The Great Video Game Business and Financial (In)Stability Thread

cube wrote:

I think that the point GG is trying to make is that there's nobody would even think about buying a division that loses that much money, especially since it's a consumer sales based division.

Ah. Well, if that's the case, then I probably would have to agree. Although, if Edgar Bronfman is crazy enough to buy Warner Music…

I suppose they could just kill it.

I think that the point GG is trying to make is that there's nobody would even think about buying a division that loses that much money, especially since it's a consumer sales based division

Exactly... especially given how tightly integrated into their cloud infrastructure this unit is.

The Internet loves to hate, and Wall Street loves to exaggerate. Microsoft tampered with a winning formula; of course it's gonna get picked on.

Except it wasn't a winning formula at all.. As we know all to well its been losing money since they started the Xbox division. The challenge is that we "know" its losing money fist over fist..but what we don't know is exactly how its losing money. Are they too top heavy in terms of management? We have a vague idea that its not on the unit sales (supposedly) and for sure Accessories are never a losing proposition (in fact its usually the largest source of revenue). It could be that the back-end infrastructure they have put in place to run Live and now all the other stuff that's coming along with is just way to expensive vs the revenue coming in from Gold Memberships.

It takes time to grow a brand, especially in a market with such a high barrier to entry, but after tens of billions of dollars flushed down the drain and 13 years of trying…I'm with the CEO.

I'm certainly not an expert but I believe that this entire division is supposed to be an answer to Apple and Google's challenge to the consumer ByoD (Bring your own device) and the new changing demographic of the "gamer". Microsoft needs to be brand relevant with the next generation that will be the first really to go into the workforce with a real solid chance they have never once touched a device running Windows and/or Office. Certainly doesn't use an "email" client and probably doesn't use email that much at all (many teenagers and young adults I know have only ever used an email account for school). The PC (Windows) gamer demographic is a rapidly aging one.. as is in many ways the traditional console "gamer" demographic so Microsoft with this division wants to be a strong consumer choice for the Living Room and the Mobile/Tablet world.

So far we can see its not working out.. and its an uphill battle. Shame since in many ways they have strong devices.. certainly the Surface Pro is a fine device that people like myself find tremendously useful (I barely use my iPad now).. Windows Phone is a great mobile OS.. just no one knows about it and no one would ever pick it over Android and IPhone. But it might very well be that Microsoft finds the downside risk just to great to exit the market...even if it means losing Billions every year.. they have to continue to try and stay relevant to the younger generation.

Fake edit

My above point.. I can't tell you how many times I go into start-ups and they are 100% Mac.. no real "network" (in the traditional sense) outside of a wifi network. Their apps are almost 100% cloud based and they live in a web based world (both work wise and personal wise). Email is typically either Google Apps or some other Cloud provider (though I'm seeing more and more Office 365) Premise infrastructure if any is frequently solely limited to their code base management.

My first go around in the .com start-up world in 1999-2002 it was almost 100% Microsoft with some limited Linux.

Certainly filled with some hubris..but a good read nevertheless. Interesting that Ed's take is that the division isnt losing money anymore but still trying to catch up to the sunk cost.

http://www.zdnet.com/10-amazingly-st...

I suppose they could just kill it.

That would probably annoy a large number of very vocal customers, especially just after launching a new $500 machine.

The only companies I see capable of both buying and running Xbox and their massive network store architecture would be Google, Facebook, and Amazon. Microsoft would never sell to Google for rivalry reasons. Amazon would probably rather not buy something heavily tied to Azure instead of EC2, but maybe the changeover wouldn't be too tough. Facebook likes to buy things, so maybe they'd do it since they don't seem to have any other good ideas for how to spend the massive amounts of ad money they bring in.

Sure Xbox isn't a money maker, but another company buying them would be looking more at the brand and name recognition than the current structure. Building that kind of brand recognition isn't easy or cheap.

[url=http://www.zdnet.com/10-amazingly-st... Ed Bott Report[/url] wrote:

More important, it is a well-loved Microsoft brand that is widely available in hundreds of millions of living rooms, where it has the potential to tie into other Microsoft services and expand Microsoft’s reach into the consumer market.

I think this is by far the most important part Microsoft cannot afford to forget. XBox has grown into a welcomed, recognized brand; while Microsoft (as a brand) is now bland, passé and last-generation. Why would you ask "XBox" to step aside so "Microsoft" can get another chance. You'll burn the former by association with the latter.

Remember poor, under-performing Tomb Raider with its disappointing millions of copies? Apparently it's now exceeding expectations. What a difference a year makes.

