HappySqurriel on 30 March 2008
| starcraft said: I'm going to give a quick lesson in economics to MikeB, Captainpreferences and nine0nine. Sunk Costs: Sunk costs are irretrievable losses (investments) made at the beginning of an expansive venture (in this case, Microsoft's investment in consoles). Economics dictates that a Chief Financial Officer should NOT take sunk costs into account when deciding the future direction of a company's venture. The reason for this is simple. The money has already been spent, no action can retrieve it. The best possible course of action a company can take is to examine the current cash flow situation, current deployable assets and finally future growth and profit opportunities. There is no conceivable reason why a competent economist would instruct Microsoft to leave a growing industry in which they are currently profitable and have large amounts of available assets (physical in terms of manufacturing facilities, but also in terms of developer and publisher relationships). If there ever was a reason, it would NEVER be that they have already accumulated too many sunk costs. Furthermore, anyone that thinks Sony will launch the PS4 more than a year after the Xbox 3 is a fool. The Xbox launched a year after the PS2 and look what happened. The PS3 launched a year after the Xbox 360 and resulted in the likely permanent crippling of Sony's gaming dominance. The only exception is the Wii which adopted a disruptive strategy, the kind that only pays off occasionally. |
Just to add further support to your argument ...
When Microsof began the XBox project they added several of their emerging product divisions into the Entertainment & Devices division. It is likely that the reason these divisions were added was to leverage the XBox in order to create profitable products; an example of this would be the video downloads available through XBox Live. The XBox 360's userbase is large enough to support many of these side projects, and these side projects are one of the key long term objectives of the entertainment & devices division. Canceling the XBox line at this oint in time would be throwing the baby out with the bathwater.
