Investor adviser says Microsoft gaming a "disaster"

Discussion in 'General Video Gaming Chat' started by zz101, Apr 20, 2007.

  1. zz101

    zz101
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    "Investor adviser Roger Ehrenberg believes Microsoft's foray into gaming has been a "disastrous endeavour", and that it should rethink its entire strategy.

    His conclusion was based on "objective numbers" taken from the Microsoft's financial statements, which show a total loss of USD 5.4 billion from its efforts.

    "Microsoft needs to take a long, hard look at its gaming strategy: and, in fact, its entire H&E [Home and Entertainment] strategy," Ehrenberg stated on Forbes.com. "At what point, regardless of its virtually endless financial resources, does it say 'enough is enough'?"

    Link - http://www.eurogamer.net/article.php?article_id=75566


    ***didnt post this in the 360 forum for obvious reasons***!!!

    Whilst obviously this guys comments are going to go down like a lead balloon to some on here he does have a point on the financial costs to MS. We hear over and over that MS have bottomless pockets and can afford to make a loss on equipment and pay well over the odds for exclusives etc but its not likes its Bill Gates personal money they are spending they do have investors to consider.

    I also agree that they tend to pander to the so called 'hardcore gamer' - its all shooters and racers - they have limited diversity in the types of games so how can they ever expect to appeal to a mass market? Will there ever be a pink 360 - thats probably a good yard stick for mass market acceptance.

    What consititutes a sucessful strategy for MS and how much money will it cost to get them there and will they be willing to spend it??

    p.s. first person to use the expression 'troll' or 'fanboy' gets a pink 360. :D
     
  2. Mark Botwright

    Mark Botwright
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    Well the article seems fairly dismissive of Ehrenberg's views.
     
  3. Guns_LotsOfGuns

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    Do you really want to get into the discussion about console manufacturers who sell consoles for a loss? and whose games departments make less than other departments in thier buisness?

    I think not, those in glasshouses...
     
  4. zz101

    zz101
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    Dont really get your point - Sony has the PS2 - the best selling console ever - they are not trying to break the market nor are they throwing billions at it.

    The article is dismissive, sure, because MS have invested too much to just give up - but surely that cant go on forever? At what point does the 360 become the sucess that justifies the investment?
     
  5. Mark Botwright

    Mark Botwright
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    His point was that Sony are losing money on the PS3 as well. The fact that Sony produces the PS2 is irrelevent as this only points towards the companies ability to make a profit as does Windows for Microsoft.

    Surely most would accept that Microsoft would've considered this a tough maq
    rket and thus factored this into how long it would be before they started making a profit.

    My comment about the article being dismissive was not about Mr Ehrenberg's views concerning Microsoft's business strategy, rather, the journalist's view of Ehrenberg's ill informed stance.
     
  6. Guns_LotsOfGuns

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    Ok look at it this way Microsoft has windows and media center the best selling operating system ever, a market that Sony are arguably trying to break into with the PS3 (Playing HD Movies, able to run an operating system etc).

    Should Sony give up and go home because there is a huge competitor alreadly in the market and they are losing hand over fist WITH EVERY ps3 sold?

    No?

    No company would, if every company only entered a market where there were no competitors, then no one would ever make anything.
     
  7. zz101

    zz101
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    I think trying to compare the PS3 with Windows is way off base - it has a blu-ray player and you can add a user unfriendly non Sony operating system to it, so what? - there is no comparison. The linux thing isnt even a key feature - and blu-ray looks to "probably" beat the MS backed HD-DVD anyway(even MS seem to admit this).

    Regardless the article isnt about the PS3 - which, yes, does sell at a loss blah blah blah etc etc - but Sony is fully established in the home entertainment market unlike MS. Its MS trying (and potentially failing) to break into that market which the article is about. The playstation brand must of made Sony billions - the Xbox brand hasnt made anything for MS yet I dont think?

    So at what point will MS say enough is enough? One thing i didnt realise is that the original Xbox was more sucessful than the 360 has been so far. Thats a completely new brand up against the established PS2 - this time the 360 had no competition yet isnt selling as well?

    Have they missed the boat and designed a console for too niche a market?
     
  8. Mark Botwright

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    In short: No
     
  9. zz101

    zz101
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    Based on what? Its not even outperforming Xbox1.

