Microsoft’s pockets not so deep for the Xbox 360 division
By Mike Ferro
One of the silliest arguments fanboys like to make is that Microsoft has a vast reserve of unlimited resources, all of which can be thrown at the Xbox division. Just like any other business, Microsoft is in the console market to make money and not to fuel useless fanboy fancies.
According to Silicon Alley Insider, Microsoft is in a hiring freeze and slowing down spending for the time being. Initially, it was reported that all of Microsoft would be doing this, but a clarification from a spokesperson indicated that this was false. According to an email sent out by Robbie Bach, head of Entertainment and Devices (Xbox and Zune), only his division will be enforcing a freeze on hiring.
Just a few days ago I talked about the closure of one of Microsoft’s internal game developers, Ensemble Studios. That brought the number of closed studios within the past year and a half to four, plus Bungie, which went independent.
Microsoft stated its desire to seek scalable business ventures on the heel of a massive price drop across the board for the Xbox 360. There is definitely some belt-tightening going on at the Entertainment and Device division. This isn’t all that surprising, considering that Microsoft’s primary business has always been the operating system division since this is where most of the money is made.
Since the Xbox division is the furthest from being a highly profitable business unit, it makes sense for Microsoft execs to clamp down on its weakest link. The reality of the business is, there are consequences for throwing $50 million checks at studios for DLC (that have yet to materialize), spending $1.15 billion on faulty hardware (RRoD) issues and dropping nearly $80 on the Xbox 360, despite cut-throat manufacturing costs. At the end of the day, Microsoft executives have to answer to the stakeholders of the company regarding past business decisions.
It looks like Nintendo might ultimately get the last laugh this generation. Nintendo has proven that you do not need hardcore games or high definition graphics to succeed in the video game market. It seems like Sony and Microsoft are currently in the midst of playing catch-up to Nintendo this generation instead of the other way around. Oh the irony.
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October 6th, 2008
Actually, it was Sony that showed you don’t need the best graphics and hardcore games to win. Both previous Playstations won their generations with the worst graphics and selling mostly to casuals.
But, anyway, MS may well jump out of the console wars next time around. I think its unlikely that Sony and MS BOTH go on, and Sony’s gaming division has made money before, at least.
It wouldn’t matter if MS had unlimited resources, the idea of a business is to make money. If a part of the business isn’t making money, you make changes, and if it still doesn’t, you cut it off.
MS is making changes right now. If it doesn’t work…well, you don’t become a huge company by making unprofitable choices…
October 6th, 2008
MS has made a lot of money! More than 150 million dollars in XBL alone!
October 6th, 2008
matt:
PS2 Had the lowest spec but the best graphics weird only some Xbox game had better by a tiny percentage. Microsoft is gonna drown in debt because everything they makes turns to shit. Nintendo is a timed winner until people realize they need real games with good graphics.
October 6th, 2008
I’m sure you’re going to get bombarded by people shouting that Sony spent X billion on the Cell Mr. Ferro.. Another deep dark hole.
I dunno, Wii’s make $$$, the PS2 props up the PS3 and Windows (etc.) seem to prop up the 360. Guess its a race to see whos bean counters say ‘holy shit we’re not gonna make any money from that!’ then poof, gone
October 6th, 2008
PS2 had crap graphics and poor specs. It only did as well as it did because of “casual” games like sing star and buzz.
October 6th, 2008
@Ivan
Xbox and Gamecube both had better graphics than the ps3. Look at RE4 for a ps2 to GC example.
The only game I could think of that was better on the ps2 rather than xbox was MSS2. Of course it was developed for the ps2, and ports tend to sucks.
@me.
ok..there..crap graphics. God of War 1 and 2, Shadow of the Colossus, and Final Fantasy 10 says Hi! *rolls eyes*
October 6th, 2008
FERRO,
Correct me if i’m wrong, but hasn’t the 360 been turning a profit for nearly a year??
October 6th, 2008
@harry
http://www.xbox360fanboy.com/2008/01/25/microsofts-xbox-360-division-is-seeing-the-profit/
October 6th, 2008
Gamecube and Xbox didn’t sell shit a major failure.
