Microsoft's Blunder of the Decade : What X-Box Should Have Been
In 2007, Bill Gates and Steve Jobs appeared for the first time together in a live joint interview at the All Things Digital conference, answering pointed questions about the history behind their companies and thoughts on the current state of the industry. At one point, the conversation turns to hardware vs. software business models, and goes like this:
Steve Jobs: Alan Kay had a great quote back in the ’70s, I think. He said, "People that love software want to build their own hardware."Walt Mossberg: Well, Bill loves software.Bill Gates: Oh, I can resist that. --everyone laughs--
Microsoft is a software company.
You get a real glimpse into Bill's mind in that conversation, and it's obvious his business was, and always has been, software. That is what Bill is passionate about and that's what is at the core of Microsoft's DNA. Not hardware. Hardware is simply not their business, and they became the behemoth that they are because they had the right approach for tapping into the latent talent across the industry : create a standard, based around their software, for all the other PC hardware manufacturers in the industry. This model works and works well.
Steve Jobs makes this comment later on in the same interview:
You know, because Woz and I started the company based on doing the whole banana, we weren’t so good at partnering with people... where Bill and Microsoft were really good at it because they didn’t make the whole thing in the early days and they learned how to partner with people really well.
That's why the model works so well. Microsoft is great at working with partners and that's another key element that is infused into their core. But all of that is the old Microsoft. The new Microsoft chases the around the iPods and the Playstations of the world, playing the game with their competitors' rulebooks. And that thinking is what has led them down the path of one of the biggest mistakes in the life of the company: The X-Box.
Microsoft vs. Microsoft
The Microsoft Gaming business unit lost a piece of the company's spirit when they made the decision to make an X-Box at all. The fact is this: Gaming PC's come in every range of price, shape, and ridiculousness -- but there is one, and only one, constant in all of them: Microsoft software. And Microsoft decided that instead of fostering that huge, massive customer base that they already have in place (basically every PC in the world that runs Windows) in the proven way that they've been successful for 30 years, they'd instead be a competitor... to themselves.
That is the blunder that has cost Microsoft not only billions in losses, but billions in lost revenue they could have had if they would have embarked on a completely different business trajectory. Microsoft never had to develop their own hardware -- after all, they downright suck at it. They could have spent that time and money working with partners to accomplish the same end (provide a gaming platform), with none of the risk, and all of the reward. Instead, Microsoft has chosen to make their support of gaming on the PC a joke. After Microsoft's announcement of their poor numbers for last quarter, they started making cuts. And the first to go? The head of the Games for Windows business unit, and Aces, the developer behind the 25+ year old Flight Simulator franchise, a cornerstone of the culture and history of PC gaming. In fact, Aces, and Ensemble (Age of Empires developer) before them, are the last in a string of game developer cuts since 2006 that leaves Microsoft with no developers left for the PC at all. Fathom that.
As a result, Microsoft now faces real threats from companies who plan to make Windows irrelevant. Whether it's Linux on netbooks, Google in the cloud, or OSX on the Mac, Microsoft is losing Windows mindshare with the masses -- those same people who are buying X-Box's, which Microsoft makes no money on (instead of the 22 million copies of Windows they could have sold). Now, when those people are looking for a replacement for their current Windows PC, Windows won't be on their list of requirements when they buy. After all, they game on their X-Box, now they just need something to run a browser on. Earnings last quarter on client sales revenue: down 8%. X-Box and PC games revenue: down 22%.
If you want an easy way out, blame it on the economy -- but please disregard Apple's amazing last quarter growth, the 5 bajillion netbooks that sold last year, and the fact that gaming industry revenue continues on an explosive trajectory.
WHYWHYWHYWHY
Someone at Microsoft talked someone else at Microsoft into the console business model that says: 1) Need cheap hardware to grab massive and widespread market penetration, 2) To get it cheap enough, have to take a loss on the hardware, 3) We'll make it all back on the software.
That guy probably doesn't have a job anymore.
But a new guy in his place is thinking the multi-billion dollar mistakes have all been made, so it's time to start making money. That remains to be seen.
