Stupid, Stupid xBox
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Previous gen:
> Xbox sales: 24 million
> PS2 sales: 153 million
Current gen:
> Xbox 360 sales: 76 million
> Wii sales: 100 million
> PS3 sales: 70 million
(all data from each console's respective Wikipedia)
How is it "crushing" its competitors?
Otherwise, I bought an XBox360 recently to get the Kinect for openFrameworks hacking and played a little bit with the console. All the points in the article regarding the UI are spot on - it is TERRIBLE to use. Nintendo's UIs are no reference either, but at least they're functional, while Sony's XMB is actually quite good (although the PS Vita's OS is a horrible thing to behold, which is scary for the PS4).
- Through 2005, the Xbox gaming division had lost over $4 billion [1]
- Microsoft took a charge of $1 billion dollars on its June 2007 income statement to account for the cost of replacing bricked Xbox 360s [1]
- Xbox 360 and PS3 losses total $8 billion [2]
Luckily for Microsoft, they've had the cash to burn to strong-arm their way into the market. The units sold is nothing too impressive when you account for losses.
1. http://en.wikipedia.org/wiki/Xbox_360#Timeline_2
2. http://www.vg247.com/2013/01/07/xbox-360-and-ps3-losses-tota...
Or are you saying that, taking licensing into account, the Xbox still lost money for Microsoft?
2005 and 2007 were a long time ago. Do you know of more recent numbers?
The second link has recent numbers.
In what world? The Xbox has been turning a profit for most of its life. AFAIK it lost money its first couple of years (primarily due to the fact it was rushed to market), and since then it has been largely propping up Microsoft's entertainment division, which otherwise would be bleeding like mad. (The division lost money last year not because the Xbox was unprofitable, but because it wasn't profitable enough to cover Windows Phone's tab as well as its own.)
That, and the fact that nobody in Japan wanted to buy one.
You hear people say this a lot, but based on my experience, it's basically bullshit.
Japanese people love non-Japanese stuff, and indeed, being foreign gives a product cachet.
However, they're also fairly different than American consumers. In particular, they're (1) super picky (in a way that Americans really aren't), about quality, but also style, reputation, etc, (2) not so price-conscious, and (3) maybe a bit more reluctant to take a risk on something unknown.
In the case of the PS2/3 vs. the xbox/360, the PS series had a huge name-recognition / familiarity advantage, and better support by Japanese game makers offering popular series. MS tried to prime the pump by pushing some "Japanese style" games heavily (and paid through the nose for prime placement in shops), but if you're a Japanese gamer who experienced the sheer massive volume of domestic content for the PS series, sticking with it seems pretty sure bet. Moreover, the high price of the PS3 was a bit less of an issue than with very price-conscious Americans.
Look up the "chicken tax" sometime.
Ecomonomics?
> The Xbox has been profitable for most of its life
No.
https://docs.google.com/spreadsheet/ccc?key=0AmSmlk-Wo4uhdEh...
"it lost money its first couple of years … and since then it has been largely propping up Microsoft's entertainment division, which otherwise would be bleeding like mad."
That is exactly what that chart shows. The Xbox has been turning a yearly profit since 2008, which means it's been turning a profit for most of its life.
Their strategy worked brilliantly, and none of their competition has such a strong competitive advantage. Does it matter that it was expensive to acquire all those Live subscribers? No it does not. They made a huge bet on the future, and they had obscene amounts of cash available to do so.
While Sony has spent the last few years trying not to go bankrupt, Microsoft is sitting on nearly $70 billion in cash. While Sony can't make a profit, Microsoft is generating $6+ billion per quarter. Microsoft can afford to make long term bets; Sony cannot easily replicate that approach.
If the PS4 isn't successful, Sony is done in the console business. Given Microsoft's failure in tablets and smart phones, you can bet they'll spend whatever it takes to keep the XBox relevant in the living room.
The latest Nintendo console is going to be a flop (on par with the GameCube), leaving only the PS4 as real competition in traditional console gaming. Microsoft will widen its Live advantage over Sony & Nintendo accordingly, becoming one of the few subscriber kings (along with Apple, Amazon, Netflix).
But I have doubts. Even if the PS4 / WiiU fail and Microsoft does "spend whatever it takes to keep the XBox relevant in the living room", will that be enough? Microsoft wasn't shy about spending money on Zune, Windows phones, or tablets -- but the Zune is gone, the Windows phones have low single-digit market penetration, and the latest tablets don't seem to be doing better (we'll see, but it's not looking good).
Reasons I'm doubtful about the future of the Xbox:
1. It's not competing against the PS4. It's competing against Steam boxes, Android consoles, phones, and tablets. Not direct competition, but competition for our attention.
2. Indie games were big in 2012, and 2013 is looking bigger. Microsoft's platforms (other than Windows) are looking less palatable, especially for newer studios. Larger studios still fail as often as they ever did, but they're not getting replaced. The AAA titles will keep coming, but they're competing with scrappy folk who license the Unity and Unreal engines for prices that are very friendly... until you want to release your game for the Xbox.
3. With every generation of consoles, it becomes more difficult and expensive to produce content that leverages the new technology. It was a long time before people figured out how to produce content that really made the PS3 look better than the PS2, although much of that was due to architectural decisions. It may be that the survival of the Xbox depends more on what the market looks like in 2015 rather than 2014 or 2013. What will Apple have released by 2015? How many indie studios will have edged the behemoths out of the industry?
4. New generations of consoles no longer provide additional media functions that consumers desire. Two generations ago you got a pretty fine CD player with your PS1, last generation you got a DVD player with your PS2, and this generation you can play Blu-Rays or stream content from Netflix/Hulu. What's left? We have a PS3, but much of its justification was as a way to play Blu-Rays, Netflix, and Hulu.