October 6th, 2008
@ivan.
I thought we were talking about graphics. Where did console sales come from?
October 6th, 2008
i thought we were talking about video games/gaming in general, didnt realise we were talking fanboy crap.
October 6th, 2008
Ivan that is not true. EVERY Xbox game looked better then the PS2 version. EVERY GAME. Which is understandable when you consider xbox came out last in that generation. Which goes back to the question why does the PS3 not have better graphics this time around considering it came out 1 year after the 360. Only a few titles this time around look better, slightly.
October 6th, 2008
How can Microsoft and Sony be playing catch-up when both of these consoles sell more games then the Wii. Hardware sales mean nothing if your games don’t sell.
October 6th, 2008
MS made a 240 million dollar profit last quarter after all debt was said and done. Xbox 360 has been in the black for 2 quarters.
MS got tons of game developers over to 360 and the price is worth it for the next generation. Microsoft has always said this is a long term investment.
MS is DESOLVING Ensemble into Microsoft Game Studios so they all have projects after Halo Wars.
Bungie , although going independent will make all things Halo for Microsoft and currently have 3 different Halo projects in the works.
Microsoft got their foot in the door with Xbox, showed they can compete heavily with Sony with the 360 and their next machine will be built to prevail.
Microsoft has a new Xbox in the works 100%, I know 100% that IBM has been working with Microsoft on it for a while now.
Microsoft thrives to beat the competition and they have showed that through the way they have backed the Xbox division.
October 6th, 2008
Obviously tgrass21 is a fanboy.
Microsoft is an evil company my friend, not because of this console fanboy crap, but because they believe in Monopolies.
Everybody who works in the IT industry knows why Microsoft is a company that needs to be watched at all times.
They have been sued for anti-trust regulations two times in the past.
It stands against everything our capitalist society is built upon.
I really hope Microsoft goes away, and we get a better alternative to them.
October 6th, 2008
@CAD
I think I can answer that PS3 question. The Xbox came out 18 months after the ps2. They put new tech (better video card) into it, hence better performance.
The PS3 was spec’ed around the same time as the 360. They just had to wait on blu ray.
As for the ps3 not looking as good as the 360…. Programmers are getting the grasp on the ps3 cell architecture. Using the processor for better performance. By the end of this gen I believe a fairly good distinction between the two consoles. (1st party games mostly)
October 6th, 2008
Anyone that thinks that ANY of these companies care about anything but profits is a fool. Corporate MS isn’t going to back a “next” Xbox if the games division this gen (hardware and software combined) is a loss. Unless the games division can show Ballmer how they will be able to profit from staying in gaming, he’s lost so much on Vista you have to wonder how staying in gaming would make sense. Same for Sony, if all that’s keeping the their games divison afloat is PS2 hardware and software sales, they’d be hard pressed to be able to sell staying in the biz. That said, even as losing propositions to begin with, I think Sony would have a easier time selling to the bosses staying in gaming than would MS. Sony has a much longer history and a much broader customer base. Sony is selling PS2, PS3, and PSP in good numbers, MS has only X360.
October 6th, 2008
I think that video games are too healthy an entertainment product right now for any of The Big Three to drop out any time soon. Heck, I’d say that, by next-gen, we may possibly have a FOURTH competitor in the home console market.
-Arvis
October 6th, 2008
The only ones making the money in the video game market are the studios.
Manfucaturers are bleeding money this gen.
Sony, just won Blu-ray war so they are seeing double profits from media royalty and studio game royalty.
They are also taking it slow, no price cuts, focusing on PS2 and PSP at the same time.. seems like smarter strategy.
Microsoft price cuts seem likea desperation move, like they are trying to win the holiday with it, like they have to prove it to the execs to keep the Xbox division from sinking.
October 6th, 2008
@Martin… MS has actually showed alot of change in the last few years and they showed some real balls with the Xbox. Admiting what they f’d up and backing it up with over 1 billion dollars seems pretty nice to me.
Microsoft has listened to gamers and has been puting in tons of work to make Xbox and Xbox Live better every day. Sure they may use ideas of others but in the end it’s just making Xbox a richer experience for all.
