MSFT is going to throw many, many billions of dollars at this project. the console, retailing for $300, will be a $100 loss per unit. with plans to sell 1 to 1.5 million units over the holiday season, plus a $500 million marketing budget, there's $650 million to get things going. not to mention all the development costs up to now.
I doubt Sony has the money Microsoft has, but both companies got the resources to fight a battle like this. Obviously, Microsoft could win if they really wanted to by giving consoles away. Sony couldn't compete, but that would kill Microsoft's stock, so I don't think MSFT will go to the extreme limits to beat Sony. Although, there has been talk about how consoles are the future, ect..
So maybe MSFT sees this as critial.
just as important--the PS2 already has 20 million owners (including me). they are going to clean up this holiday season with some stunning releases--the biggy is Metal Gear Solid 2. the anticipation for this game is probably bigger than the Harry Potter flick--at least among male adolescents under 45.
In this industry the technology doesn't really matter. The games are what matter and Sony has lots of them.
when i first heard about the Xbox, i thought it was a silly idea. after all, these consoles, unlike earlier generations, are really expensive and the games cost a lot to produce and buy. the economics are different from the PS1 era, when you could buy games for 20 or 30 bucks. now it's more like 50, plus the console costs twice as much. that extra several hundred dollars puts a serious dent in the budget of your average 11-year-old. i didn't see how this model would be profitable, since all the money is made on the software (thus fewer titles sold means less profit).
well, not exactly. Correct me if i'm wrong, but PS1 games at first were more than 20 or 30 bucks. At least at BestBuy. It was when the PS1 went up against the N64 that Sony realized that if they could get games for their console at around 20 or 30 bucks, that they'll continue to sell more units and keep the game developers in their corner. I think Nintendo, by the way, made 5 dollars on every N64 game sold. Doesn't matter if the game was developed by Nintendo or not. Could have been more. Plus, since Nintendo cartages are expensive, Nintendo could never really get games as cheap as PS1 games (may be wrong on that, but generally it wasn't that profitable to sell N64 games at 20 or 30 dollars a pop). Some of this may be a bit off, since I haven't shopped for consoles in a long time.
Developing a game for the PS2 isn't cheap. I think it was in the area of 2 or 3 million, although it costs about 2 million or so to develop a action shoot'em up game for the PC.
then again, maybe it's just corporate hubris. it's a huge undertaking, and this will be a battle worth paying attention to. if MSFT can pull this off and crush Sony while marginalizing Nintendo, maybe they will be the greatest and most profitable corporation of all time.
if it fails, they will lose a ton of money and it will be an excuse for value mavens like Mucho Maas' evil twin to say they shoulda been paying dividends.
it'll be interesting. if they win, it could provide a lot of profits to an already huge company.
So let's ask the serious question. Is the gaming market worth the risk to MSFT? Seems like the answer is yes, considering their present committment. So, if I'm right (that Softie will make game intro inroads), which of the two has the financial staying power to climb to the top of the heap from that point?
the console industry is very interesting. Just in the dynamics of it all. Very expensive business to get into and much harder to get the support. Once you've gotten support, a network effect builds around the platform. One problem Buffett would have is that every 3 or 4 years a new generation of platforms become available. Now that Sony dominates this industry, I doubt we'll ever see a small company challenge them. It's ganna have to take a company with huge resources. I wonder what Nintendo is going to do if the Gamecube only gets say 15% share. Nintendo has lots of cash, very popular in Japan (the japanese love Nintendo and was rated the #1 most wanted company to work for) but I don't see why Nintendo will risk it's huge cash to try and win a war they could very possibly lose. Not a very good use of capital. Then again, if Gamecube proves successful and gets 30, 35, or 45% share...then Nintendo will stay in the console industry. I would think at least...
If anything, Sony should be a close partner. I understand that Sony used to make a lot of noise about taking MSFT on, but they seem to have backed down from that.
it is possible that Sony realized that you don't want to piss MSFT off and become enemy #1? Instead they will silently use the PS2 and PS3 to become the leader in home entertainment and the internet. Not sure how Sony is going to do that..
what if MSFT took Sony's Windows license away? That'd be interesting..
given the costs, i think it better be a helluva victory for them. who ever heard of a HALF-BILLION-DOLLAR marketing campaign???
true..mayber MSFT is just tring to spread some FUD and hopefuly make it sound like they are putting every single muscle behind the xbox. If I was a game developer, this is exactly what I would want to hear.
Here's the more interesting part. Every single xbox includes a Intel processor. Unlike Microsoft who is taking on all the risk, Intel doesn't do a thing. If the xbox sells 50 million units, then Intel should benefit. Hmmm...Think what that would do for Nvidia (however that's spelled?) I doubt Nvidia has ever sold 50 million units of anything?? If the xbox isn't successful...well, Nvidia still has a profitable business. |