On a side note, every time I've stopped by Ground Kontrol (the local arcade) recently, it's been packed. Even with a cover charge, even when most people have work tomorrow, even when the machines cost 25¢ per play, the doorman was turning people away because the building was at its occupancy limit.
Live is based around mainly exclusionary practices - delaying demos, preventing you from playing multiplayer or using Netflix. PS+ on the other hand offers discounts and even free games (while you subscribe).
What was surprising about last generation was how Nintendo kicked everyones butt in the beginning.
- People buy more games per console (not even including digital sales) on the Xbox which is the real money-maker
- People pay Microsoft an annual fee for XBL which their competitors provide for free
- People spend more money on XBL on top the annual fee compared to their competitors for digital goods
- They actually get ad revenue for XBL on top of the annual fee and digital goods revenue
I beg to differ, as the NXE and the Guide are comparatively a joy to use, and while the Metro one has available real estate plagued by ads and feels lacking WRT what it could be (e.g pinned apps should stand front and center), it is enjoyable enough. There are a number of system-wide underused features, like global vibration settings, global racing games and fps mappings...
XMB could be great but pales in comparison due to poor choices, limited development, and is injecting crap I don't want call to actions like Singstar in my Games entries, while the settings area is a complete mess.
Pet peeves:
* It stings a little when I hit the PS button to look at the (missing) time while in game.
* It stings a lot when I have to manually toggle the DST setting
* I cringe every time I have to manage downloads on the PS3
* There's no way to have multiple profiles connected and save progress and trophies for coop games (the Halo series leverages that to great end)
All in all both have their shortcomings, but it really feels like the xBox acts as a modern platform/system whereas the PS3 acts like a PS2/Dreamcast era console.
I am wiling to guess that game development will follow the path of app stores. Consoles like the OUYA [1] will start to take over. The cycle from development to distribution will be cut by orders of magnitude. xBox needs to get on it and so do the other consoles!
[1] http://www.kickstarter.com/projects/ouya/ouya-a-new-kind-of-...
"Why can’t I write a game for <device with a CPU> tomorrow using $100 worth of tools and my existing Windows laptop and test it on my home <device with a CPU> or at my friends’ houses"
If as a company you're going to push for any device (game console, tablet, TV-box, phone, etc.), that seems like a number one pre-requisite to significant market share.
However, I just do not see the never ending thirst for apps that people act like exists. What I do see is people enjoying well produced, well adapted, easily distributed pieces of software that do what they need, whether that's in the form of a web application, a mobile app, or a desktop program.
I don't see people just flat-out demanding apps. No one says "I'd prefer to type all my documents on my 9 inch touch screen device" when there's a nice, light, ultrabook with a keyboard right next to it (and the same office suite on both devices).
HOWEVER: of course people want their devices to be able to do lots of cool things. However, that's only if you can do LOTS of really cool things and do them well.
Everybody, even your grandmother, snickers at the shoes equipped with a Twitter reader. There are limits, and developers would do well to take a good hard look at those limits.
There are some interesting forces at work here. The amount of time and effort needed to build a truly cutting edge game console has historically been high, further tools to get the most performance out of the hardware have required similar investments in expensive engineering time. This combined with selling the consoles into a very price sensitive market.
In order to recoup those costs, given the market realities, the console makers have traditionally resorted to extracting a 'tax' out of the game developers. On the theory that charging a few extra $ for your game to cover the cost of the tools / access is possible, whereas trying to fund the tool development on the back of base console sales is not possible.
Historically this has been the PC's "secret" weapon against game consoles for a long time. The cost of building tools was offset by developer fees across a much wider base of developers. "Free" tools were good enough if the hardware was sufficiently over powered, and gamers would spend $3500 on a machine that "normal" people would budget < $1000 for. That makes things flexible.
Then there are the phone games, which like PC games, have the advantage that the phone is useful for other stuff and there are more developers trying to write apps for it.
Ooya's promise is that the existing Android infrastructure / developers will support tool development, and the wide variety of handsets will constrain there efforts to work on systems that are similar to the modest abilities (relative to all android platforms) of the Ooya console.
So to respond to the articles point, the reason you cannot write a game for Xbox using $100 worth of tools is because if Microsoft only got $100 from everyone writing a game for the Xbox you would not have enough money to actually create the tools, much less support them decently. Their best effort at this was XNA but they have since killed that due to lack of adoption, if you are EA you can pay big bills, if you aren't, there are not enough of you to pay any bills.
Those are typically not the graphics-intensive ones. I'm not sure what specs your machine make it into a 'gaming' PC, but I have yet to see anyone in the industry call a machine with the specs that 1000$ gets you today a 'gaming machine'.
Actually it is 25$ once and for all.
Google Play, as far as I'm aware, don't do this for every country you sell in. Leading to situations where you may be liable for tax payments but won't know it unless you do the research yourself. This is discussed in more detail here: http://retrodreamer.com/blog/2012/03/why-dont-we-have-paid-v...
The source is messy and compiler-specific, and many implementations are irrelevant to modern systems. For example, I recall Chapter 14 is about implementing multiplayer over serial cable by directly writing to I/O ports in assembly language to drive the UART. I never did get that to work, but trying to translate the book from the Watcom C + MASM toolchain to the QBASIC + DEBUG toolchain -- without access to a working copy of the former and zero prior C experience! -- actually taught me a lot.