The 360 was made to evolve to demand.
Ya, I love the 360 but I also like my PS3. I think HOME is a waste and Sony is behind in games but they will change in time because PS3 is also made to evolve.
Blu Ray won but that isn’t saying much. Blu Ray isn’t catching on so hot and with this econmy….rising gas prices, record home forclosures, record prices in home heating, record inflation and record job losses are going to keep the HD market at a distance for quite some time. This recession is just starting to roll.
MS made the right move by giving people choice. You DON”T need blu ray or a hard drive to play games, look at the Wii.
October 6th, 2008
tgrass21- no you don’t need a blu ray or hard drive to play games. You also don’t need to have a Porsche to drive, you can drive a Geo. I think I would rather have the Porsche though!
October 6th, 2008
no, Microsoft just needs to go away, everybody hates them, everybody in the IT industry dislikes them.
World will be a better place without them to tell you the truth.
Windows isn’t even the best operating system, Microsoft was better at double talking with their lawyers so that more manufacturers put Windows on the PC.
OS2 was by far superior than Windows 3.1 back in the day, I want the superior platform to win not some fanboy crap blindly backing Microsoft for no good reason.
Fanboys make me sick, learn the details before forming an opinion.
Blu-ray is doing fine, do some googling, according to analysts Blu-ray is selling faster than DVD did 10 years ago.
You have to listen to both sides and formulate what is the truth and not listen to idiotic dribble.
October 6th, 2008
Martin: Take your own advice.
Regarding the basis of this article - it’s correct, but what people here don’t seem to realize is that MS is not losing money per 360 sold with the price cuts. They designed the machine to be cheap to manufacture (compared to the PS3 anyway) and they haven’t been selling them at a per-unit loss since early 2007. (though push that back 6 months after taking the 1.3 billion repair charge.)
That’s why the division has been in the black the past few quarters. They cut the price every time they are able to reduce the mfg cost of the machine. They aren’t doing a loss-leader strategy of taking a loss on the machines to gain market share. That’s why MS took almost 2 years before cutting the price of the 360 the 1st time.
Regardless, the other major misconception by most people is that MS and Sony are purely interested in dominating the game market. Neither one of them, if they could have, would have released a Wii. (they might have wanted Wii features, but they never would have released a machine that only did what a Wii does.)
Why? Because they both have a bigger agenda. MS especially, desperately needed to get a consumer device into people’s homes to advance their home media strategy. This all part of the plan including the original Xbox. Xbox was to establish the brand name and credibility, 360 to actually get the media functionality into the homes. And since every department store or outlet that sells video games, sells Xbox stuff, they have suceeded with that. They could have spent 2 billion on an ad campaign and never acheived that. That’s why MS management is OK with the money spent. A Wii would never accomplish this.
Sony’s agenda is Blu-Ray. They need Blu-ray to be the next DVD. If it weren’t for the PS3, Blu-Ray would be really in trouble. With that long term view, they need to have Blu-Ray in the PS3 and a Wii, again, would never help. If Blu-ray is successful, they’ll make the PS3 losses up several times over, and they still have the PS2 cash cow to bridge the gap. Once the PS3 comes close to breaking even on manufacturing costs, Sony will reply with a cost cut.
That’s why they prefer to offer bigger HD’s instead of a price cut (as does MS.) The cost of the HD remains constant - the capacity increases. If you could get a 20GB HD for 1/3 the price of a 60GB HD, both MS and Sony would still be selling them. But 20GB HD’s are obsolete, and the cost to make a 20GB HD is now the same or higher than a 60GB HD. There’s no cost savings to pass along, so they give you a SKU with a bigger HD instead.
What MS should do for the 360 Arcade is throw in an 8GB or greater flash drive. Then the Arcade could run any game that benefits from a hard drive, download content, etc. and flash memory will only get cheaper and cheaper, so they can still cost reduce as time goes on.
October 6th, 2008
Mike Ferro is a complete idiot. He writes article after article about Microsoft. Did Bill Gates screw your wife or refuse to hire you. All of your article are based on nothing. You no little about what you’re talking about even though the information is there. The Xbox division made almost 500 million last fiscal year despite being the only money making product in it’s division. please get a life and stop. If you’re really just a ten year old, I don’t mean to be mean. But grow up and stop being a fanboy.