The problem is that Microsoft didn't think that third-parties would fit into this. For this to work, someone has to make some serious concessions on making money on hardware to get the price of entry down. I suppose Microsoft thought they would be the only one interested in doing such a thing (or it was just plain, stupid greed, which is more probable). No!! Partners!! Please don't tell me that someone can't come up with a revenue sharing model where even games sold in retail could be tracked (digitally distributed software is obviously much easier). With all those $billions$ they'd have to spare from not wasting it all on the X-Box hardware, Microsoft could certainly crack that nut. $Billions$ could certainly have worked wonders on the piracy problem. $Billions$ applied to the right problem goes a long way.Partners!!
What the X-Box should have been
It didn't have to be this way, though. The X-Box should have been every Windows PC on the planet. It should have been a digital distribution platform to rival Steam. It should have been a Windows Gaming OS sku that looks exactly like what you see when you turn on an X-Box. It should have been been Microsoft leveraging the long-tail of indie PC development and bringing that talent into the mainstream, along with their big AAA exclusives like Halo and Gears. It should have been hardware manufacturers competing over console system designs -- I should be able to buy an HP or Dell "X-Box" right now, and I should be able to leverage the fact that those manufacturers will give me options for Blu-Ray or Wifi and whatever else they would need to do to compete with each other and Sony. The consumer wins. Microsoft wins. Partners win.
Microsoft opened their own can of worms on this one, and frankly, they can have it. But, every partner who stood to benefit from Microsoft not screwing everything up should be pissed. Instead of building a rich ecosystem like we've got on the PC, we've got a console vs. PC war that nobody benefits from except for the forum fanboys who thrive on drama. Now, I can't play Halo or Fable, and Blizzard can't sell WOW to 22 million X-Box gamers. Now, X-Box gamers get crappy networking and "matchmaking" for multiplayer (console gamers don't even know what they're missing), and I get the joke that is Games for Windows Live. Now, X-Box gamers can't even use a browser or access the huge libraries of classic games from GOG.com or Steam, and I can't play XBLA games.
Actually, everyone didn't lose. Nintendo is pretty happy.
Related article: "Mega Irony: Microsoft Digs Up Apple's 25 Year Old Mistakes"
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25 Comments:
Ya know, it kills me to say this... but you are right. I've heard that the great tradition that is Microsoft Flight Simulator may be ending soon because of cutbacks and layoffs, and I'm sure there are some in the XBox division who are heaving a sigh of relief because it wasn't them that got the ax. Microsoft is cutting funding of one of the most well-known PC games of all time, instead of an industry segment they never should have gotten into.
I love how so many people preface agreeing with me with "I hate to say this". Love it!
It does not kill me to say this, and yes, I absolutely agree with you.
In all honesty, Xbox 1 was a good idea as entry-level PC that PC platform would benefit from. You had x86 CPU and DX8/GeForce graphics. It was too good to be true.
Then, Microsoft turned on its ugly head and started acting like a company from mainland China. The amount of cost-cutting on Xbox 360 just horrified me. To see DVD manufacturer forced to change the tray because it was 1 cent more expensive (and welcome scratched disks), to see Seagate forced to ditch all shock measures from their notebook drive (tampering with original design), going extra cheap on cooling... all was grooming for a disaster. They lost billions on Xbox 360 due to RMAs, and consumer confidence is gone.
Well, that's why company is threatened by Google. In this blog, you were dead on.
Theo, it's not the hardware itself that I'm arguing against -- it's the entire business model. And in that case, the original X-Box is flawed too. It's flawed because they could have done BETTER if they would have stuck to their roots and done it the right way on the PC platform, WITH PARTNERS. The original X-Box may have made some money (all of which was lost to the 360), but they would have made MORE if they would have really innovated on the PC instead.
I agree with this article 100%. I abandoned Windows around then time the 360 came out (for Linux). If it weren't for the games I still want to play being windows-only, I would never use it at all. Now I'm stuck constantly rebooting OS's to get what I want. I wish Linux would get organized and start a major gaming initiative. The Linux community needs to make it every bit as easy for developers to make stellar software for the Linux platform as Microsoft made it to develop for windows (back in the day). Sadly, this is will be difficult to do given the decentralized nature of the Linux community, but I still have hope.
