OMG, an analyst says something true!

Its something totally obvious, but its still not a bunch of nonsense! Good job!

looks like the era of "loss leading" strategy for console making is about to come to an end.  sony pulled it off because, as it turns out, not so much because of the strategy, but blunders on competitors' part.

xbox couldn't pull it off, which wasn't much of a surprise, and now even with the playstation brand, which turned out not to be big a deal as most thought, ps3 couldn't pull it off.

thank god innovation and ingenuity is back in this business.  should have been the case every generation. 

im pretty sure that most of that red has to come from the original xbox.. i mean it has to right??  

he was right about japan though the wii is outselling the ps3 3 to 1 but the ps3 is also outselling the 360 3 to 1.. japan is usually an indicator but this generation might be different?

Microsoft just has not been aggressive enough, but they have built a solid foundation that should serve them well at some point. I disagree Microsoft absolutely needs Japan, even if they could certainly use it. I also disagree they should just make toys.

Selling hardware at a loss has worked just fine for previous console losers, and with big enough penetration, it will continue to do so. The only companies it hasn't worked out for are those who moved less than 10 million units. The number's higher now, but none of the three should have a problem achieving profitability.

The XBox lost $4 Billion after selling 25 Million systems so I would say that worked out pretty awful for them ...

The fact is that the loss leader strategy has never been pushed to the level that Microsoft and Sony have. In most cases it has been assumed that the console lost very little on actual manufacturing costs and most of the up-front losses were associated to research and development costs. It was rumored that the PS2 was taking a record loss of $75 to $100 per system and then the XBox was rumored to lose $150 at launch; these numbers were assumed to have similar accuracy to the $300+ losses that are rumored for the PS3.

selling consoles at a loss works well for the console that wins, other than that it hasn't been good at all.  Even if 360 were to win, its lack of sales in Japan will keep it from reaching high figures like PS1 or PS2 even if Microsoft could reach the casual market in america.  Microsoft better have a very long term plan here because they aren't gonna be profitable (over a generation) for quite a while.

The lost-leader strategy can still work as long as the systems are on the market longer than before, which is what Sony and Microsoft are shooting for. I've said it a number of times, the 360 and PS3 are gonna be around for another 7-10 years. Sony has pretty much confirmed this all those times they've been claiming the PS3 is "futureproof." So if the 360 is around for a total of 8 years, and is selling at the same rate as the XBOX1, the 360 would sell 50 million units. Along with Live and all the other fees, microtransactions, and overpriced accessories, MS could conceivably make a profit this time around by the end of the 360's life.

But how often has a trailing console been able to survive 7 to 10 years?

Just because a company says that they see a long life in a console doesn't mean it will have a long life (Nintendo said they thought the Gamecube was going to be a good system for 8 years). There is a reason why consoles are a cyclic/generational market; after 5 or 6 years you can produce a system for $200 which is 10 times as powerful as a system which was $2000, consumers begin looking for new games (and new types of games), and interest in the market as a whole begins to decline. Part of the drive in the market is that there is always something new, if you're unwilling to produce the new product someone else will and they will become the dominant player.

In general you are right, the longer life (which dominant consoles get) is one of the ways to recover from the loss leader strategy; but this goes back to the only way the strategy works is if you're the dominant console.

This is pretty much one of the stupidest articles ever.

360's main competition is the PS3. Which of course, the article conveiniently ignores. Of course, 360 is more or less destroying the PS3. USA sales to date are 5.3m 360, 1.2m PS3, and 360 has outsold PS3 every month both have been out, where Xbox rarely outsold it's competitor PS2.

5.4 billion losses..who cares? Microsoft has 30 billion in the bank it's shareholders are begging it to spend. 5.4b over six years now, is less than 1B a year, a paltry figure to MS. All that to establish a very powerful Xbox brand in that time, was worth it. 

MS is poised to defeat Sony for the high end of the market within two generations, nuff said.

Also Japan is important, but the USA is far MORE important. MS cant do well in Japan because Japanese are extremely nationalistic and for the most part wont buy American industry products. Blaming MS for that is just stupid. 

Nintendo can do all it wants with the Wii, the problem is the Wii is not a trojan set top box. That is what MS and Sony are worried about. MS needs to worry about Sony, and they're killing Sony. MS wants to be set up where you get IPTV on your Xbox, you stream PC media on your Xbox, you download movies and TV on your Xbox.  So far, it's working out great.

And losses are part of the (non-Nintendo)  model, as this maroon might need to learn. How much has Sony lost on PS3 so far? The idea is to win it back over the second half of the life cycle, which it's looking good for 360 to do that for sure.

Japan will buy American products.  This has been brought up before - look at the ipods in Japan - huge.  Microsoft still needs better content for Japan, and to some extent, for Europe.