DMeisterJ said:
Squilliam said:
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DMeisterJ said:
MS has gone backwards on their second console.
The exclusion of a Hard Drive, and a high failure rate is taking two steps back no matter how you cut it.
The exclusion of the HDD was because the cost of HDDs doesn't scale well with the other cost reductions. They tend to be a fixed cost. By not having the HDD Microsoft is able to scale the price of the Xbox 360 down to the PS2s level and lower with time.
Obviously, MS will stay in the game, but they have to be profitable. I don't think that even with all the money MS has, that they can afford to have another console be in the red. MS is down, what, 6 billion or so since the original XBOX came out? No matter how much you have in the bank, if they don't ever see profitability, it won't keep on coming, and the hardware directly ties into that. Spending 1 billion on repairs isn't chump change, and that can never happen again.
Theres no reason to assume at this point that the Xbox 360 won't make a profit. Between Live/Game royalties and the profit of their private game studios they would be raking in over 1.5 billion dollars per year in revenue. (Assuming 80 million games sold per year)
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So you admit that the RRoD was a step back! AHA!
OT:
I'm not saying that 360 won't make a profit, but the fact that it's so much in the red means that it'll take forever to make that back, no matter how much revenue you rake in. And that MS can't afford to have bad quarters or years, as the division is largely doing sub-par.
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Ok lets say that the opportunity cost of the Xbox 360 business was $8.45 billion in the bank - Assuming interest with time etc. A return on investment of 7% would be fair given todays economic climate. So they would need to profit 600 million per year or 150 million per quarter to make that invesment worthwhile from a profit perspective.
So the real question is whether Microsoft can make 600 million a year in profit from this moment out to justify the expense of getting into the home console market.
Between a few hundred million dollars in revenue from Xbox Live per quarter and an average royalty of about $10 per third party game theres a decent chance they will make a profit to justify the investment.