It's a bit more complex than you think. The biggest reason MS even joined console gaming, is they were worried about Sony wrenching away gaming and business applications from the PC. The future of set top boxes replacing the PC is a very real possibility, and instead of fostering the old platform (IBM PC), they've decided to invest heavily into the future.
You're also factually wrong about MS not making money on Xbox, they're making a fair amount of money on Xbox, they've been profitable each quarter for over a year. That's even with Zune dragging down the MS entertainment division.
PC games revenue is WAY down, Xbox games revenue is somewhat up.
Over time MS figures the Xbox will become much bigger, it's certainly on track to do just that.
Either way, do more research next time. Oh, and you might as well buy an Xbox 360. I know I did, and it's a great platform which I enjoy very much.
@Anonymous: I disagree with your entire first paragraph. I think the X-Box was the wrong approach to combating Sony. Set-top boxes are not going to "take over gaming" unless someone lets it happen. That would be pretty hard to do, but that's a completely different conversation.
Profit: Actually, you are the one who is factually wrong. Incremental profitability is a PR scam and they have lost far more money than they've made over the years. And in my view, their loss has been compounded because their effort has been misplaced.
And you should clarify that *MICROSOFT* PC games revenue is way down. Which is understandable since they have no more PC game developers.
I just think it's odd that it seems like MS actively has been trying to kill off PC gaming. Now, I understand their favoring of Xbox, what with licensing fees and the greater control developers (and MS) have, the greatly lesser piracy rate, and the greater push they can have marketing and shaping the dynamics of the platform because of their control. I find it surprising how MS seems to go out of their way sometimes to make PC gaming actually worse.
I can see why you think that blunders were made by Microsoft when you look at it completely from the PC side of things.
For Microsoft to succeed in the console game market there was no way they could have repacked a PC and been successful. All those benifits of a PC console you list, different manufacturers, PC software, Windows, etc are the very reasons that it would fail. You have to remember that the console community and market is not the same as the PC market. Microsoft was not interested in the PC market, they already were well intrenched in the PC market, they wanted a slice of the console pie. Those very same features would turn off the console crowd. Just as you do not seem to be interested in a non-pc console (making an assumption here based on you not saying you own any or expressing interest in one) the people who do buy the Xboxs, Wiis, and the PS3s of the world are not interested in any of the "benefits" of a PC style console. For most they would be turn offs.
Microsoft was very smart in that it went to great lengths to distance the Xbox from the PC world. The skepticism and hatred by the console community twards Microsoft at that point was as hot as any "PC vs Console" or "Mac vs PC" fanboyism that exists today.
It has obviously worked out very well for them. In just two console generations they were able to come from no where and put them selves squarely in second place in the lucritive console market. Beating out Sony who was the juggernaut of gaming when the Xbox came out.
You are wrong about Microsoft starting the PC vs. Console war. It was already running hot. Microsoft just made sure they were fighting on both sides and reaping the benifit of doing so.
You are probably right about the inevitability of set top boxes that go out to the internet and act as a main hub for a lot of peoples internet solution. However I think that making the assumption that its going to be a PC or straight computer is a bit nieve. There are already millions of TVs with a console attached to them so its just as likely they will come out on top in that battle.
Emma, thank you for your thoughtful comment. After having to delete reams of nonsense in the past few hours, it's a breath of fresh air.
You say that Microsoft couldn't have re-packed a PC, I agree. I agree that it wouldn't have been a PC as you know it. However, are phones and PDA's and assembly robots and all of these other machines that run Microsoft software "PC's"? No, but they run Microsoft software and third parties integrate.
My point was that there was no reason to try to become Apple and Sony and Nintendo, because that's not what Microsoft does well. They should have stuck to their business model.
CableCard technology might be a bad example considering its current problems, but look at that business model. It's a specific piece of hardware/software that Microsoft makes available to Gold Partners. It's an open platform that people can build their own products around, within a very specific framework.
Microsoft couldn't do this with gaming? They couldn't produce a Windows Gaming SKU that turned their defined hardware ecosystem into an X-Box?