So maybe there is a reason toolchains should be expensive -- to encourage starving students with lots of time but little money to expand their minds by jury-rigging alternatives :)
[1] http://www.amazon.com/Tricks-Game-Programming-Gurus-Andre-La...
It might interest you to know that according to http://en.wikipedia.org/wiki/DJGPP, there's been a DOS port of gcc since 1989.
Why? Because it's going to be an inferior product with an inferior ecosystem that no average gamer is going to trust to stick around. People stick with what they know and have liked in the past, unless you give them a very substantial reason to change direction (positive or negative).
Some people want OUYA to succeed, but that's not reason enough for it to.
Apple has the infrastructure to deliver games, has tiny/medium/large touch devices that can connect via bluetooth in many customers hands (which already play games), and many many game developers familiar with the platforms. Every big studio has an iDevice team and there are hundreds of good iPhone games out there. If Apple can position the AppleTV as a console (maybe open it up to developers) or build something more along the lines of a traditional console, they will crush.
You can already do cool stuff like stream the game to the TV via airplay and use the device for a score/map screen (basically a WiiU) and it works surprisingly well and doesn't need cords or anything.
The only other real competitor here I see is one of the bigger android vendors like Sony or Samsung. If Sony could get the company in shape and stop producing products that compete with each other, they have many of the same advantages as Apple. They have android devices, experience making console/tv/etc hardware and even own game studios. They make every kind of electronic that goes in the tv room. But Sony has had this for years so that seems unlikely. They have already had huge employee slashes and are floundering.
Samsung has the same thing going on. They make everything and they have huge android phone/tablet penetration. I could see them easily jumping in on this and I hope they do. More competition blowing the doors of this stagnant industry could lead to a renaissance of smaller game studios.
EDIT I should add that Valve also has a chance here. There are many rumors swarming about a valve console or something similar. They have the distribution system and the games market experience, but have no experience with how to make hardware. Remember the last time that happened? I believe they called it the "red ring of death". I'm not saying valve can't pull it off but hardware is hard to get right. I look forward to what they do.
I have to say I find a lot of Apple stuff maddeningly quirky as well, and don't think they have a magic fix for this space. But they could certainly shake the space up if they choose to enter it, and I wish they would since more competition is good.
This opinion is pushed around a lot, however I cannot really see it happening, and I doubt Apple will ever pursue such a strategy.
For Apple to enter the console market, they would have to compete with the big boys, meaning if it can't push 100 million polygons at 1080p it will never get great adoption (who will want develop for a console with graphics out of 2005, and who will buy a console that doesn't have Call of Halo 7?). This means they have to create a modern console platform AND sell it at the price of an iPad. I'm not sure how the ghost of Jobs will take the news once he finds out Apple is selling hardware at a loss.
Next I doubt they would have anything to gain other than "you can now play CoD on the Apple ecosystem." They would lose money on the hardware, they wouldn't make much on the software if App Store profits mean anything (http://articles.businessinsider.com/2011-07-11/tech/29964545... reports they may have made ~$300 million). It just doesn't seem like a good idea finically. As far as the game console ecosystem goes I don't think MS/Sony/Nintendo will ever have to worry about Apple.
All in all, I am not really convinced that the App Store market will work for any of them. I strongly believe only Valve has the resources (and direction* ) to transition into the digital delivery era, at the expense of introducing yet another company into my living room. Still the question is how do you effectively deliver a magic box capable of playing Call of Duty at 1080p at the price of current consoles sustainably/profitably. Vavle's success so far doesn't worry about hardware. Their customers are either willing to spend $1000+ on a gaming every couple years, or just suck it up and blame Dell/HP for why their laptop can't play CoD.
* If Sony got their shit together, you are right, I believe they would take over the living room. They almost did it with PS2, and if the PS2 had come a bit later, or the PS3 was able to sell as much they might have done it. I think Sony could have built an Apple level brand loyalty (in the sense of having a Sony Computer, Phone, Laptop, Console) and (if they got much better at software development), they could have built a Sony store to manage your content on all those devices (after all they already own most of the movies and music). In another universe Sony may have been a Google + Hardware.
I think they could build a next-generation-console-capable Apple-TV and sell it at or below $199 while keeping their 40% margin. They would sell you each additional wireless controller (and it would be sweetly designed, I suspect) for the standard $79 peripheral cost.
The primary contributor to their bill-of-material cost savings vs. competitors is that they already own and/or license at huge volume their CPU and GPU cores and know how to fabricate them in multi-core formats with high-speed cross-connectivity. They can also buy RAM and flash for SSD storage at better costs than anybody else. These are the primary cost drivers (basically money flowing to IBM, nVidia, etc for CPU/GPU and money flowing elsewhere for RAM/SSD/HDD) for xBox, PS, Wii.
Apple would have dramatically lower overall startup costs versus the original xBox/xBox360 and PS2/3 given they already have a toolchain and SMP operating system with sandboxing, an App Store and its back-end, user-accounts and payment infrastructure, and numerous other costs shared with the rest of the Mac and iOS ecosystems.
Apple wouldn't have a lot of work to do to train developers: tell us the screen resolution, how to interact with the controller and any other new hardware capabilities, tell us anything special about the GPU's and let us go to town with the existing toolchain we are using for iPhone and iPad.
So, again, I have no idea if they'll do it, I just think it would be a very profitable business for them.
But yeah, I could see your scenario happening. It would probably be amazing either way
When the iPod was introduced it didn't compete on tech specs with the other music players. "No wireless. Less space than a nomad. Lame." - the famous last words dismissing the iPod.
When the iPhone was introduced it did have innovative tech but it was secondary to the overall experience.
