Jasper unit ...thumbs down.

[MrPopo]

Yes, Microsoft is losing a lot on the 360 hardware. But they have so much profit that they can afford to spend the money getting the hardware established. They make most of their money on the software. It's not an uncommon thing in this industry, or even in business. Amazon didn't turn a profit until their 7th year of operation.

[elvis]

Yes, Microsoft is losing a lot on the 360 hardware. But they have so much profit that they can afford to spend the money getting the hardware established. They make most of their money on the software. It's not an uncommon thing in this industry, or even in business. Amazon didn't turn a profit until their 7th year of operation.

This whole "they'll make money eventually" thing is getting old.

Over its entire life, the first XBox made a loss. And not a little loss either, but tens of millions.

Second gen now, and the 360 is in worse condition thanks to a shoddy hardware platform. Microsoft have lost about twice as much as they did on XBox 1, and we're only a few years in.

Overall, this is turning into a big black money pit for Microsoft. They keep throwing cash in, and things don't get any better for them. Lucky for them they have plenty of other cash cows to keep them funded (as do Sony). But you have to consider it's pretty interesting that out of the three current console manufacturers, only one is consistently pulling a profit (and that one has no fallback business to siphon cash from, either).

I can't help but think that the reason we're seeing such shit hardware from Microsoft is that they don't really care if this business unit makes money or not (they've publicly stated that their interest is presence and market share, not profit). Compare and contrast to Nintendo, who would go belly up overnight if the same sort of rubbish hardware quality plagued their product lines.

Seriously... how many hardware iterations is it going to take before we see a 360 that doesn't RRoD at the drop of a hat? How many goes does it take the wealthiest tech company in the world to make hardware that doesn't suck? All that money and R&D power at their fingertips, and this is the best we get?

[MrPopo]

Well, let's be fair, Microsoft is a software company. The people at CDC are just as geeky as Microsoft, but I'm sure they'd fail just as hard at getting a piece of hardware running in a small consumer-friendly package.

I don't have all the numbers for the financial results of the Xbox and 360. I do know that they lose money on each console, not including the free reps/repairs. I know that the business model is to try and make the money off of first party games and third party licensing. I also know that Amazon is still approximately $1.5 billion in the hole. So it's not an untenable business model. As long as people keep buying the 360 and its games Microsoft will eventually see profit, either on the 360 or its successor.

Ironically enough, if Microsoft didn't offer the awesome warrenty on the 360 (which loses them a lot of money) then the console would probably have failed and lost Microsoft even more money. Think about it. You bought a 360 and a few games. That's about $600 invested. Now the 360 dies on you. Your options are to send it in to Microsoft to get fixed or sell your 360 games and buy a PS3. Selling the games will probably get you no more than $100, so you're $500 in the hole and need to spend the money to buy a PS3 and games. So you're obviously going to get the 360 fixed and then buy a few more must haves when they come out.

Now, if instead you had to pay $150 to get a RRoD'd 360 fixed I suspect you'd see more people switching to the PS3 after a failure, or not even get a 360 in the first place. It has a known failure rate, but it's a gamble (which people like) and even if it fails it's just a few week inconvenience.

[RadarScope1]

I don't have the numbers but I'm pretty sure MS is now making money on their games division, even with the warranty stuff. To say they don't care about making money through their gaming unit is just talking out your ass. They got into trouble because they wanted to cut corners so they COULD make more money. But, it did bite them in the ass.

If you buy a 360 anytime in the last year and half to two years you should be good. That's not to say none will RRoD, just that fewer will.

[elvis]

Well, let's be fair, Microsoft is a software company.

I beg to differ.

This is their second generation of games consoles. They've now had 8 years of active participation as a primary supplier of console hardware (more, if you coun't their secondary involvement previously with the Dreamcast, multitudes of arcade hardware, and their own PC input devices). They are not just "a software company", and haven't been for some time.

More to the point, they are ludicrously wealthy. While everyone else has to struggle and fight for every dollar of R&D funding, Microsoft are propping up the wonky legs on their office tables with wads of $100 bills. Quite frankly given the Batman-esque access to resources (both in terms of dollars and people), the XBox 360 should have been superb from day one.

The whole RRoD debacle smacks of corporate incompetence. And I certainly won't make excuses on their behalf, nor give them any slack because they are "a software company". The XBox 360 hardware team need to pull their heads out of their arses and fix this NOW. Having these sorts of dramas after FIVE hardware revisions is ridiculous.