October 6th, 2008
“PS2 Had the lowest spec but the best graphics”
Best graphics? Ha. Ha. Ha. No.
October 6th, 2008
I think the consumer wins in the end. Msoft and sony will continue to lose money by price drops and offering better games so they can get more fanboys under there belt.
I do think sony’s playing catchup game wise though, but we’ll soon see in about a year who is number 2.
October 6th, 2008
Microsoft did not set aside a billion dollars to be nice to gamers because they made a mistake, they did it to avoid a class-action lawsuit. Anyone who thinks otherwise is a fool, which is also the same people who think that Microsoft will ever be more than last place in a console race. Nice write up though.
October 6th, 2008
uh, Makidian, PS3 is in last place, idiot.
October 6th, 2008
ok first of all PS3 rules 360 is “bleh” & WII is kool
360 fanboys are just retarded
they think the 360 is better because it has more games its been out longer & probably they like MS
they compare the 360 to the PS3 which isn’t fair
the 360 been out longer
but when u really compare them, you’ll find the PS3 is better
the PS3 has HD, wireless connectivity built in, always has a HDD, plus free online play, and the lowest price $400
the 360 has no wireless connectivity built in (wireless adapter $100), for HD things an extra ($200),online play ($50 a year)
with all this the 360 is way more expensive than the PS3
I dont like fanboys because all my friends badger me all the time cause they have 360’s i have a PS3
they complain when i tell the truth about the 360’s faults they cant face the fact the PS3 is better
October 7th, 2008
DXmaster, where on earth can you buy a HDD for $200???? I love it how douchebags like you like to inflate the price of competitor’s peripherals to justify your purchase.
October 7th, 2008
@Keith,
I am taking my own advice, the only difference between what you think and what I think is Microsoft with the last price cut went back into the red.
The Arcade and Premium model definitely went back into the red.
The last analysis done by iSuppli indicated manufacturing cost is around $330 - $350. The arcade is defintely bleeding red.
Now, there is no way for you or I to know this so I think we have to agree to disagree on this point.
But everything else you said is spot on, Msft’s adgenda is to ensure that the 2nd “PC” makes it into the living room.
And Sony’s adgenda is dual pronged, unlike Msft their game division is one of their largest business units: PSP, PS2, and PS3
Plus Blu-ray.
October 7th, 2008
When do you need to have a wireless adapter to play games? When do you need to have blu-ray to play games or a hard drive? True, extra features are nice but not a necessity to play games and a wired connection is WAY better to play online games, any real gamer will tell you that.
October 7th, 2008
fanboisRidiots:
Well you might not need a wireless adapter to play games. But you need Blu-ray technology if you want games like MGS4 Uncharted Ratchet and Clank Resistance and many more. And a hard drive is basically always needed.
October 7th, 2008
Gears 2 already has better graphics than Uncharted and MGS 4, Also upcoming star ocean 4 shows what the hardware is capable of. Star Ocean 4 has even better graphics than Gears 2 and also Kojima himself said that MGS4 is possible on 360 theoretically he just didnt had the time and resources to make an engine for 360.
360 is not weak hardware and it has proved it till this time.
October 7th, 2008
Haha, Gears has better graphics than MGS4? You are seriously mistaken Richdad. I’m sorry you suffer from acute 360 Fanboyism, but your delusions will be the end of you. Oh you silly 360 fanboys…when will you ever grow up.
October 7th, 2008
Richdad:
Gears of War 2 graphics look just a little better then the first. Bioshock is Xbox 360 highest graphically game Gears of War 2 looks the same as the first just a little less gray with a improve graphics. MGS4 can eat Gears of war 2 in everything even Uncharted: Drake’s Fortune. MGS4 is only possible on Xbox 360 with about 10 DVD9 disc. Stop lying to youself Xbox 360 power are already max to the limit PS3 is using less than %30 percent for games like Uncharted: Drakes Fortune and MGS4. Xbox 360 is weak compared to PLAYSTATION 3.