I'd say when, not if, Apple really wades into the TV market, they should be able to achieve the same kind of disruption. TV's are an obvious choice for Apple, because the TV is one of those consumer electronic devices that occupy a sweet spot between status symbol and the everyday always connected lifestyle.
Thanks for the article. Sony/Microsoft/Nintendo better watch out!
Now I am not too keen on the video games industry and an insider might have differ, but I've tried to do my fact checking. In a way the device you described for Apple's target specs is what Nintendo did the Wii - and were hugely successful for. They sold 100s of millions of units, and it wasn't sold at a loss so they minted money. However, despite their huge shipments, only Nintendo enjoyed success. The people who bought the Wii, only bought 1 or 2 games (like WiiFit and WiiSports) and it became incredibly hard for third parties to market big budget games to them. Effectively the 3rd party abandoned Nintendo.
Secondly, if the system is not powerful enough, I believe gamers will reject your platform. I believe this is more important than the "No wireless" issue because gamers are the only ones who will spend $59.99 on a big budget game, and as a result 3rd party companies will suffer. You can't sell Call of Duty at 99 cents, and gamers don't want to play a Call of Duty that looks like it was made in 2002.
So the market, I believe splits into 2 groups - 1.) Average folk, who want the box. 2.) "Gamers", who want the software.
We can already see this today. There are Netflix Machines like the Roku (1.) and consoles (PS3). However I believe that the the console guys (Nintendo/Sony) will eventually win out, because they provided the hardware (the hard part) first. Its relatively simple to get the indie devs on your side - open up the platform. But to get the big budget guys on your side you have to convince them that they won't waste 50 million producing the next CoD because it will be drowned out by the likes of Angry Birds and Temple Run.
Lastly, I am not sold on the fact that Apple will be able to push the same numbers as Sony on Apple TV without "big boy" support. If EA is not going to support your system I don't think the Apple Box will sell as much. (the Apple TV only sold 2.7 mill while PS3 sold 10 times as much). While Apple is known as the company that can sell a brick to the masses, I am not sure they can sell 25 million consoles without some big franchise names at launch.
Microsoft's huge win on both PC and Xbox has been their active and aggressive devrel for games, which was where Sony stumbled hard on the PS3 (Cell processor development difficulty abound).
I'm not sure Apple will/would do it, but I think they have the muscle. They aren't competing with CoD, they are competing with Tetris. They want you to buy and play games on your media device, not watch media on your games device. Hugely different market which is ripe for picking.
Apple would probably not build a device they lose money on: that isn't their game. They are a hardware company and they make their money on hardware. This is why I assume they would build something similar to the AppleTV with maybe a bit more juice: rely on the iPad to deliver the CPU juice and the AppleTV (or whatever) to show the content. "Everyone" already has an iDevice, leverage that and jump in.
If your console cannot play Call of Duty and Mario like the big boys, you aren't really competing in the same space, and as long as Mario and CoD are popular, your average person will simply just buy the iDevice and a Nintendo. Now if the Nintendo has the advantage of doing everything the iDevice can do, most people will simply opt to buy the Nintendo, especially if they are being sold at the same price.
So yeah at first Apple will compete with on delivering simpler game experience like Angry Birds or Space Team or Letterpress. But so what? People love those! Don't forget that "hardcore" gamers are no longer the focus here, other markets are much bigger. Apple can wait to focus on bigger titles.
If you look at the Wii sales, you'll notice polygon pushing does not equate sales or profits.
I'll agree with you on principle, though. While gameplay > graphics every day of the week and twice on sunday, coming to the table with graphics from half a decade ago in this market is rather.. unwise. It's a huge blow to developers, a huge blow to imagination, and a boon to their competitors.
I met with them last year when they were talking about possibly acquiring Bionic Panda Games (which unfortunately didn't happen) and they seem to have an interesting business model. Every game will have a free version, either a full but limited version or a playable demo, and they'll have their own store similar to Google Play.
The only deficiency is that they don't have a motion controller like the Kinect or Wiimote.
Hardware is hard; software is hard; distribution is hard; but they want to do all of it all at once. I wish them the best but I don't see them lasting unless they get acquired
My Playstation 3 forces me to do various updates to watch Netflix (which is what I use the system for 90% of the time). All of the systems ask you to input text in a super-awkward way to setup various aspects of the system (on-screen keyboards really suck for typing in complex WPA2 passwords).
The XBox 360 is the most annoying by far, as it constantly bothers me about signing onto Microsoft Live. There were some fraudulent transactions on my account (which I thought was super-odd, because I use lengthy/unique passwords on everything), which Microsoft (after a 30-day period) refunded to my bank account. But I haven't been able to sign onto XBL since, and haven't really bothered to call Microsoft for support. The PS3 doesn't constantly bash my head in with sales and random junk when I just want to watch Netflix. Also, Microsoft seems to think that UI changes every 18 months is a great idea. They don't seem to add much value.
Sadly, the Wii has been turned on maybe three times. It kinda feels like a dinosaur at this point. I use my Raspberry Pi more these days for gaming...
It makes me wonder whether this will be the generation where consoles can no longer get away with having poor UI design.
That being said, the author has a strong point in regards to the indie game market. Game development could and should be as simple as it is on Android because the platform's support is there... it's just locked behind layers of legal and financial obstacles. I'd love to see an xBox Live market where indie games are strongly promoted, and I can't imagine the cost to Microsoft would be strong enough to outweigh the revenue gains they'd make if they took a percentage of sales.
Browsing games to buy on the Xbox itself is painfully slow. Many, many, seconds, just for simple screens to load.
