DonFerrari said:
MS started head to head with Sony this gen and have tons more money than bankrupt Sony yet can only sale 1/2 of the competitor... no company throws money around for the sake of it.
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That's exactly the point. Microsoft is not a hardware manufcaturer at heart, they are a software company. They bought their way into the market by losing up to $1bn a year for more than half a decade with their Xbox business. If anything this proves my point: Even a software company can get into the hardware business by pumping lots of money into it. That's exactly what Microsoft did with the original Xbox and Xbox360. But with their current Management they are now forced to turn a profit. (I was wrong saying Microsoft was willing to put more money into it, though. You are absolutely right: Sony would take more of a financial hit).
My point is: Sony and Microsoft are bigger companies with bigger cash reserves, way higher yearly revenues and a bigger workforce than Nintendo. Whenever Nintendo releases a sustaining innovation (i.e. a faster console, a more hardcore controller, etc.) Sony and Microsoft can outcompete them and make something even faster, more connected, more hardcore. That's why Nintendo modeled the Wii as a disruptive innovation instead of a sustaining innovation: Disruptive innovations make it very hard for established companies to react to them (in the case of the Wii the backlash from the hardcore gamers was so strong Sony and Microsoft didn't dare releasing their own motion controller for years, and even then made them an accessory. Also, Microsoft failed at making Kinect a central part of Xbox despite trying to position it as a hardcore gamer device.)