As far as the PC vs. Console war, no I don't think it has worked out for them, for the reasons I cited in my post. The relevance of Windows has never been lower, and there is a lot of competition in that space now. They've failed to decidedly WIN the console battle, which means they don't have a winner on either side.
Certainly, there's a lot of speculation here. Certainly, pursuing the "PC" would have been risky too, but since it stays closer to their core business strategy, I think it would have been far more lucrative.
Every system in the history of consoles barring the Wii have sold at an initial loss. It's a loss leader. That's the way of the industry. Attract people to your high margin products with an item you're selling at a loss. Microsoft's gaming division makes money on software, not hardware. Same with Sony.
Even supermarkets do this. Sell coke at a loss to attract the consumer and push high margin items.
"barring the Wii" !! That's why Nintendo has slam dunked this generation of gaming, and has changed the rules of the industry. Read "Blue Ocean Strategy".
No truer words have been spoken.
And yes, most of those who started the X-Box farce over at MS, are no longer there.
I have said this before; the worse thing that could EVER happen to PC gaming, was for MS to enter the console business.
For some time now we the hard core and old school PC game devs have known that it was only a matter of time before MS abandoned or killed PC gaming altogether since they're not making money on it like on the console closed system. Not to mention the fact that their attempts to monetize PC gaming via Games For Windows Live! backfired spectacularly. Then they had to give it away for free and literally beg publishers and devs to actually support it. Most of us with enough common sense, have just flat out ignored it.
TBH, I was half expecting Sony with their PS3 to give them a righteous spanking, thus leaving them in the #3 console position. That position would have seen the MS games division facing closure right about now.
But Sony in their infinite and totalitarian wisdom, decided to screw that up with the stupidity that is the PS3. Now they're paying the price. Serves them right. You only get one (maybe two) chances to screw up a sure thing the way they have.
I can remember back in the early '80s walking into a B. Dalton's, Software Etc., and so forth, the Apple II software occupied 90% of the shelf space, and most of it was for games. Apple dominated the private market, and thus the gaming market, for many years. The fact that their dominance in system sales to educational institutions gave them a leg-up on home sales was just icing on the cake.
Along comes Microsoft to observe this trend, and they began plotting to capitalize on it. Suddenly, toward the late '80s, the PC began to take over as the gaming platform of choice, and games for Apples/Macs started ot disappear from the shelves in droves. New system sales for Apple plummeted to a dismal <10% market share and has remained there ever since. To make matters worse, in the late 90s back comes Steve "I hate gaming" Jobs, who actively (some would say maliciously) discourages anything that might make Apple hardware an attractive platform for original game development. "This is a serious platform for serious art hippies," seems to be his philosophy... such as it is.
Now Microsoft is abandoning the very thing that helped them gain dominance in the home market. Even more perversely, they're doing it right at a time when businesses -- the other component of their software success -- have shouted a resounding "NO" to Vista deployment -- and those business aren't real keen on Windows 7 (a.k.a. Vista Redux) either.
There's a saying in business that for every person capable of building a successful company, there are legions waiting to destroy what made it successful in the first place. Microsoft is just the latest example.
Perhaps if the Linux codeboys could get their act together and make a smooth, soccer-mom friendly OS which also encourages game developers, they could capitalize on the vacuum. But judging by my last install of Ubuntu, that seems as far away as ever.
Oh well... at least there are still good indie devs out there for Windows. We'll see how it pans out. Meantime, I'll confine my console gaming to drunken bouts of Wii Sports at parties, saving my core gaming time for IL-2 and Eve Online.
I disagree that Microsoft's entry into console gaming is the worst thing thats ever happened to PCs.
I really dont think that it has affected PCs much one way or the other. If Microsoft had not gotten into console games I think that PC games would still be where they are today. Microsoft has been trying everything in their power to make PC games sell more. So maybe they did not do the right things and had they done things differently the PC market would be bigger. Its hard to speculate how different decisions on the windows games side would have changed the PC market.
I dont see how Microsoft getting into consoles has changed the PC game market. In fact I would almost argue that it has given some extra life to the PC game market. For as not-a-PC as the Xbox and 360 are, there is still a lot in common. The consoles use a variant of direct X. This makes it extremely easy to port games to the PC from the console allowing companies that might be drawn away by the more lucrative console market to keep at least one foot in the PC world.