This guy totally nailed the reason I don't start up my Xbox as often as I'd like: It's annoying to get into. Once I'm in a game, it's _usually_ OK, although the slow saving thing is jarring. But the thought of it starting up, asking to update and reboot (usually 2 or 3 times in a row) - ah screw it.
- It gives official confirmation of the (somewhat obvious) idea that the XBox was a defensive move against general living-room entertainment boxes.
- It shows that he has a very distorted view of the gaming landscape, if the truly thinks that the XBox is the dominant platform, or that mobile games are a genuine threat to console gaming (they most certainly are not).
- He singles out Apple of all companies, as the biggest threat to mobile gaming, despite the fact that Apple doesn't seem to be too interested in anything other than simple 99¢ iOS apps, dismissing the companies like Nintendo who, for all their recent troubles, have a long and storied history with gaming that Microsoft can only hope to compete with.
- He brings some good points about the interface though. But that's honestly not the XBox's biggest problem.
Ask Blackberry how far not worrying about Apple got them.
The threat of mobile gaming on the PC/Console gaming landscape has been recognized by some of the largest stars in the industry, eg: Gabe Newell states Valve wants the PC in the living room but the biggest competitor is Apple.
[1] Dice 2013 Keynote with Gabe Newell at 7:30 minutes in. http://www.youtube.com/watch?v=PeYxKIDGh8I
Notice how Gabe is talking about how Apple is a threat not to consoles, but to PCs moving into the living room (i.e. his company's plans). To people who don't know the industry well, this might not be easily differentiable, but the reality is that the two come from fundamentally different lineages.
The thing that sells gaming platforms is not "natural progression into the living room", not an "upgrade cycle", not "development tools". It's the games.
If Apple takes a similar approach to living-room gaming as they took to the iPhone, with an open development platform, or an "Apple TV" that plays games, but is not primarily focused on games, you'll see roughly the same quality of games come out there as on the iPhone. And notice how no iPhone apps sell for more than 99¢ these days.
Apple has no history of game development. It's not a part of their DNA. And the gaming industry is a difficult business to succeed in. So to take any other approach would be monumentally difficult for them.
The biggest threat to console gaming is not Apple. It's the consoles themselves.
Consider the case of the iPhone vs. handheld consoles. The iPhone was released in the heyday of the Nintendo DS. The DS sold like hotcakes throughout its lifecycle, and didn't slow down at all even as the iPhone's app store exploded onto the scene.
It was only once the 3DS came out that handeld consoles started to have difficulties. Of course now everyone starts blaming smartphones for taking the market away from them, but look at the console: it has a lineup of games that's mediocre at best, it focused on 3D features that nobody cares about, it had hardware flaws like a terrible battery life, and it was very expensive at launch. No wonder it disappointed.
If consoles end up failing, they will fail on their own merits. It won't be because of an app store.
I always thought xBox looked cooler.
I'm not saying "Xbox" is necessarily the best, or that I even have an opinion, but it does happen to be the correct capitalization.
However, the xbox is crushing its competition, in several ways, and let me explain why a naive reading of unit sales is misleading.
Many consoles sell at a loss, especially initially, or on a very small margin, console sales alone are meaningless. Console sales themselves just serve to expand the player base, enabling follow on game and service sales where the vast majority of the profit to the console maker and of course to the game makers comes from.
Here's where things get interesting. Nintendo has always sold everything at a profit, so they've never lost money on incremental console sales. However, again that margin is still fairly small, what they need is game sales. And for the Wii that's been a disaster. They sold a huge amount of consoles but a lot of the people who own them don't play them very much, and they don't buy many games. This is a big reason why Nintendo has stopped making a profit overall as a company the last few quarters, which has been rather disastrous for them.
Now let's look at Sony. They started off with a crazy console design, which is almost an experimental prototype device, this is not the sort of thing one usually does with a console. The result was that the hardware of the console was hugely expensive, which meant that they were losing a huge amount of money on every console sale, about the same as the cost of a Wii. This meant that Sony needed to have strong follow-on game sales to make up for such huge loses. However, because the console was so difficult to develop for they struggled with game availability for a long time. Eventually these factors started to become less of a problem. Multi-platform game engines eventually matured sufficiently to where it wasn't a huge problem to target PS3/360/PC releases for most games, and that has helped PS3's game library tremendously, in addition to a very small handful of excellent exclusive titles (such as Little Big Planet, Heavy Rain, etc.) Also, eventually Sony managed to reduce the hardware cost of the PS3 down to a point where they weren't bleeding money on each sale so horrifically. However, despite all of this improvement it's questionable whether the PS3 has made a total profit for Sony overall, and if it has it's likely not very large. Worse yet, a lot of Sony's big efforts such as the playstation network and the Sony Move have not taken off and not garnered much enthusiasm in the market.
And then we get to the 360. This console certainly has its fair share of problems and debacles. At launch it was definitely sold at a loss to the company. It struggled with reliability problems and expensive warranty extensions through many of the early hardware iterations. And sales in Japan have always been weak. But, somehow it managed to come out ahead. The 360 never sold at as much of a loss as the PS3 and it didn't take long for them to get to a point where they reduced hardware costs enough to make a profit on console sales. Even with the expensive $1 billion warranty extension their balance sheet on pure hardware alone is far, far better than Sony's, which means that MS actually needs to sell fewer games per console to come out ahead in total profit. As it turns out, people who own 360s are far more active gamers than people who own other consoles. They play for more hours per month, and they spend more money on games. Of all of the consoles currently on store shelves, the 360 has the highest multiple of average number of follow-on game purchases per console. But it doesn't stop there. The Kinect add-on has been one of the most popular consumer electronics devices in history. Also, whereas every major competing online multiplayer service is offered for free (Steam, Origin, PSN), Microsoft's Xbox Live Gold service costs money. On its own it has subscription volume and costs similar to the most successful MMOs in existence (such as WoW). That's a testament to the sheer volume of people who think that Microsoft's service offering is valuable enough to pay cold hard cash for, but it also, of course, goes straight to Microsoft's bottom line, to the tune of around a billion dollars per year. And because it's a digital service the development costs are fairly low. But wait, there's more. In addition to game sales, xbox players are also more likely to purchase DLC packs and other digital content such as xbox live arcade games. Again the incremental costs on these digital goods are fairly low so Microsoft (and the game publishers) make a much higher margin on them.