    Also if its not niche can you genuinely see a pink / female friendly Xbox??
     
  10. Sinzer

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    Doesn't mean it is the best tho :)

    I think these sort of articles are interesting, but as always it is the opinion of one person and most "expert investors" have different opinions depending on their bias.

    It is a fair point though, how long will a company continue to throw money at a project, that simply isn't going to return on investment.

    It is an arguement that is irrespective of which platform is better, but this thread will most probably get dragged into that.

    It is interesting to see what the aims of microsoft are in this market. It seems that given their complete disregard of costs, that have a different goal to making money at least in the short term, simple penetration is all they seem to want.

    On the OS side of things they did the same with Windows, they actually had a very lax attitude towards piracy for a long time, because all they were concerned about was get it into peoples homes. Once in everyone's home then it is easier to get them to use in a work environment, because they are familiar with it. And know it is established, they start making people fork out the money for it :p
     
  11. Mark Botwright

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    Is this really how you judge mainstream success?
     
  12. zz101

    zz101
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    :rotfl: its just an example, but a good one.

    How would you judge mainstream success? What does MS need to achieve?
     
  13. BrokenArrow

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    As the article says:


    Because EA make the best games.:rolleyes:
     
  14. Mark Botwright

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    They'll want the name Xbox/Microsoft to be synonymous with gaming and home entertainment. Think of the money they're ploughing into the brand as being like advertising. You don't see instant returns, but you're hoping it penetrates the collective subconscious.

    As for pink consoles, i've always thought they were rather patronising to the female demographic. However they do seem to sell quite well.
     
  15. ukle

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    Nope but they do make the ones that draw the largest market share, and to be successful with a console you need the 'bread and butter' games that EA makes.

    As to this article ignoring all the fan boy stuff, it does raise an important point in that if the 360 doesn't turn around within the next year, I could well see them holding back investment in its replacement and having a major change of direction for the next Xbox games machine.

    Tbh the thing thats holding back the 360 at the moment is the reliability, if the consoles didn't have a reputation of being as reliable as an Alfa then more people would by them, but just like the Alfa nobody wants something that looks nice but is in for repair a few months of the year.
     
  16. zz101

    zz101
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    But wasnt that the point with the last Xbox - they were investing in it for greater returns with the 360 yet Xbox1 sold better? Also is Xbox really a well known brand name yet outside of gaming circles?

    As for pink consoles - not quite sure how thats patronising as they have a choice - but as you say they are popular and the 360 would have to have mass market appeal for them to sell hence my point.
     
  17. zz101

    zz101
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    I'm not so sure its the reliability factor as the average punter in the street probably wouldnt be aware of that. I think its the brand image - first its a Microsoft product ( :thumbsdow negative conatations for most people ) and secondly its been too specfically marketed towards the 'hardcore gamer'. They needed to come in with a PS1 style campaign IMO and now theyve missed the boat. They also desperately need some family / kid friendly / gimmicky accessory titles and some Mario / Sonic / R&C wide appeal characters. If you look at all the upcoming big titles like Halo, Bioshock etc they probably wont mean anything to the average consumer.
     
  18. Mark Botwright

    Mark Botwright
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    That depends who you consider the average consumer to be.
    They'll both most likely be on the front covers of multiformat magazines.
     
  19. zz101

    zz101
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    Does the mass market read gaming magazines?
     
  20. Mark Botwright

    Mark Botwright
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    It certainly can't avoid seeing them in every newsagents.
    I haven't been to the cinema in a few years, but from magazine covers i know whats the next blockbuster.
     
  21. CAS FAN

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    MS will not really see any return on their investment until they have got a decent market share of the video games market. They have learnt a lot from the XBox and produced a better console with the 360. They have also thrown a lot of money about securing exclusives etc. They are clearly committed to the goal of achieving a majority market share and have invested too much in their strategy to deviate to much now.

    Personally i'm not sure if their strategy is the best way of securing a larger market share. Nintendo's method of expanding the market seems to make much more sense to me. With the Wii & DS they have appealed to families and people who would not normally play video games. The way I view it is a bit like this :-

    Imagine TV entered the home in the late 70's, early 80's, but for the first 25 + years all that was shown were tv programs to appeal to generally young males! Then a TV company came along that invented programs to appeal to females, middle ages folk, young kids and pensioners. Best of all they made some programs which could be enjoyed by all age groups and both sexes alike.