Sure the argument could be made as Ed did that had Microsoft come up with a set top PC that was designed around gameing that allowed for seemless transition of games from the TV to the desktop it might be different today. However, as I argued, I just dont see Microsoft would have made huge inroads into the console market with a system like this.
I am a game developer that is exactly in the position I described above. We used to make PC games but the money in the console games forced us over to stay competitive. We still release windows versions of our games but we can only do this because of the close relation of the Xbox to the PC.
The reality of the situation is not that the PC market is dead or dying its just that the PC market does not show the same growth that the console market does. This growth is critical, years ago when PC was king it was much easier cheaper to make a game then it is now. Now its exponetially more expensive to make games but the PC market did not grow to match that.
To give you a rough idea of the differences a PC game that sells one million units would be considered a great success. On the consoles this would be considered mediocre to OK. A successful console game should expect to sell 10 to 20 million units. Now one million units of a game is absolutely nothing to scoff at, but considering the budgets of games these days can run up to 50 million dollars you might not see much profit. If your game happens not to do so good, well likely the company goes under.
I will just conclude by saying that PC gamers should be optimistic. Right now gaming is more strongly focused on consoles but who knows what the future will bring, especially as the video game market keeps growing. Dont forget the most popular and highest income game in the world, WoW, is on the PC.
With Microsoft closing the flight sim development its definitely the end of an era. Even with these set backs the future for video games is brighter then ever.
Emma, I am not trying to have a PC vs. console debate here. That's been had.
Like I said in response to your last comment, while I think Microsoft should be embracing the entire install base of PC's as a market for gaming, they should have also allowed for the "X-Box" ecosystem to exist as a "platform" for third parties to develop products for. Just like with phones, etc. And the whole thing should be directly compatible with Windows, so every game that is developed works everywhere.
What I'm saying, big picture, Microsoft made the wrong choice for themselves. They embarked down a road that brings them away from their core competency: developing software for integration by partners.
Well, I should probably be silent, but people in the industry know me for having a long tongue, so here it goes:
Microsoft Xbox 1 was little more than a PC in a different box. It looked bulky, and definitely catered to hardcore users. Move to sleek and fragile Xbox 360, and you get a console which is volumetrically even bigger than Xbox 1 (box+PSU), but looks nicer - and yet, Microsoft FAILED to capture the mainstream audience.
Microsoft Xbox 1 was the ideal console because that was the console that placed Microsoft in the 2nd spot (PS2, then Xbox 1, then GameCube), but it was also a key trojan horse for the developers. I cannot name developers that I spoke to for obvious reasons, but x86+DX graphics and easy portability to PC drove legions of developers from Sony and Nintendo to Xbox.
When Microsoft announced that the company is moving away from x86 architecture, the amount of pissed developers could be named in dozens. Legendary franchises such as Winning 11 (PES) moved to Xbox due to easy programming interface, and Microsoft made a living mess of it with Xbox 360.
If Sony didn't scr*w the pooch with hard-to-program Cell processor with its retarded limitations (14MB/s write-to-CPU speed, 256+256MB of memory instead of 512 unified, lack of programming tools, lack of documentation etc etc etc...), Sony would drop from #1 to #2 and Xbox would be nowhere.
It happened what happened. But Microsoft broke binary compatibility between in-order PPC and out-of-order x86 cores and many people were not amused.... one of quotes that I have saved from that time was this. This is a statement from a legendary developer whose games shipped in millions (published this on INQ loooong time ago). Name will remain concealed for lack of political correctness:
"Comparing Xbox 1 and Xbox 360 CPU is similar to comparing a racing horse to a dead cow. Instead of having one functional core, now we have three disfunctional cores. In fact, I think we should put blue (disabled people) stickers on every console, because that's exactly what Microsoft did. They took a racing horse and chopped of three legs. Now, they're asking us why we have all these problems with the code, and they only got themselves to blame".
Microsoft Xbox 360 as a console with PC graphics and dual-core x86 processor would have turned the world upside down.