What does this all mean? Several things. First, in total Microsoft has been far better at consistently extracting significant profits from the gaming market over the lifetime of the current console generation. Second, Microsoft has far more momentum in terms of game sales and customer loyalty and enthusiasm than the other console players. Third, Microsoft is making far more headway than other console makers in earning revenue from digital goods and services, where the profit margins are the highest. Fourth, many game makers find that they make a lot more money from the xbox versions of their products, which helps ensure that exclusive games that aren't on the xbox are a rarity.
And this is precisely why this year we will see all 3 companies release new consoles, and why Nintendo has already done so. Because without a significant disruption in the status quo the result is that the xbox will continue to outpace everyone else, and continue to gobble up more and more market share and gaming revenue. Nintendo is trying to give themselves a chance to stay relevant. And Sony is trying to put themselves on a new footing. And Microsoft is trying to hold onto what they have or extend their lead.
Note that I intentionally left out a lot of complicating elements such as competition from PC and mobile/tablet gaming, introduction of new console makers, etc. That may play a role in the future but it hasn't played a significant role in the fight between the different home consoles so far.
Microsoft and Apple are dominating in very similar ways when it comes to gaming consoles (Microsoft) and mobile (Apple).
Yet Microsoft hasn't been able to replicate this winning strategy with its own phones. It seems to me that if one department at Micrsoft is "killing it", it would be Xbox. Yet that's the last thing anyone talks about.
In phones MS has been ahead, then utterly disrupted, then made valiant come-from-behind efforts. But the problems they are faced with are different than they're used to. With phones they're fighting against the network effect of competitors. They need to not just be a little better than the competition, they need to be a lot better. Also, look at how much money both MS and Sony spent buying up game studios and exclusive content for their consoles and compare that to the relatively weak outlays in the same vein for mobile content.
The $20 billion / year in sales server and tools does, is three times the size of the XBox + Live group.
" Touting strategic and market success when you’re just experiencing your competitor’s stumbling failure[...] "
The problems of the PS3 where the exotic hardware, the problems of the Wii were the exotic HID. Because of this, Microsoft won this generation, but actually it does not tell us anything about the next generation of consoles. And I think it is a bit disappointing, that this round of the console war was not won by doing anything right, but by fumbling least.
However, if you look at, say, Valve/Steam vs. Microsoft, especially now that Valve is moving into the console market, that should terrify people at Microsoft. Valve is starting at a disadvantage, but the future of gaming on any platform is digital distribution and they have by far the most experience and the most connections in that area. Most importantly, they have a long history of helping game publishers squeeze the most revenue out of games through sales and promotions. At the end of the day game publishers follow the money (indeed, one could describe that as an almost darwinian process), and the most profitable platforms for 3rd parties are going to be where the development effort and player base will end up coming to rest.
When I was a kid, every video game was "Nintendo"
During the PSX/PS2 era, every video game was "Playstation"
Now, every video game is "xbox"
(Also a PSP is a "DS")
I imagine they pick up the words unconsciously over time from TV/news/papers/passing conversation, which could be a pretty good indication of where the brands stand next to each other.
Also, what scale do you use to compare costs? From the fact that you call Kinect (sold ~18M [1]) "one of the most popular consumer electronic devices in history" and Move (sold ~15M[2]) "has not taken off" it appears that either you are using some kind of highly non-linear measure or are better informed than almost everybody else.
[1] http://en.wikipedia.org/wiki/Kinect#cite_note-18-million-1
[2] http://en.wikipedia.org/wiki/PS3_Move#cite_note-15_million-4
24 Million Kinects and 76 million XBoxes!
From what source?
>And the Wii/Wii-U's profitability per unit is also well known and publicly admitted.
Really?
And Xbox, I figure, is also "well known"?
>With any console you can generally just look at the parts list and compare costs to retail.
True, if you know the costs of parts you can do this.
In particular that 360 has made more money for 3rd party devs than Wii.
It doesn't really matter if Microsoft makes more money per gamer than Nintendo if Nintendo is still more popular. As a ludacris example I'd consider consider a company that sold a million $1 items more successful than a company that sold one $2 million dollar item. One has market. The other just as a customer.
I'm not suggesting Wii is more popular than 360. I have no idea since I have no data. I'm am suggesting that the profit of Nintendo vs Sony vs Microsoft is irrelevant. What is relevant, I think, is which console is making money for 3rd party devs because that's the console that seems like it would have the most support in the long run. I'd love to see real data as to which console that is.
Nintendo themselves have confirmed it:
"With Wii U, we have taken a rather resolute stance in pricing it below its manufacturing cost, so we are not planning to perform a markdown."
1 - http://www.nintendo.co.jp/ir/en/library/events/130131/04.htm...
The Wii U has 2006 PC level hardware at best. If you need to take a loss to sell it at these prices this is going to be really bad (unless the controller is taking the lion's share of the cost).
