Xbox/UltimateTV Hybrid Microsoft's Xbox losses, and more

Discussion in 'Archived Threads 2001-2004' started by John Kilroy, Jun 25, 2002.

  1. John Kilroy

    John Kilroy Stunt Coordinator

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    "Microsoft takes heavy losses on the Xbox
    Beating Sony and Nintendo in the gaming console market is apparently worth billions to the software giant.
    By Dean Takahashi
    June 24, 2002
    Microsoft executives are predicting heavy losses related to the Xbox video game console, but the company is prepared to keep supporting its central offensive against Sony and Nintendo by launching a version with new features next year.
    Microsoft expects to lose $750 million in the current fiscal year ending June 30 and another $1.1 billion in the next fiscal year, according to a source familiar with the matter. David Hufford, a Microsoft spokesman, declined comment on the financials.
    Meanwhile, the Xbox team has been working for about nine months on a machine that combines the features of the Xbox with UltimateTV, a set-top box that features digital video recording. Mr. Hufford said, "Regarding a hybrid box, we are moving full steam ahead with Xbox in its current state while staying deadly focused on games. Of course we have engineers looking at dozens of possibilities for the future of the console."
    While Microsoft does not break out the loss figures for the Xbox from the rest of its operating results, it has said it expects to sell 3.5 million to 4 million units by June 30, and 9 million to 11 million by June 30, 2003. It has also said about three games are selling for every box sold.
    The losses suggest that it will be difficult for Microsoft to make a profit on the division for some time unless it starts selling a much larger number of games and begins reaping profits from the upcoming launch of Xbox Live, its online gaming service.
    The losses aren't unexpected, but they do show that Microsoft expects to lose more money the more machines it sells. When Bill Gates approved the Xbox in the fall of 1999, he was told that the console could lose $900 million over eight years and that if Sony cut its prices aggressively, then Microsoft could lose $3.3 billion. After much hand-wringing, Mr. Gates approved the box because he felt Microsoft needed to face the threat of the PlayStation 2 and hook gamers on Microsoft products.
    "There is a debate going on if it is better for Microsoft to lose more money and get an installed base, or underperform in unit sales and lose less money," said John Taylor, an analyst at Arcadia Investment in Portland, Oregon. "My sense in strategic sales is it is more important to get an installed base."
    Microsoft can absorb the Xbox losses. The company has an estimated $42 billion in cash reserves and, for the year ending June 30, it is expected to report a net profit of about $10 billion and revenues of $28.25 billion.
    Full Article here
     
  2. John Kilroy

    John Kilroy Stunt Coordinator

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    I'm an Xbox owner and supporter, but a second version of the console does not sound like a winning strategy to me.
     
  3. Brian E

    Brian E Screenwriter

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    I don't know. If they were to sell both the XBOX and an XBOX Deluxe it might be ok. Many early adopter types might go for a deluxe box. It sounds interesting if they can get it all worked out.

    What is really needed is a larger software selection with a better multi tiered software price structure. There needs to be more games at $30 & $40. There just needs to be more software period. Hopefully after all the expected titles hit later this year it will help.
     
  4. Dave Bennett

    Dave Bennett Screenwriter

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    I think what Microsoft needs to realize is that it's killer software sells consoles not superior technology. I'm thinking this is a bad move and will sell pretty poorly.
     
  5. LowellG

    LowellG Stunt Coordinator

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    There is a good rebuttal on this article at the Beyond 3D Console forums. It makes this article look poorly written and researched.
     
  6. Jeff Kleist

    Jeff Kleist Executive Producer

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    URL for that article?

    Agreed that MS needs to learn that killer software sells consoles. Sega cannot continue to save their ass
     
  7. Adam Tyner

    Adam Tyner Screenwriter

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  8. Chris Beveridge

    Chris Beveridge Second Unit

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    Course, you heard only "woo hoo" comments when Nintendo and Panasonic teamed up to make a hybrid Gamecube/DVD player. But since that's only in Japan, and done by Japanese, it won't get as much flak as something like this.
     
  9. Jeff Kleist

    Jeff Kleist Executive Producer

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    Nintendoites tend to be blindly loyal, of course they're woo-hooing
     
  10. Dave Bennett

    Dave Bennett Screenwriter

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    The other thing about the Nintendo/Panasonic thing, is that it was only allowing the Cube to do what the PS2 and XBox could in terms of DVD playback. Many see the cubes lack of DVD video playback as a problem(I'm of mixed mind on it). However, this is clearly trying to do something that a console has never really done. Combining an XBox with an PVR device could be an interesting way to help PVR's grow, but they are currentlly a struggling market, as is the XBox. In my mind, combining two poorly selling product just creates one horribly selling product. I know this isn't a great example but think about it this way. If Sega has combined the 32X and the Sega CD into one unit somehow, would it have sold any better? My guess is that it would have sold worse. However, I'm interested in this and I'm curious to see where Microsoft is heading. Now they'll be telling us what TV shows to watch as well as what software to use [​IMG]
     
  11. Dave F

    Dave F Cinematographer

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    Interesting how Red Herring turns a supposition into a confirmation. Got 'em a lot of press though. Note how they mention the addition of new features and hardware in the same breath as a Robbie Bach comment in order to try give the impression that the info comes from him.

    -Dave
     
  12. Morgan Jolley

    Morgan Jolley Lead Actor

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    Why doesn't MS just make the X-Box 2 what the hybrid is going to be? This would save them some development costs, and people aren't going to buy two of the same thing (even if its not the same, people will see it like that).

    Either way, huge losses and developing games for a competitor's console sounds awfully familiar *cough* Sega *cough*
     
  13. Andre F

    Andre F Screenwriter

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  14. Camp

    Camp Cinematographer

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    Microsoft should strongly study Sega's history before attempting Xbox Deluxe. Clearly they are foreigners to this business. They should just buy Nintendo and end their worries. [​IMG]
     
  15. Dave F

    Dave F Cinematographer

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  16. Jeff Kleist

    Jeff Kleist Executive Producer

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  17. Jean-Michel

    Jean-Michel Supporting Actor

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  18. Morgan Jolley

    Morgan Jolley Lead Actor

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    MS doesn't have interest in the handheld market, but if someone buys a GBA game, that money could have been a good part of an X-Box game.

    GBA is owned by Nintendo, and Nintendo makes the GameCube. Nintendo is making ways for the GBA and GameCube to connect. So when games for the GBA and GCN are being made to enhance eachother, those GBA sales will start to add up and help the GCN. Plus, all GBA sales benefit MS's competitor.
     
  19. Andy Sheets

    Andy Sheets Cinematographer

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  20. Jason Seaver

    Jason Seaver Lead Actor

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    Morgan, you do realize that Mircosoft makes products for the Mac, right? They just go where the market is.

    Besides, it's good long-term planning. It gets their product visible to people who, right now, wouldn't think of buying an Xbox.
     

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