BTW, Xbox 4 is going to be an interesting console... Intel is offering complete design, dual-core x86 CPU and base version of LRB chip, all in 32nm, set for 2011 frame.
For more specs of that concept, you will have to wait until www.brightsideofnews.com launches (yes, shameless plug here, can't help myself ;)
The Xbox was never imagined by MS to be simply a gaming console. What MS wanted was control of the "home theatre" system. In their minds, the future was going to be set tops that would control all of the home electronics (tv/video/audio/etc). And part of that was going to be a move away from standard computing at the time. This was an extremely scary concept for MS, because their business was all tied up in home computing - if people moved away from pure computers, they'd be in trouble.
MS tried putting out a purely "home theatre" designed system, but there wasn't demand for it at the time, and it flopped. But MS realized that lots of people were buying game consoles, and with proper integration, the game console could easily become the "home theatre" system. So that's what MS aimed for. Part of that, of course, required that the Xbox sell well, which meant that it needed top quality games. But again, MS wasn't interested in focusing on a gaming system, for them, that was a secondary benefit.
At this point, it's hard to say what MS is thinking with the Xbox, I suspect that they've fallen in love with the gaming aspect, as it certainly provides a decent revenue stream. And while consoles are still moving towards a "do everything" idea, they are doing it a lot more slowly than I think MS envisioned (and home computers, while trending towards laptops instead of desktops, is still a major market).
But I think it's clear that the main problem with that article is that it's made an incorrect assumption - that MS had any real interest in "gaming". Gaming was simply the carrot that they used to get people to buy the xbox for market share purposes, not because they had any desire to focus on gaming.
I'm going to completely disagree.
Sure, MS could have just sat on their hands and been happy with owning 90% of the market. However, business 101 dictates that you must ALWAYS try to grow your business. If you already own pretty much the entire market, you must either hope that the market gets bigger (which is beyond your capability to control), or you have to try to expand into a different market.
Since you want to stay close to your original field of interest (it makes no sense for MS to start printing hallmark cards), that means MS could have gone into PC Hardware or chip design, but those markets are already oversaturated and there's not much money to be made in them anyways.
So what's left? Consoles. At the time that MS jumped in with the Xbox, Sega had already quit, which left Sony and Nintendo to compete with. Bill Gates had also already said at the time that he envisioned the console becoming the centerpiece of the family living room, and that he wanted the console to become the centerpiece of all entertainment functions, most notably through a marketplace. His ideas of ordering pizza through the Xbox might have been a bit goofy, but it shows his intent behind it. If you get a console into 50 million homes and can charge the people 5 cents per micro-transaction, that's a seriously insane amount of money you're talking about.
So MS's journey into console territory was, imo, well reasoned and planned. The reason it hasn't done as well as expected (though I have no idea what MS expected), is because they made the stupid decision to force "being first" for the 360 at any cost, which lead to a production line which was running at... 16% efficiency? (I think, I can't recall the numbers.)
MS's decisions on Windows are, imo, completely separate from what they did with consoles. Now, Microsoft WANTS every PC gamer to switch to an Xbox. Why wouldn't they? They've already got an entire division working on games, they probably don't feel too happy about having to double up for their Windows department. MS would just love it if games were all on the xbox, and Windows could just be released for corporate and casual home use owners.
I have no idea why they were blowing the stupid smokescreen that "Vista is for gamers!" when it's been clear from day one that that was just total bullshit, and they've never intended to make any kind of effort into making windows more gamer friendly. Maybe they thought that they could sneakily kill windows gaming, or something.
It's easy to say in hindsight "Well, if they had just focussed all that money on Windows, they'd be making a lot more money now!", but would they really? Suppose they HAD made Vista an asskicking game friendly OS. Would they really have gained more than that 90% market saturation already?
Console gamers are, by and large, a fairly generalized bunch. They want to play on a big screen TV, in their living room, have buddies over. They don't want to sit behind desks looking at (relatively) tiny screens, fucking with drivers for five hours to get a game to run.