I wanted to add that there is a general vibe in this overall thread (not your comment - the vibe that you have responded to) that Microsoft essentially muscled their way into the console industry and achieved market dominance, largely because of their financial abilities.
Certainly, their financial abilities allowed them to shoulder the losses on hardware, but as you have pointed out, it is a common practice to implement a loss leader [1] strategy on hardware to achieve market share for other services (e.g., subscription gaming services, games, etc.)
Back to my point regarding financially muscling their way into the console market and why I do not believe that this is an entirely correct assessment.
For example:
1. Microsoft included a NIC in the XBOX at launch. It was baked-in; this was not an add-on. Sony had to step up and compete by offering the PlayStation Network Adapter, initially as an add-on. Also, Microsoft launched XBOX Live approximately 4 years ahead of PlayStation Network... 4 years!
Before that time, Sony essentially relied on game developers and publishers to support networked gameplay via a server infrastructure that was not controlled or offered as a subscription service by Sony. That service did not occur until Sony offered PlayStation Network.
2. Microsoft included a hard disk (a console industry first) in the XBOX, for storing downloadable content.
These are two examples of why it is not entirely correct to say that Microsoft achieved success solely by financial ability alone.
It was Microsoft that had the vision to launch with a unified, subscription-based gaming service with XBOX Live and a hard disk for storing additional content. They ultimately delivered a superlative networked gaming experience out of the gate, particularly with the quintessential launch title, Halo: Combat Evolved.
But if you're relying on your console being a solid default favorite platform for games because it makes financial sense there's nothing wrong with that. It may not be as satisfying a "win" as exclusivity, but it's precisely the sort of win that you want. And it should still be flattering that developers are targeting your console merely because they think it's a good system rather than out of any backroom dealings.
Of course, you can change the equation with custom hardware, as the Kinect has done, and that has generated a few decent exclusive titles. We'll see what MS does with the hardware with the next console rev, maybe they'll be able to deliver more on the promise of the hardware and bring more major developer attention than it's gotten so far.
But I also think that a thriving indie dev culture, as the OP is calling for (or rather, chastising MS for thwarting) can do the same thing: it can give a platform exclusive titles (games, but the same could be said of non-game apps) at least for a while, just because small indie devs can often only target one platform, at least until their indie title is a hit bringing in the cash to target other platforms.
(Had a little bit more but will have to leave it there as my laptop's reserve battery power warning is getting very insistent.)
If you really want to look at sales, games are far from the only revenue source, accessory, downloads, XBOX live are all significant. Nintendo has made a lot of money reselling legacy games. They may be cheap but there is no R&D costs and they get everything not just a tiny slice of a 3rd party game.
As to loyalty, that's next to non existent in the console market. You get a slight bump on the next generation and that's about it.
PS: From a pure ROI standpoint Nintendo crushed the completion this round. Unfortunately the Wii U does not seem to be making the same headway.
Can someone explain how Sony and Nintendo are stumbling failures in the console market? How extreme their failure must be, to feel comfortable stating it as a common fact requiring no explanation! I must be way out of touch.
Furthermore, MS is apparently using a hardware-based display plane system where there are 4 independent display buffers that can be refreshed/displayed at different resolutions and framerates. 3 of the display planes are for the game to use (one for the HUD, 1 for foreground, 1 background) and 1 plane dedicated to the OS.
I do 110% agree with the author that having a more app-store like ecosystem would be absolutely huge, and if MS were to properly implement, would let them compete vs Apple.
If I had the money I'd buy both MS and Apple stock, because one of them is in the best position to win the living room in the next 5 years.
The other things, like the settings screens, are just as bad as ever.
I wouldn't award Sony's crossbar interface any points either. After a few years (on two systems), I've learned where to go hunt for the 2 or 3 things I usually use... but that's not a complement.
The Wii, despite being sluggish, at least had a UI that made it very quick to launch games. I haven't used a Wii U so I don't know if it's any better. Based on my 3DS, I highly doubt it's objectively "good".
He's commenting on this thread too as natbro.
Somewhat related, an indie company managed to get a fighting game out on PSN and XBLA. It just got an update on PS3, but it can't get updated for Xbox because the patch is bigger than 4MB. [1]
Keep in mind, these are free updates that fix bugs and stability issues, not paid DLC. Even so, patching is really, really expensive. [2]
[1] http://shoryuken.com/2013/01/08/skullgirls-xbox-360-patch-de...
[2] http://kotaku.com/5884842/wait-it-costs-40000-to-patch-a-con...
They are about to find out what happens when piping hot cookies are hand-delivered in 30 seconds or less to the living room, for free.
The only thing Microsoft, Sony, and Nintendo have going for them right now is that the iPhone and iPad are drawing away virtually all of Apple's not-inconsiderable attention.
Here's how it will work: Apple will release a $99 controller. It'll look like a SNES controller mated with an iPhone 3GS: 4" standard-resolution multitouch screen, D-pad, four buttons, two shoulder buttons, and a Lightning port. (Inside is NOBODY CARES. gyro, bluetooth, Wifi, iOS SOC, battery.) And, naturally, it will be the least embarrassing looking item in your living room.
You'll take it out of the box, type in your Wifi password, log in to iCloud, and THAT IS IT.
The Apple TV (of which there are millions already installed) leaps into action. All the plumbing is silently set up, the App Store icon appears, a free showpiece game immediately offers to install itself, and Apple connects a half billion users to the television overnight.
Most of the Wii U's best controller ideas are co-opted, the overall controller complexity is a scant third of anyone else's, it retains all the power of touch controls, it requires no complicated setup whatsoever, all the game state is cloud-backed, dozens of touch-resistant game genres suddenly find a home in the lowest-walled garden of any shipping console, customers can add more controllers if desired, and the whole panoply of mobile software can infiltrate the last screen standing.
