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Forums - Gaming Discussion - (Business Perspective) Does MS really need Xbox Hardware?

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Azzanation said:

Sony have the marketing rights, which pushes a huge amount of CoD sales on their platform. Sales = Profits. Sony is making Billions on CoD alone, Xbox isn't. Sony have the Console CoD audience.

It's something like a ratio of like 2:1.  If Sony is making 1 billion, then MS is making something like 500 million. If Sony is making like 2 billion, then MS is making 1 billion.  

This is revenue specifically.

So this means Sony makes something like 1.3 billion revenue from Activision. And they probably keep something like $300 million of that, per year.  MS probably makes half that, $150 million per year from CoD. 

Azzanation said:

360 lost $4billion on hardware, the subs is what kept MS from leaving the market, the exact point of my thread. MS want subs not hardware responsibilities. 

It's harder to sell subs without hardware.

drkohler said:

Are you seriously trying to say that XBox is "a leader in profits"?

They were talking about Apple there.  

And saying that MS is trying to follow Apple's business model.  Not that MS is currently a leader in profits.  

Last edited by the-pi-guy - on 04 May 2023

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the-pi-guy said:
Azzanation said:

360 lost $4billion on hardware, the subs is what kept MS from leaving the market, the exact point of my thread. MS want subs not hardware responsibilities. 

It's harder to sell subs without hardware.

You need to play 4D chess here. 

Sony won't allow GP or any Subs from MS to appear on PS, as long as they have to compete with Xbox hardware.

If MS drop the hardware front and give Sony full reigns on hardware creation, then Sony would allow a modified GP service. They won't turn down the opportunity of quality IPs because it will further boost their own hardware sales.



Machiavellian said:
DonFerrari said:

I guess if MS decides to leave the console market they could very well work the servers to use different HW even more with almost all titles available on PC, but yes at this moment it would be unnecessary extra cost, but for a next gen it could make sense (not that I think they won't release a new console or that it wouldn't make sense to use it for cloud).

Machiavellian said:

Think about the PS3 and the message Sony put out during that time.  You would work 3 jobs to get this device.  You are mistaken if you believe that if Sony totally dominated the market that they would make the same decisions in the absence of MS.  I doubt we would have seen PS services anywhere near what they are today compared to MS pushing internet and Games with GOLD.  There are a lot of things Sony has done in response to MS compared to what they traditionally do. Even the PS4 is a direct result of how well the XBox 360 performed because building an extremely complex hardware device that makes it difficult for most developers to extract all the power out of the machine was never a good business decision.

So yes, the PS4 and PS5 are direct results of Sony pushing the advantages they have to make sure to keep ahead of MS and while you personally as a PS gamer believe MS has no impact on Sony direction, history show different.

I know that time very well and that phrase was both poorly done and severely misrepresented. The way it was told was "This console is so great that you would be willing to work a second job to buy it", but yes I can certainly see that Sony had arrogant thought thinking at the time that allowed them to not do the right processing and direction. Still PS3 was sold at 200 dollar loss (while PS4 was 50 from release and PS5 50-100) so it was more like they were so confident they would be selling great that they burned a lot of money instead of they priced as high as possible, because even if PS didn't had a direct competitor (it did, but considering how much marketshare they had) they know that if they fuck to much a substitute product can come (just like they came when Nintendo and Sega fucked up).

I'm not saying they would make the same decisions without direct competition (MS or otherwise), I just said that the price of the console and games wouldn't go 1k USD and games 100 USD if MS stopped launching consoles.

I have no doubt that XBL really put pressure on PSN improving (even if I don't care about MP I totally credit MS for both the good things that Gold brought as well as the bad ones such as paid online, that nowadays is likely impossible to disappear). I can't be sure if PS4 architecture is a response to X360 being a lot simpler or they seeing that the type of architecture of PS3 was dead, but sure I'm willing to credit this decision from competition pressure.

