What was Microsoft thinking when it got into videogames?

[Slimebeast]

It's always easy to be wise in hindsight. But even if it wasn't a good decision to get into the console business then for MS, that doesn't correlate to the sitation they are in today in terms of selling it off and get rid of it. That's what you have to understand with business. CEOs and accountants at corporations don't stare themselves blind on past losses. The important factor is the future, and the question "will we be profitable from here on?".

And apparently MS believes they will profit in the future and that staying in the console industry is a good thing (theoretically even with an Entertainment division in the reds, if the plan is still to disrupt Sony in the future).

So what we can discuss is the past. Personally I'm sure that MS believed the original Xbox would be a lot more profitable, maybe not as a whole, but I'm sure they counted with less than the total $5 billion loss for Xbox (+ roughly $2 billion in the next-gen investment, aka X360).

If the X360 draws in let's say $2 billion in profit until the next Xbox is launched, we're down at 5$ billion total loss.

Now what we don't know is how things would have been with Sony and the PS3 if MS never had entered the market. Would the PS3 be a lot cheaper, attracting +100 million people to a machine that would function as your media hub? And that would be the basis for "conquering the livingroom" and X amount of $$$ in the future, and perhaps even could mean some lost sales of Windows OS for MS.

We also don't know much trying to judge the present situation, where MS is among the players who battle for the future living room. But if the "living room media center"-scenario takes off in a few years, and download services and whatnot generate net incomes in the billions, that $5 billion initial loss might have been worth it for MS.