The Apple TV is a freaking trojan horse, if Apple wants it to be. Nobody else has the UX to stave them off, or the ability to hit the price points Apple can, or their sheer distribution power, or their sheer brand power, or anything.
Free cookies. Not nut-and-raisin filled wedding cakes. Which one is your kid going to reach for?
The other issue is that Apple products generally sacrifice usability for style, and in this instance that will probably mean a controller with no real buttons or something ridiculous in that vein.
This is fine and it will probably be successful, but it is not even going to be the same market that the xbox, steam box, or ps4 are hitting.
Consoles had three decades to break out of niche and they failed. It's time for the final disruption of the living room.
This is a potentially lucrative market, but it hasn't existed for 3 decades. I'm not even sure it has existed for 1. Changes in technology are only now making this possible, and tbh I hope all the console makers don't join this freemium casual game race to the bottom.
two and a half men and insert generic crime procedural are the most popular tv shows. Would you say CBS is disrupting tv right now by peddling a bunch of cheap garbage to the lowest common denominator audience.
Pre-paid boxed game software is not a growth industry, and post-paid digital is. It's not theoretical, this is happening now. It's not potentially lucrative, it's currently lucrative. The industry as a whole needs to adapt.
Apple is horrific at the gaming business, and that isn't going to change any time soon. Why? Because it's not a priority, and isn't going to be any time soon.
The substantial infrastructure pieces that Microsoft, Sony and Nintendo have built up in gaming - Apple has none of that, and it isn't going to magically appear. Apple would have to make gaming a top priority, and they will never do that.
GPU-rich devices installed and networked, check. Friends lists, check. Local multiplayer, check. Networked multiplayer, check. Distribution, check. Billing, check. In-app billing, check. DRM, check. Ad story, check. Developer program, check.
All they need is a controller if they want the living room.
If you are going to sell to console users you have to accept that the platform will live or die based on how easy it is for consumers to use, and how safe they feel using it. The platform will need developers, but it doesn't have to cater to their every whim to survive.
Developers are only important as far as providing reliable and trustworthy applications is concerned. The gatekeeper of the market needs to ensure that software sold through their market doesn't hurt their customers.
Believing that making life easy for all developers (altruistic and malicious alike) is The One True Way to platform popularity is placing far to much emphasis on the small group of people responsible for supply, and nowhere near enough emphasis on the customers.
Follow the money, take care of the people supplying it. If some developers get upset along the way because the world doesn't work the way they want, just shrug and carry on.
I would have no trust for a market that would let me publish the software I write. I write crap :(
- You still need the correct dvd inserted to play.
- You can't turn the xbox off and expect it to save your progress.
- Some games are tightly integrated with xbox live, good luck not paying for it.
- It takes forever between the xbox boot time, initial game load time, copyright notices, in game menus, and save game load time to actually start enjoying a game.
- Installing games to the hard drive for a slight load time bump is very, very slow.
Since picking one up I've been really spoiled by the ipad mini. Just pick it up and play, don't sweat the details.
Kinect menu interaction needs to be improved. Kinect Adventures has it right for its age group, showing a full mirror image of the user on its menus, but Kinect Sports is a mess of deeply nested menus, which my 4 year old, who has been able to navigate an iPad since age 2, can't get right yet. Dance Central uses an un-intuitive swipe from right-to-left, that took a while for me to figure out. I suppose controllerless UX is still in its infancy, but still...
Then we get to the sign in system: the sign-in, sign-out is very confusing, and in Kinect Sports, almost useless - I never know who the second player is going to be. I also have a very weak mental model of how Kinect ID facial recognition works -at what point are you signed into a game?
I still don't really understand XBox Live vs XBox Live Gold. Why should I subscribe for utility apps I already have, or to use a clunky web browser?
Oh yes, and no NTFS support, on a Microsoft platform.
One undiscussed economic effect is free trial/demo games and their impact on the market. Before I tried the demos with the kids, I'm planning on getting kinectimals and not getting minecraft... after the demos its intensely the other way around.
- internet game distribution is going to change content delivery just like it changed VHF/DVD rental stores. The game stores will be gone, walmart will not display/sell them.
- those who can provide a pipeline like netflix for games are going to destroy the current establishment. It will likely be worse than what netflix did, simply because the development of games is easy compared it TV/Movies.
- the idea of xbox, playstation, wii might be gone. There might be a generic console with an online pipeline connected to it. Or maybe you will have a xbox, playstation, wii portal that will connect you to the pipeline just like what netflix does for movies?
Maybe I'm just talking out my ass but it looks like things are going to massively change.
You could argue a very similar point by replacing mobile devices with PC in your argument. But I console vendors don't look in horror in the PC market.
You are also missing a fairly big aspect of a game console, the games themselves.
many people are using them more hours per day and spending more dollars per device than they ever did on consoles
Do you have a reference for this? Sounds interesting, but I haven't seen the comparison before.
Oh common man, YES it was intentional. MS worked its ass off on transitioning to casual users. Changing the ENTIRE UI, the addition of Avatars (MS's version of Nintendo's Miis), the advertising and marketing.
Oh, no wait, Apple is doing this already, and when it comes to the TV, we'll stop wishing Xbox could do it.
Allow iOS games and you have a serious, serious competition crushing game platform with a TON of existing games and content. Instantly.
these are not the things to focus on. add some hard drive space, better graphics, and a fan, and whatever else "stands in their way", and they could kill it. all of that's implied.
Steam has plenty of games in the 5, 10 and 20 $ price range.