And just to close I don't think MS have no direct, it certainly does, I do think that without MS moneyhatting a lot of games during X360 and even for titles they didn't the fact they gone multiplatform because X360 was a viable platform pressured Sony to rely a lot less in 3rd parties than in the past (and possible expend more on securing key marketing/temporary exclusivity deals) and power up their 1st party. That is why I said I don't need Xbox, because I'm not interested in its first parties or even the route of more GAAS (that Sony is also taking and I don't like), not that the market itself doesn't need Xbox or a strong competitor to PS.

It doesn't work that way, MS already put in the investment in their server farms for the Xbox hardware, that means if they drop that hardware and do not have 100% backward compatibility it would be a problem for the service since you are supposed to be able to play backwards and forwards as MS stated.  SO yes, MS will continue to invest in Xbox hardware for their server farms and if they are already investing in that hardware they will continue to release that hardware to retail because it keeps customers within their eco system, MS still make a cut on every game sold on Xbox hardware, they still get their cut from MS store and games sold on the Console and they continue to tie customers to their services.

I do not know what company you were watching but both Sony and MS money hat during the 360 days, it's    the standard business model in the games industry.  Sony did not rely less on 3rd party games, they have always been able to get 3rd party exclusive games especially from Japan because one, they have always been the market leader and 2 it was tough and still is tough to get any exclusive games from Japan over Sony.  What allowed the 360 to gain on Sony especially in the US more than any other country is how hard it was to develop for the system.  The 360 in the first 2 years was outperforming the PS3 in most multplat games and it allowed the 360 to gain significant market share.  If not for the RROD, MS success would have been much bigger but those stubbles allowed Sony to maintain and keep their market share lead.

It's not a question if you need MS first party games, it's the fact you need MS in the market to make sure Sony is always aware and fighting to keep MS in third place.  In the absence of MS, Sony would be a much different company and if you thought the PS3 was expensive, I bet you the PS4 would have been a grand if MS was not in the market.  There is a distinct difference between the you wanting any of MS games than MS keeping Sony innovating and competing like a startup.  That benefits you as a gamer on their platform.  Even now, I just purchased PS+ because Sony is selling it for 36 bucks for the whole year

Wouldn't be possible for MS on next gen HW instead of making the server being a Xbox HW being a generic computer and "emulate" for BC?

I wasn't dissing on MS regarding moneyhat, and I know Sony also does, but before PS3 that wasn't something they needed to care as most relevant games would be naturally exclusive and at worse multiplatform. When MS gone very aggressive on X360 (as they should) it forced Sony to answer with more investment on their 1st party. And sure Sony still relies heavily on 3rd parties, but they have improved their 1st party output by a big margin from PS2 to PS4.

For PS4 being 1 grand the only way I see it being possible would be if the internal cost was over 1k. PS1 dominated the market and still PS2 came with low price, PS2 dominated the market then PS3 came with 200 loss per system, PS3 struggle to tie/late win and PS4 had the lowest loss per system ever (weaker system to have a small entry price), PS4 had a healthy lead on X1 and PS5 had a little bigger loss than per system.



duduspace11 "Well, since we are estimating costs, Pokemon Red/Blue did cost Nintendo about $50m to make back in 1996"

http://gamrconnect.vgchartz.com/post.php?id=8808363

Mr Puggsly: "Hehe, I said good profit. You said big profit. Frankly, not losing money is what I meant by good. Don't get hung up on semantics"

http://gamrconnect.vgchartz.com/post.php?id=9008994

Azzanation: "PS5 wouldn't sold out at launch without scalpers."

the-pi-guy said:
Azzanation said:

Sony have the marketing rights, which pushes a huge amount of CoD sales on their platform. Sales = Profits. Sony is making Billions on CoD alone, Xbox isn't. Sony have the Console CoD audience.