I also fail to see why you harp about third party partners. Where does he get the idea that Microsoft designs all this shit themselves? The Xbox has IBM cpus in it, standard DRAM memory, standard harddisk, and an ATI graphics unit. What in this was exactly designed by MS itself, apart from the OS? They also have a TRILLION third party partners that make games for them, and from which they get licensing money.
Has this decision made MS money? Their books say it hasn't, but that's probably mostly because of their loss on the repairs. I also believe that MS stated, when they started, that they reckoned it would take at least 5 years to start making a profit.
It's easy in hindsight to criticize, but when they made the decision to go into consoles, it made sense for MS to do so. That Nintendo is currently both wiping the floor with MS AND Sony is something nobody had foreseen. That a gimmicky controller strapped on aging hardware would lead to a giant console explosion couldn't have been predicted.
I find the conclusion that had MS just pumped all this money into Windows, they would have made $billions$ of profits more to be lacking of any explanation where that billions more would actually have come from.
This is not about the games industry - it is about a software giant who made a terrible decision by abandoning what they know (Software, PC's) and blindly and inelegantly belly-flopping into the world of console hardware, something which they had ZERO experience and little reason to presume there would be much success from the beginning.
True, the XBox has beat the pants off of the Sony machines, and is definitely more of a "gamer's machine" than a Wii, but we are talking about business decisions here, not whose system is best. So, the question stands: Was the investing billions of dollars by a software company into a hardware project whose model was based around losing hundreds of dollars per unit produced and hoping that bastardized sales dollars of 1st and 3rd party software would make up the difference and yield profit a sound strategy? In my view, given that MS is in the red and hemorrhaging money at a record pace for the first time I can remember despite the runaway success of the Xbox 360 is a pretty sure sign that it wasn't.
You can say that hindsight is 20/20, but when you look at the way MS poured the lion's share of it's resources and capital into such a dubious business model, and in doing so siphoned resources away from the PC and software side in such quantities that those markets, which should have been their "hedge bets" as it were, were horribly under-served(see Vista, PC Gaming Alliance, Games for Windows, aka colossal failures), it really wasn't that hard to predict an unhappy ending.
@Theo : I understand that you're saying Microsoft made some serious errors in their hardware designs around the 360. But what I'm saying is WHY did they need to develop the hardware for the original XBox or 360 AT ALL? The original XBox was built on x86 technology -- so why not let Dell and HP, and whoever else wants to, make their own? Why close the ecosystem?
@ Emma
I dont see how Microsoft getting into consoles has changed the PC game market. In fact I would almost argue that it has given some extra life to the PC game market. For as not-a-PC as the Xbox and 360 are, there is still a lot in common. The consoles use a variant of direct X. This makes it extremely easy to port games to the PC from the console allowing companies that might be drawn away by the more lucrative console market to keep at least one foot in the PC world.
uhm, thats very wrong. For one thing, the console is a closed system. So MS controls it. They also control what games go there. It is also closed to everyone but publishes. The PC doesn't have any of these issues because you don't necessarily need a publisher to sell your PC game.
Any dev who has worked with MS on consoles (even XBLA, XNA etc) know how convoluted and heavy-handed dealing with them is. It is stiffling and with no upside. Even those jumping on the XNA bandwagon, are slowly finding this out.
Even with XBLA, which was billed as something that it no longer is, has been locked out to publishers. Yet, with the exception of a few titles such as Braid, that store is packed with complete.utter.rubbish. Cluttered. Convoluted. And only a few gems.
The first mistake they made was limiting XBLA because they wanted to cover their butts over their brain dead decision to release a SKU with no HDD. So now XBLA had all these restrictions on file size and such. When they finally increased the file size, nobody cared because much of the same heavy handedness, Red Tape and wanton tomfoolery, prevails.
They originally touted XBLA for indie devs. They lied. Once the publishers started getting on board, XBLA became the lite version of a standard retail XB360 game. When publishers realized that XBLA was FUBAR, they didn't bother with mainstream releases on there, but just stuck with the status quo, and only occassionally releasing the usual tripe in order to grab some residual income. Income which btw amounts to nothing, compared to the alternatives.
MS took the popularity of the XB360 - and their lead over PS3 - to go back on their original position and promises.