I still don't get why Microsoft always seem to get it easy from Joe Public when it comes to their shoddy product quality. If toasters broke as often as Microsoft gear did, there'd be overnight class action. Hell, there was more of a stink kicked up about the slimline PS2's shoddy optical drive laser than there was about this whole RRoD thing.

[RCBH928]

I know this is out of topic, but
How can Sony and Microsoft continue to make business and investment while they are making loses and not see the light of profitability in the near future? I believe they are a company and their main goal is to make a profit. I get the idea to lose money on a console in exchange of games profit, but over all losing while cranking top games like God of War 3, Halo's, and developing new technology? That is like burning more money, in the press they seem all excited and happy like they are making money as much as possible.

Any how, when I first heard that you should pay license fee to the console manufacturer I really felt it is evil. You should make profit on the console, and if we say consoles sell 20-30 million on average lifetime and you make only $10 profit margin(very very low) then you will make like $200 million ! Isn't that enough? Plus profit on all games you sell. 3rd party should pay nothing, they are making more cool games to build more reasons to sell a game on your console they should be thankful(console manufacturers) not charge them money. Now maybe they should charge those who are not exclusives, and reward exclusive developers with 0 license fees.

Any one know how much do they charge 3rd party for making games on their consoles?

[elvis]

How can Sony and Microsoft continue to make business and investment while they are making loses and not see the light of profitability in the near future? I believe they are a company and their main goal is to make a profit.

Microsoft and Sony are both very aware of brand recognition, which is why they're willing to lose money time and time again on certain products and markets.

I work in IT, and know a lot of very hardcore Microsoft fans (I've worked with my fair share of Microsoft MVPs across various projects and companies). I'll tell you now, I've seen first hand people who will buy an XBox 360 simply because it's a Microsoft product. Some who won't even buy games, but just used the thing as a media center because of the brand.

Microsoft have said publicly that they want to stay in the games biz even if it's just for the presence in the market. Even if they lose money, at least their brand is getting out there. I guess you could consider it a giant marketing/PR move if you like. This is the same company who spent 5/9ths of their US$9 billion Vista budget on marketing.

Sony are in much the same boat. They have their fingers in lots of pies: from movies and music to home theatre hardware to the chips going inside super computers. Video game consoles represent a nice way for them to tie some of that together (easy movie->game tie ins thanks to in-house licensing, and cheap access to powerful CPUs inside the PS3). But overall the presence and brand recognition is what they want. Even if they lose money on PS3, people are going to recognise the Sony brand, and use that familiarity to make choices elsewhere about what things they'll buy.

ArsTechnica documents the phenomena here:
http://arstechnica.com/old/content/2007 ... iority.ars

Human beings will often confuse familiarity with superiority. And getting your name out there in multiple markets ensures you are the familiar choice, which is why these companies are happy to lose money in one place in order to secure customers in another.

[RCBH928]

makes sense, I get it now..

But I still can't believe there are people out there that will buy a 360 just cause it carries the Microsoft name, given that Microsoft brand does not reflect quality and it sure shows in the 360. I won't make it my media center because keeping it on for long hours will sure RRoD it.

[Niode]

I don't think they're buying it for the Microsoft name, they're buying it for the games they want to play, the hideously popular fps war genre and the reams and reams of casual friendly games available for it. Not to mention it is the cheapest console currently available (up to £20 cheaper than the Wii in this country.)

[Jayson]

Sad to see that they still are having problems.

When mine red ringed (a pre-Falcon unit), I was pissed but I knew it was coming (sad I know) as a lot of people I knew had been hit with the issue. The warranty exchange was pretty painless and I was glad to have it, but after about 3-4 months of having the refurb and playing it very little, I started to have issues with the DVD drive refusing to open and then refusing to play discs at all.

I called MS to try and get that fixed and they told me that the warranty was on the red ring only and that I would have to pay $150 to have the drive fixed and I would be responsible for shipping this time. ON A FREAKING USED REFURB that they sent me as a replacement. This really left a sour taste in my mouth.

The thing wasn't completely dead so I sold it to a guy that planned on trying to fix it for $150. I have no idea if he succeeded or not. I ended up selling off or trading the dozen games I had and rebuying a couple of cross platform titles for the PS3 and decided to just stick with that until they get their hardware issues worked out. I guess i still need to wait some more.

I love the arcade games, loved some of the exclusives I have played and have been drooling over some of the newer exclusives that I never got to play, but I am definitely still gun-shy of the hardware.