It's something like a ratio of like 2:1.  If Sony is making 1 billion, then MS is making something like 500 million. If Sony is making like 2 billion, then MS is making 1 billion.  

This is revenue specifically.

So this means Sony makes something like 1.3 billion revenue from Activision. And they probably keep something like $300 million of that, per year.  MS probably makes half that, $150 million per year from CoD. 

Azzanation said:

360 lost $4billion on hardware, the subs is what kept MS from leaving the market, the exact point of my thread. MS want subs not hardware responsibilities. 

It's harder to sell subs without hardware.

drkohler said:

Are you seriously trying to say that XBox is "a leader in profits"?

They were talking about Apple there.  

And saying that MS is trying to follow Apple's business model.  Not that MS is currently a leader in profits.  

Although I don't think it is the case it could even be that the profit margin of MS is higher than Sony for the console division or that it could be when they have more GP subs than HW.



duduspace11 "Well, since we are estimating costs, Pokemon Red/Blue did cost Nintendo about $50m to make back in 1996"

http://gamrconnect.vgchartz.com/post.php?id=8808363

Mr Puggsly: "Hehe, I said good profit. You said big profit. Frankly, not losing money is what I meant by good. Don't get hung up on semantics"

http://gamrconnect.vgchartz.com/post.php?id=9008994

Azzanation: "PS5 wouldn't sold out at launch without scalpers."

Azzanation said:
the-pi-guy said:

It's harder to sell subs without hardware.

You need to play 4D chess here. 

Sony won't allow GP or any Subs from MS to appear on PS, as long as they have to compete with Xbox hardware.

If MS drop the hardware front and give Sony full reigns on hardware creation, then Sony would allow a modified GP service. They won't turn down the opportunity of quality IPs because it will further boost their own hardware sales.

Naw, Sony would still consider MS a threat no matter if they sold hardware or not.  If you had a chance to totally nuke MS ability to gain any leverage why would you give them any outs.  You kicking their butts on hardware and software sold, there is no incentive for Sony to let them compete on their hardware with their services when Sony is trying to do the same thing but at a slower pace.  There is no scenario if I am Sony that I would ever give MS any leverage that can come back and slap them in the face when you can just say no and worry about nothing.  The 3D chess move for Sony is a "Hell NO, go fish" because at the end of the day, their is no incentive for them to help MS.



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Azzanation said:

Disagree. 

For starters, weather UPlay, Originas, EpicGS, Battle.Net, Windows Store and ill add another GoG didn't exist, it wont change anything to how Steam is still ran today. If anything, competition has created more issues with the PC market place, like when EGS entered the market, creating more headaches for users and poaching games off Steam which frustrated players. Steam doesn't need competition.

They didn't at the time. Correct. I never said they did.

However, they do exist now. And they are the competitor to Steam.

Every market needs competition.

drkohler said:

Are you seriously trying to say that XBox is "a leader in profits"?

No one has said that. So don't try and gaslight.

drkohler said:

A few months ago, MS admitted losing $100-$150 per console sold. Shortly thereafter they reduced the price of the consoles by $50...

I actually want Microsoft, Nintendo and Sony to loose money on hardware, that means us consumers get more bang for our buck.

drkohler said:

How much does XBox pay the MS Server division for using Azure? For maintaining/expanding server hardware?

What makes you think only Xbox buys server space on Azure?

You know 3rd party makes up the bulk of Xbox game sales overall, right?

drkohler said:

"Volume sales can come later and capitalise on that". Yeah, we know that excuse:

Phil Spencer in 2016: "Yeah this year wasn't really good, software wise. But next year, you will see..."

Phil Spencer in 2017: "Yeah this year wasn't really good, software wise. But next year, you will see..."

Phil Spencer in 2018: "Yeah this year wasn't really good, software wise. But next year, you will see..."

...

You are missing my point entirely. Try again.

drkohler said:

Rinse and repeat and we are now in 2023. Still the same guy with the same announcement.