Most of those who did that, are either gone or on their way out. The people moved into new positions are going to be doing pretty much the same thing.
With the demise of PC gaming as we know it, publishers and developers (who need a publisher to get a game on the console), have no choice but to tow the line.
As soon as Sony get their act in gear, it will be game over for MS in the console space. MS eventually screws everything up up. So it is only a matter of time.
The dearth of talent - mostly due to lost jobs - is a direct result of devs abandoning what they know, used to, and love on the PC gaming side, to go look for work with publishers on the console side. Where - at the very least - they'll get paid. That results in glut and an excess in talent all pooling for the same resources. When the income can't sustain that influx, the result is what you have seen with all these closures and layoffs.
There was a time when you could pitch a really good game and concept to a publisher, get it funded, released etc. Now, if you're not talking about a game based on someone else's idea or game, and its not multi-console at the very least, don't bother.
To make things worst, publishers keep outsourcing overseas because it is cheaper to pay a studio of twenty $500K USD a year, than pay a US studio of ten $2m USD a year to do the same job. When it comes time to trim the fat, it is usually the more expensive talent here at home that gets the axe.
The inflated rising costs of console development is just that: inflated. And this is due mostly to the fact that publishers are throwing a lot of bodies at a game, rather than throwing the required talent at it. To wit: An XB360 console is no more expensive than a high-end PC. OK, so you could probably buy two mid-range PCs for the price of a dev kit, but the fact is that the talent (devs, artists, modelers etc) don't cost more because they're developing on the console as opposed to the PC. Most of the costs of console dev comes from one single thing: marketing.
Publishers - more often than not - end up spending more money on marketing a game than they do on the actual development. And since all costs are attributed to the game, it all adds up.
A $30m budget for a console can be made for a little on $2m on the PC. Same game. Same assets. Same everything.
It is this bloat, waste and foolishness that has led to the meltdown in the gaming industry.
If MS had not entered the console gaming business, the PC would be a far better position than it is now. When it was just the PC and PS2, the PC gaming business was - even in the face of piracy - booming. Now, that [inflated] boom is coming from the same usual suspects who release PC offerings as residual income since the bulk of their earnings come from the console sales of the same product.
When people look at PC sales - and think WoW or MMOs - they're barking up the wrong tree. I dunno about you, but I'd rather see ten good PC games be counted, than one single behemoth that is WoW.
I have been doing this since the early eighties and I have seen the trends - and I know a LOT of people in this business. Most just want to stay in their jobs and earn a paycheck.
So I say it again, MS entering the console gaming business essentially killed PC gaming. Period.
All that money they spent chasing Sony, could have been spent on DRM and integrated copy protection initiatives since they have the upperhand: the Windows OS.
@ Theo
If Sony didn't scr*w the pooch with hard-to-program Cell processor with its retarded limitations (14MB/s write-to-CPU speed, 256+256MB of memory instead of 512 unified, lack of programming tools, lack of documentation etc etc etc...), Sony would drop from #1 to #2 and Xbox would be nowhere.
Indeed
At this point, it's hard to say what MS is thinking with the Xbox,
No, its not hard at all. Despite having the best minds (e.g. Blackley, Fries et al) MS proper had no clue. As Dean in both of his books on the making of both consoles said: Thr sad thing about the [xbox] project was that people got chewed up in the pursuit of Sony as if it were the only way to get the job done.....The Xbox was the product of a chain of flawed individuals, and yet by many small miracles it came into being.
What I don't understand is if the money is in the software, then why doesn't MS provide an emulator to run Xbox on PCs?
Great article. The original xBox was the last time µ$ tricked me into paying money for one of their products. I was pleased in the beginning, but the promises never materialized. Nothing ever compared to Halo, no family-friendly titles ever, and no services to make it a real set-top box. A few short years latter and they try to sell me a 360? Fool me once, shame on you. Fool me twice, shame on me. I actually gave my xBox away!
The X-Box was not just a way to make revenue. It was a way to get MS into the living room.
Although they could have relied on partners to do this as well I'm assuming they saw Sony as a competitor that would somehow work its way from the living room into the home office.
Of course this is silly, but I imagine it still was a thought.
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