MS Preps for "Tough Times" in 2009

[Dodece]

Microsoft is apparently preparing itself for a lean year in gaming. Not just a lean year for them, but a lean year for everybody. There is no harm in being prepared to take measures in regards to being more cost effective. Fortunately for Microsoft at this point in time they are probably one of the leanest manufacturers. They do not have a massive stable of development studios to feed, and given their current market position they can probably pass on buying a few exclusives. I am not terribly worried for them.

Nintendo will probably enjoy diminished sales, but whereas Microsoft is lean. Nintendo enjoys the advantage of always being profitable. So while their console and hand held gaming machines may see diminished sales. I only say this, because they are always through the roof. Which means to me some mildly interested parties which may tighten their purse strings. They will still make a profit without changing anything. They will just make less profit. Even if it gets bad for them they still have a treasury like Microsoft.

Sony is the one I am concerned about, or at least massively aware of. Frankly so should everyone else. Their strategy requires a sustainable momentum to function properly. Were we to see a 20% drop off across the board year over year. Sony would suffer badly even if the margins compared to other manufacturers were the same as early last year. Not only would their hardware be in serious jeopardy, but so to would be their software business. A 20% drop off would mean more then half of their developers would be unprofitable. Something the profitable ones could not counteract.

Sony uses a heavy loss leading model, and according to the rumors they are not going to abandon this model. They are not going to reduce production. So the net result is the same result we had a year and a half ago. Where Sony was churning out machines at an ever increasing rate, but they were going unsold. So Sony had to slash prices until they liquidated the surplus. Sony cannot afford these losses so the end result is that Sony may have to halt production, and that basically means the end of the console. Even if the supply would last for more then a year.