XBox was and still essentially is a vanity project initiated by Balmer/Gates. For any "normal" company, it should have been killed 1-2 decades ago as it has been writing red numbers day one ever since its inception.

Who cares?

The quality and quantity of games is irrelevant to my points.

Last edited by Pemalite - on 04 May 2023

--::{PC Gaming Master Race}::--

Machiavellian said:

Naw, Sony would still consider MS a threat no matter if they sold hardware or not.  If you had a chance to totally nuke MS ability to gain any leverage why would you give them any outs.  You kicking their butts on hardware and software sold, there is no incentive for Sony to let them compete on their hardware with their services when Sony is trying to do the same thing but at a slower pace.  There is no scenario if I am Sony that I would ever give MS any leverage that can come back and slap them in the face when you can just say no and worry about nothing.  The 3D chess move for Sony is a "Hell NO, go fish" because at the end of the day, their is no incentive for them to help MS.

No they wont. How would MS be a threat to Sony by offering games to the PS platform that will boost PS console sales even further and Sony profits off? MS don't need to put subs on PS either, they can just use Sony's hardware to sell digital software that also makes Sony money. You really need to learn to play chess as well as know what you are talking about. Sony make money on Xbox games sold on PS. More games sold = more profits. Sony and MS don't hate each other like you think to believe. It's a business not a sport. There is no plastic trophy at the end of each generation.

Pemalite said:

They didn't at the time. Correct. I never said they did.

However, they do exist now. And they are the competitor to Steam.

Every market needs competition.

The current Console industry is full of bad competition. Xbox hardware is not needed.



Azzanation said:
Machiavellian said:

Naw, Sony would still consider MS a threat no matter if they sold hardware or not.  If you had a chance to totally nuke MS ability to gain any leverage why would you give them any outs.  You kicking their butts on hardware and software sold, there is no incentive for Sony to let them compete on their hardware with their services when Sony is trying to do the same thing but at a slower pace.  There is no scenario if I am Sony that I would ever give MS any leverage that can come back and slap them in the face when you can just say no and worry about nothing.  The 3D chess move for Sony is a "Hell NO, go fish" because at the end of the day, their is no incentive for them to help MS.

No they wont. How would MS be a threat to Sony by offering games to the PS platform that will boost PS console sales even further and Sony profits off? MS don't need to put subs on PS either, they can just use Sony's hardware to sell digital software that also makes Sony money. You really need to learn to play chess as well as know what you are talking about. Sony make money on Xbox games sold on PS. More games sold = more profits. Sony and MS don't hate each other like you think to believe. It's a business not a sport. There is no plastic trophy at the end of each generation.

Pemalite said:

They didn't at the time. Correct. I never said they did.

However, they do exist now. And they are the competitor to Steam.

Every market needs competition.

The current Console industry is full of bad competition. Xbox hardware is not needed.

Sony doesn't do anything to ban minecraft or any other MS owned title from their store, they even gave some in PS+. So yes depending on how the GP is proposed Sony may accept, on the ABK case it seems like MS offered the GP and Sony was willing to accept if MS allowed PS+ on their end and them things didn't worked out.



duduspace11 "Well, since we are estimating costs, Pokemon Red/Blue did cost Nintendo about $50m to make back in 1996"

http://gamrconnect.vgchartz.com/post.php?id=8808363

Mr Puggsly: "Hehe, I said good profit. You said big profit. Frankly, not losing money is what I meant by good. Don't get hung up on semantics"

http://gamrconnect.vgchartz.com/post.php?id=9008994

Azzanation: "PS5 wouldn't sold out at launch without scalpers."

My Post

Xbox Hardware is needed for xCloud, Xbox Live Gold and the 30% Cut.

Microsoft makes literally billions from the 30% cut.

