Million said: People have the belief that the 360 is profiting and recouping the billion of losses that MS made on R&D , Hardware Isssues , Advertising/Promotion , Price Cuts , Games exclusivivity etc. MS to date have never made a penny from their games division , their losses currently are around 3X's that of Sony's gaming divison.
Except in that last FY. If Microsoft can have another profitable FY they'll be on track and everything else can be written off as a sunk cost.$6 Billion profitable ? not this gen.
You don't know what FY even is do you?
- Releasing new consoles requires alot of R&D (which cost alot of money), you can't just assemble PC components together under a case in 2 months and pass it off as a console. Duh. It's not like Microsoft doesn't have the budget to do this. And with the xbox/360, MS has proved they know how to make a console (more or less).
Budget is irrelevant business is about profitability , keep in mind MS isn't an individual with a large savings account it's an entity owned by it's shareholders (which probably run into the millions, I dunno)
Keep in mind they just saw their first real profit last FY. They knew that this wouldn't be an easy market to enter and they came prepared to dig in and eat the costs of entry. You spend money to make money after all.
- Releasing a new console takes months if not years of strategic planning recruitment , development , production , getting developers to make new games. All of which cost alot of money. Again, nothing the competition doesn't face. Microsoft is starting to build its market value and the 360 is showing a lot more potential not only as a platform of gaming choice but as a competitor than the xbox did.
The 360 won't recoup all MS's cost this generation ,meaning MS will be making a further loss on their gaming division even before they release their next console.
Of course it won't. Do you know what a sunk cost is? Please look it up. Right now, the aim isn't to recoup everything they lost in one fell swoop. Aiming for that at this point in time really would make them foolish.
- Promtions / Advertising proberly run into hundreds of millions I'm glad you have solid numbers. And no, not every game has to be a Halo 3 but Microsoft very much did get quite a return on all that promotion.
Solid numbers I don't have , the ability to guess I do have. MS must have spent at the very least $250 million on the promotion of the 360 and it's games so take that as a basline figure.
Again, no solid numbers.
- MS may have to pay for game exclusivity if the PS3 fares better than it this generation(POSSIBILITY) MS already does pay for titles and because of that the system is look better and better every game.
Again MS doesn't have infinite reserves of cash ,what they spend comes from what the make in profit (gaming division contributing 0 to that) they don't grab funds of trees.MS can and will continue to buy exclusivity but it will come at a huge cost.
Microsoft has an infinite reserve of cash as long as cash keeps flowing in. If buying titles is profitable for them, they'll likely keep doing it. What's even nastier is that it'll begin to force the competition to do the same. Development will go to the console that offers the most incentives.
- If HD downloads doesn't take of due to lack of popularity or competition then this is another reason for MS to drop out of the games division. This is almost completely unrelated. Microsoft released a HD add-on for the 360, but that's the extent that their games division impacts the format rumbles.
I'm talking about HD downloads not HD-DVD.
Fair enough. HD downloads is a risk that should be interesting, but it'll be putting Microsoft in competition with a lot of other businesses but... they have the online delivery system and infrastructure already in place so the cost of entry there is lower for them than other businesses.
- MS really shoudln't try to diversify too much , they're loosing ground in their core markets , if they don't choose to drop gaming competition will force them into it. On the contrary, by diversifying especially into the RPG market, they're gaining a lot of people's interest. Their best interest is not to further narrow their market but to expand it and gain as many consumers as possible.
Interest and customers doesn't neccaserily equate to profitability , the XBOX got "interest" didn't help it profit MS. We'll see down the line how it turns out. Right now it's all speculation.
- If MS rush into the market first with their 720 they'll be scared whith RROD and other hardware issues that XBOX consoles have been famous for (even if they came in last it would still be a concern amongst customers) They'll face the RRoD stigma regardless of when they would enter the market. Entering the market early doesn't mean rushing, it simply means planning earlier.
Well this gen it was rushing , granted they may be more organised and strategic in their introduction of the 720 but that's more timely and costly to MS. It's not as easy as saying Sony will start planning in year 20XX let's start 6 months earlier to beat them.
With this gen it was, but they also delivered a product capable of facing Sony's PS3 in specs a year before the PS3 was even released. Rushing or not, they built a monster within the time frame given.
Sony has effectivley wiped out all the profit they made with the PS1 & PS2 combined with the release of the PS3 , however it's highly unlikely that they could have won the format war without out. The success of Blu Ray & Sony's HD TV's (which success will largley be attributed to the PS3) will determine whether the PS3 was a success or not.I'm pretty sure Sony will release the PS4 , but I dought they'll put as much emphasis on technological advancement and all in "one'ness" due to the success of the Wii. Whatever Sony's gain as a company has been, they've sacrificed their games division to get it.
The long term gains may be worth it , we're yet to see.
Long term gains to what? Certainly not their games division.
The games industry is experiencing incredible growth so I wouldn't be suprised if MS released the 720 I just don't think it's a smart move for them to do so , they have their core businesses which are generating a profit for them (software) so I think diversifying into to the games industry may not be a smart move. Luckily for Microsoft, they haven't hired you to think on their behalf.