October 7th, 2008
MGS4 took 50 Gig on PS3 because of the Cell and because Kojima used uncompressed 7.1 sound.
The Cell isn’t that good for game processing, thats why it needs all the disc space. The Cell can’t even use one main texture menu that is normal for creating each game level with specific textures from that list. The Cell needs each and every single level to have it’s own texture and lighting …. that more then doubles and triples the amount of space needed right there.
October 7th, 2008
PS3 Rules ^^ in 2 years ppl will look back and think man… XBOX sucks munky scrotum ^^ LOL neways i think long term wise xbox will lose the race because the PS3 can only get better can the XBOX? really, ask urselves
October 7th, 2008
Yes I would say becase being a XBox gamer I have seen rise in graphics to new levels every year from 2005.
Gears 2 is not just a little better than Gears 1 since you can see how many things are going on screen and the levels are so huge and 4XAA alll time with no frame drop or even texture pop ins.
I played Uncharted and it had best textures in any game I have seen but still Gears 2 has the same amount of texture and much more going on the screen and animation of Gears 2 is much better. MGS4 characters itself are not as detailed as that of Gears 2.
See the 5 minute single player campaign in HD and then you will know. Also Bioshock looks good but Gears1 still looks better.
October 7th, 2008
Here’s a better idea. Wait until the game is released before you state how great the graphics are.
October 7th, 2008
Can’t say I’ve yet to see anyone refer to Gears 2 as the best looking game so far.
I have seen plenty of reviews saying Uncharted is the best looking game so far, Shane satterfield of Gametrailers still says it on his invisible wall from time to time.
Also EGM/Gamespot/Gamepro/IGN all say MGS4 is the pinnicle of its medium with highest quality textures ever on a game. “Kojima dares you to zoom in on every screen to find a flaw and there are none.”
See, one thing non MGS4 players don’t realize you can press up on the D-Pad during every cut scene and look at all the textures close up.
Guess what no pixelation whatsoever.
Lot of games prevent you from doing this because of pixelation. Gears 2 texture wise look almost the same as Gears 1 that is why Geoff Keighly and alot of reviewers always refer Gears 2 to Gears 1.5.
Gears is a 3rd person game so you can never run up to a wall get get one inch away from it to see how pixelated it gets. Its trickery used for low res textures, looks good far away but looks crap close up.
October 7th, 2008
MS didn’t get where they are today by losing money. That being said there is a lot potential in the console market and MS knows it. I suspect MS is trying to settle into a more long term strategy. They have already made a name for themselves in the console market, now they need to make some money with it.
October 7th, 2008
The Cell Broadband Engine is capable of running multiple Xenon based games simultaneously. In 2009 almost %90 of all Xbox 360 games will be done on 2 DVD9 Disc like Forza. Blu-ray Disc is need for HD games and longer games. PS3 is capable of performing real-time advanced AI technology. When you play games like Ratchet & Clank Future: Tools of Destruction you think you watching a 3D film the graphics are superb. Have you ever play Uncharted: Drake’s Fortune that game is a graphically master piece. And MGS4 is in another level.
October 7th, 2008
at Makidian: amen brother, amen
at Richdad: you don’t know nothing about graphics. just go get some glasses…
at martin: i’m with you, mgs4 is the best looking game ever up until now.
at every xbox fanboy: shutafk up
October 8th, 2008
Stop talking about Uncharted. It’s not that great. I’ve played it through twice…and the graphics are fine.
But I like Bioshock better. Mass effect (maybe not graphically) is better.
When will you PS3 fanboys realize that it doesn’t matter if you have a computer that is 1000X more powerfull that what you have now…if you’re using the same old video card YOUR GAMES ARE BOTTLENECKED! The video card and ram on the PS3 are what’s holding it back.
Common’ - it’s not rocket science.
The gameplay on the PS3 and 360 will always be relatively equal. What the PS3 has as an advantage is the blu-ray. Developers can use that space to, essentially, serve up a blu-ray movie. This adds to the ingame content as the cutscenes can be more emmersive.
But that’s it. Case closed.
Get both machines and have fun.