Lets put this simply, do you think that Xbox will be pulling in more than Activision-Blizzard-King if they went 3rd party? Not just more, they would need to double what ABK makes in order to do this whilst achieving the same revenues they have now.

Microsoft does not report profits of individual aspects of their business IIRC. Only the overall business. So all shareholders and us will see is Xbox going from a $16bn business to a maybe $10bn business, if not less.

Not saying it won't be possible in the far future but there is a lot of things that Microsoft has to do to grow its business to make this viable, as I detailed in my post.

And yes, Sony would likely demand Game Pass is 1st party only and even more than that they'd demand a revenue sharing, they aren't going to allow Game Pass on PlayStation for free, all the IPs Xbox has on Xbox make 100% of the revenue as well, Xbox IPs on PlayStation make 70%.

Right now it makes absolutely zero financial sense for go 3rd party.

Last edited by Ryuu96 - on 05 May 2023

Azzanation said:
Machiavellian said:

Naw, Sony would still consider MS a threat no matter if they sold hardware or not.  If you had a chance to totally nuke MS ability to gain any leverage why would you give them any outs.  You kicking their butts on hardware and software sold, there is no incentive for Sony to let them compete on their hardware with their services when Sony is trying to do the same thing but at a slower pace.  There is no scenario if I am Sony that I would ever give MS any leverage that can come back and slap them in the face when you can just say no and worry about nothing.  The 3D chess move for Sony is a "Hell NO, go fish" because at the end of the day, their is no incentive for them to help MS.

No they wont. How would MS be a threat to Sony by offering games to the PS platform that will boost PS console sales even further and Sony profits off? MS don't need to put subs on PS either, they can just use Sony's hardware to sell digital software that also makes Sony money. You really need to learn to play chess as well as know what you are talking about. Sony make money on Xbox games sold on PS. More games sold = more profits. Sony and MS don't hate each other like you think to believe. It's a business not a sport. There is no plastic trophy at the end of each generation.

Pemalite said:

They didn't at the time. Correct. I never said they did.

However, they do exist now. And they are the competitor to Steam.

Every market needs competition.

The current Console industry is full of bad competition. Xbox hardware is not needed.

MS will always be a threat to Sony because Sony has a service just like GP called PS+ but one thing it does not do is day one release of their own games.  GP directly competes with Sony services so why would Sony let such a service on their console that would compete with PS+.  Second, Sony also have a cloud platform in PS Now that is part of their premium subscription just like XCloud is part of MS ultimate sub.  This means that GP on all levels competes with Sony and their services and there is no incentive to let MS run their services on their platform to compete with PS+.

Sony also will have an ambition to enter more Cloud based services or expand their own to multiple devices.  Your point only look at today but I never got the feeling that Sony would not want to enter those markets, they are just not moving as fast as MS because they have a commanding lead in consoles.  MS whole plan is disruptive to Sony and how they want to move and how fast they want to do it.  So no, advancing MS strategy and accelerating their ability to expand beyond consoles is not a benefit to Sony and no incentive for them to allow GP on their platform.  As far as Sony is concerned, they would be a much happier company if MS left the market period then having to worry about what other disruptive things a trillion dollar company can do to unseat their market position.  By the time Sony is ready to compete in the device market, they could find themselves way behind MS which is not a scenario they want to be in.  

If you kind of think about it Sony has been more reactive to MS then proactive when it comes to anything not hardware related.  They were more reactive to putting games on PC, reactive to expanding PS+ to compete with GP and they are still reactive to driving into the devices market because it marginalized their console.  This is why they really fought hard to block the ABK deal.  Their just isn't any benefit to accelerating MS goal for Sony and they they would need to react to it but at a less financial base.

Also there is nothing stop MS from putting games on PS platform even today.  You forget that if MS want to they can still publish Bethedsa games to PS if they desire.  We are not talking about MS putting their games on PS, we are talking about MS putting GP on PS which is something totally different.

Last edited by Machiavellian - on 05 May 2023