financial releases, and to my knowledge Microsoft has never claimed the 360 was a huge profit maker.

Do you have a link to a breakdown of the Entertainment and Devices division that shows how much the 360 is making? I've looked for that data before but have never come across it, and the entire EDD section of Microsoft isn't profitable. As the article pointed out they've racked up $8.6 billion in losses in the last 10 years. In fact, the last two quarters of fiscal 2009 showed the Entertainment and Devices division had returned to losses. If the 360 was making large profits, why is the EDD still struggling to keep itself in the black?

Anyway, you can post the link to the EDD breakdown here or send me a message. Either way, I'd love to see where you're getting your info from.

xaviertooth3055d ago

any moment now, the 360 rabid fanatics will call BusinessWeek a trash and not credible site. any moment now.

DuneBuggy3055d ago

Since its credible,does that mean that the estimated Natal price of $100 Bizweek stated will be used by MS haters instead of $150?

HopSkotch3055d ago

Microsoft has plenty of money to make bad business decision. They'll make up for their loss somewhere else

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