current videogame sales= Capitalism at its best, random thoughts (1 Viewer)

[Mark Evans]

I hope all 3 survive, but right now, I think the XBox is doomed.

I don't think that's the case at all. I'm not an X-Box fan by any stretch, though I would like to have one in my collection. That being said, even I can see a number of good points to why people would want one, Live being a prime example.

Microsoft is big enough to throw money at this for literal years, even if it turns into the Linux of the console world. That's just the way they do things. Maybe in the long run it'll pan out, maybe it won't. But I think predicting the demise of the Box based on its first-gen performance is slightly premature.

 

[Brandon_H]

I'm not saying Microsoft will abandon Xbox, but I do think Rob has a point.

Microsoft today is not the Microsoft of even two years ago. Yes, it still has its substantial cash horde. But it also is under increasing pressure to pay attention to the whims of its shareholders, which is something it's been able to dodge in the past. Witness its recent announcement of a dividend. Okay, it's a tiny dividend, but it's still a dividend, and once you start paying those, you just don't stop -- nor do they ever get smaller, unless you want to risk the wrath of hordes of little old ladies from Iowa swarming the mikes at your annual meeting (or worse, incur the wrath of institutional investors or analysts.)

Having negative income on a project is one thing. But losing 40-plus percent on the top line, well, that's unacceptable to anybody -- especially little old ladies from Iowa. They don't care how much cash Microsoft has stashed away. All they care about is that Microsoft COULD have had even MORE if it weren't for that damn video-game doohickey, with its violent games that corrupt those kids today . . .

I'm sure that Microsoft has valued the Xbox project using a option-valuation technique. It surely expects to lose money on Xbox1, but for the entire Xbox project to have positive cash flow over the long run. But there IS a break point. If current losses rise above a certain level, and Microsoft deems it unlikely that sales of future incarnations will give the project a positive lifetime cash flow, it will pull the plug.

That hurdle might be so high that it never gets crossed. But it didn't take long for Microsoft to punt on UltimateTV. I don't see too many of their goofy computer-based telephones around anymore. And many of the Xbox's pioneers (Seamus, anyone?) have beaten a path out (or maybe been beaten out of) the big M's door.

Everybody says that Nintendo will fold first. But they forget something. Video games are Nintendo's core business. No videogames, no big N. Thus, Nintendo will fight until the bitter end. Witness its efforts to bring EA Sports back on board, its recent turnaround on LAN support for GCN (and one can probably assume that Internet play is next,) etc. It's not throwing in the towel.

On the other hand, well, video games aren't part of Microsoft's core business. Killing Xbox won't kill the company. It would even help the bottom line. And all that hype about convergence, well, there's no guarantee that a video-game console is the living room 'Trojan Horse' anyway. It could just as easily be a PVR, or a cable box. Microsoft's future isn't staked on this console.

Don't get me wrong, I don't want Xbox to fail. Hell, I own one and just bought three games for it this week. But I don't think that Microsoft executives' assurances that they are committed to the project, or the company's cash pile, are guarantees that the console's future incarnations are certain.

As long as the games keep coming, though, I'll keep playing. (My Dreamcast isn't gathering any dust, and the games stopped coming for it a while ago.)

 

[Adam Nixon]

The market is definitely large enough now to support 3 consoles (which means Nintendo won't be going away -- sorry Jeff )these days, but each one of the non-Sony machines MUST have original content to distinguish itself.

The PS2 debuted at an extraordinarily lucky time -- DVD was just beginning to pick up steam, Sony was coming off of PS1 success, and the competition was over one year away. It will be interesting to see how this plays out over the next few years.

 

[BrianB]

But I still think there are too many small companies.

I think you underestimate the number of games you like (or at least, respect) that are made by "small companies", I think you underestimate the impact on the industry that "small companies" have had over the years.

Without independent developers, we would not have had Populous, GTA, Lemmings, System Shock, Thief, Command & Conquer, Doom & Tomb Raider (for example).

Yes, some of those games were developed in conjunction with larger publishers. Yes, some of those companies have grown into big companies or been bought out. That's part of the reason why they're needed - they're a catalyst, they're a growth mechanism for the industry.

 

[Morgan Jolley]

Yes, some of those games were developed in conjunction with larger publishers. Yes, some of those companies have grown into big companies or been bought out. That's part of the reason why they're needed - they're a catalyst, they're a growth mechanism for the industry

I understand and wholeheartedly agree. But I still think there are too many small companies than are good for the market. If each company merged with another smaller company, they'd have a moderately sized company with double the assets, double the man power, and a potential for a better output.

While most of what is running through my mind is idealistic and will probably never happen, it's still what I think would be good for the market. Overall, I'd prefer less choices of higher quality.

 

[Dave F]

And many of the small companies aren't necessarily "seen" by the consumer. Their work is generally listed under the name of a larger developer that has contracted them, the publisher's name is the one getting the press, etc...

Lessening the number of small developers would have a chilling effect upon the industry.

The Xbox situtation has a strong similarity to the PocketPC situation. It took a loooong time for PocketPC to make any headway, or gain the respect of the PDA world. It was the laughing stock of the industry. Eventually, Palm crawled up inside it's own butt and died, and now PocketPC reigns (and I say that as someone who loved the PalmOS). The Xbox has been facing a similar situation, and has been succeeding faster. The Xbox may go away, but it will most likely be to make way for the Xbox 2.

I'm reminded of a conference call where one of the VP's was asked about MS's "exit strategy" in case the Xbox failed. His reply? To double the amount they are currently spending and make it a success.

-Dave

 

[Brandon_H]

No executive for any company will ever admit to contemplating failure, or even publicly admit a project is failing, until the plug is pulled.

I'm not saying Microsoft isn't committed. But public pronouncements don't mean much to me. And throwing good money after bad doesn't sit too well with stockholders -- and aside from designing the world's best hardware platform, I'd argue that Microsoft hasn't spent too wisely on Xbox so far.

 

[Rob_Pierce]

Microsoft is big enough to throw money at this for literal years, even if it turns into the Linux of the console world. That's just the way they do things.

That's a common misconception. In the past, they took gambles, but MS's success is based on very profitable, high-margin segments, not throwing darts at a board. Hence my feelings.

Great discussion guys, too bad Billy-boy won't ask us how to run things; I'm sure there'd be an XBox in every home if he did.

 

[Morgan Jolley]

The N64 had no competition for the first 2 years and let up, Sony took over

Though, technically, the PS2 came out a year or so before the N64.

 

[Jeff Kleist]

Great discussion guys, too bad Billy-boy won't ask us how to run things; I'm sure there'd be an XBox in every home if he did.

Yeah, and it wouldn't have bombed in Japan if he'd listened to me a year before he launched the thing