    We all know that there have already been some fairly token efforts (Buzz, Singstar, Eyetoy etc.) to produce family games that appeal to a large audience. They have mostly come out on the PS2 and maybe that is part of the reason why the PS2 sold so many consoles. With the Wii (and DS for that matter) Nintendo has based the whole console (and just as importantly, the marketing) around this idea of games for all. This opens up the entire console to a larger marketplace of people who just wouldn't consider a 360 or PS3. MS on the otherhand are spending a fortune trying to steal bits of Sony's marketplace.
     
  22. Jay

    Jay
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    Penetration is exactly what ms are after, it's been brought up several times that ms are usng the xbox brand to to push other things into peoples homes, which shows in their ''live anywhere'', and their ''games for windows" ultimately ms want everyone using windows vista and are trying to use gaming as a way to get people to jump aboard. They are trying to merge the 360 with the pc, which can be seen by the ability to use 360 peripherals on the pc. This article can give a nice little insight http://www.joystiq.com/2006/12/18/games-for-windows-vista-how-a-new-brand-and-os-will-change-pc-gam/
     
  23. Jay

    Jay
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    Ea make constant rubbish, and then update it with novelty features that no-one care about. However they have openly admitted to pushing more games on more successful platforms, there was even a press release where they announced they were going to produce alot more for the wii, due to the wii being more succesful than they had first thought.
     
  24. Jay

    Jay
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    No infact only geeks know xbox :D (joke)As you've said the previous xbox was for computer geeks into shooters, they are trying to change that with the 360.
    Playstation is the brand that everyone knows, infact older people or people not into gaming are likely to say 'Play playstation' wheras before it was ' Play nintendo'
     
  25. Bilbob

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    Didn't the XBox sell something like 25 million? Not sure on the figures, but it's somewhere in that region isn't it? Now that was out for over 4 years, and the xbox 360 is nearly half way there after 16 months, without A SINGLE PRICE DROP... persoanlly, I'd say it's doing very well indeed, thankyou.

    Also, I'm not sure how many times MS need to say it, but they have stated their determination to get the nbumber one spot from Sony, and they don't apparently care how much it costs them to do it, because they know that once they have it, they will become very profitable, just as Sony has been for years. Don't forget Sony's VERY lean period, where if it wasn't for the PS2, they would be bankrupt by now. Home electronics was losing them a fortune, should Sony have got out of it? Of course not, they invested, they recovered, they made profits, just like any business, and I'm sure what MS intend to do too.
     
  26. Jay

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    The xbox 360 has had a price drop on the core http://www.gamesindustry.biz/content_page.php?aid=19303 granted it's not a big price drop but it was a price drop nonetheless.
     
  27. Bimbeemer

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    I think I tend to agree with My 3rd Xbox....it's more about getting the box into peoples homes which will open up future revenue streams later down the line like IPtv and the advertising revenues which it could generate from it...

    I think these incarnations of the current crop of "games machines" are more about the media content and cross selling...and less about straight up gaming...not to say i'm not enjoying the games...I just think they've opened it open to a much bigger playing field...with MS's bottomless wallet and Sony's influence in Music and films..
     
  28. Dunwa

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    Over the past 5 or so years there has been a convergence of technology as it slowly begins to operate from the same building blocks. We’re now seeing DVD players with built in hard drives and even TV’s with built in DVD players that have built in hard drives, where will it all end.

    In short unless you are an AV enthusiast and you want the best from every component I believe that within 7 years you’ll have mass market adoption of one “box” under your telly which does everything. This is why MS entered games market to establish a foothold in the current niche market that is populated by the HTPC enthusiast. If that market were to explode the key and only player would be Sony and they would reap the rewards.

    Establishing Microsoft as Gaming brand is second to moving the MS name out of the PC only market.

    The question is will that market ever explode and the all in one connected digital home become a reality or will it be as successful as the Internet enabled washing machine ?
     
  29. Mark Botwright

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    I think we all generally accept that getting the brand known and devices into home, even at a loss, is a business stretegy. But the question arises, how much can a company lose before it's strategy is deemed unviable.
     
  30. Dunwa

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    When you generate revenues of $44.28bn per year based on 2006 figures and $12.59bn in profit, my guess would be for a while.
     

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