Wait, you mean not everyone who will ever buy a game buys it the first weekend? Some people wait for the price to drop? Others wait for reviews and impressions? Sometimes word of mouth builds over time and leads people to buy the game a month or more after release? THIS CANNOT BE! MY REALITY IS COMING CRASHING DOWN ABOUT MY EARS!

ClockworkHouse wrote:

Remember poor, under-performing Tomb Raider with its disappointing millions of copies? Apparently it's now exceeding expectations. What a difference a year makes.

Chaz wrote:

Wait, you mean not everyone who will ever buy a game buys it the first weekend? Some people wait for the price to drop? Others wait for reviews and impressions? Sometimes word of mouth builds over time and leads people to buy the game a month or more after release? THIS CANNOT BE! MY REALITY IS COMING CRASHING DOWN ABOUT MY EARS!

With my eternal drum-beating about how the game industry is just the music industry delayed 8-10 years, this fits the narrative perfectly. Music used to be waaaaaaaay too focused on release week/month/etc., largely driven by the soundscan charts. But the majors have learned, by and large, that a long tail strategy can work. A garden hose can put out as much water as a fire hydrant can, given sufficient length of time.

So…there's hope for gaming? I guess?

shoptroll wrote:

I'm surprised no one mentioned Jack Tretton is stepping down from Sony after 19 years.

I was about to!

Honestly I could care less about this move except that I rather enjoyed his smarmy personality at E3.

I'm surprised no one mentioned Jack Tretton is stepping down from Sony after 19 years.

Good to see that shift to mobile strategy is working out well for them.

Minarchist wrote:

But the majors have learned, by and large, that a long tail strategy can work. A garden hose can put out as much water as a fire hydrant can, given sufficient length of time.

So…there's hope for gaming? I guess?

For what it's worth, Nintendo was beating The Long Tail drum back during the Wii era.

EDIT: What's kinda funny about the Tomb Raider sales thing is that Underworld (the previous mainline TR game) had a similar problem back in 2008. 1.5 million in sales from Nov. - January and did not meet Eidos' expectations. However, by May 2009 it had reached their sales expectations. Some things are just slow burns.

Regardless, their sales expectations were astronomically out of line as this is a series that hasn't done sales around 5 million units since the original trilogy in the 90's (based on skimming the Wikipedia articles) and the overall trend has been downward since then.

TheGameguru wrote:

Certainly filled with some hubris..but a good read nevertheless. Interesting that Ed's take is that the division isnt losing money anymore but still trying to catch up to the sunk cost.

http://www.zdnet.com/10-amazingly-st...

To be clear, Ed Bott is very pro-Microsoft, right? I don't mean to claim he's a Microsoft plant but based on the amount of books et al he has written about Microsoft products I've got to believe he's super pro Microsoft. I mean, he referred to the predictive text on W8 phones as "amazingly accurate" which leads me to believe he hasn't used anything but a W8 phone.

There's a few points in that article that very clearly are true (IE; Windows being unstable) but some other things just sound like, well, as GG said, hubris.

I agreed with his view on the Xbox platform. Especially given several of Microsoft's other ventures that initially started out bumpy but through sheer "will power" eventually dominate the market. Windows Phone though not sure there will ever be a turning point for that to be anything but a bit player compared to iOS and Android.

I'm just not sure Microsoft can afford to kill the Xbox brand. I hear a few grumblings that not just a few wanted the Surface tablet to be marketed as an Xbox Tablet with emphasis on gaming vs productivity.

TheGameguru wrote:

I agreed with his view on the Xbox platform. Especially given several of Microsoft's other ventures that initially started out bumpy but through sheer "will power" eventually dominate the market.

Like the Zune!

(Sorry, couldn't resist.)

Minarchist wrote:
TheGameguru wrote:

I agreed with his view on the Xbox platform. Especially given several of Microsoft's other ventures that initially started out bumpy but through sheer "will power" eventually dominate the market.

Like the Zune!

(Sorry, couldn't resist.)

Well that whole space just got killed by smartphones. Microsoft while farting around with it while their crappy Windows CE phones were rotting in the market should have moved faster with Windows Phone and maybe they might have had a chance.

TheGameguru wrote:

I agreed with his view on the Xbox platform. Especially given several of Microsoft's other ventures that initially started out bumpy but through sheer "will power" eventually dominate the market.

Their Windows/Office money hasn't bought them much market dominance since Ballmer took the reigns.

In any case, is there a likely scenario where Xbox has any more success than they did last generation?

ChrisLTD wrote:
TheGameguru wrote:

I agreed with his view on the Xbox platform. Especially given several of Microsoft's other ventures that initially started out bumpy but through sheer "will power" eventually dominate the market.

Their Windows/Office money hasn't bought them much market dominance since Ballmer took the reigns.

In any case, is there a likely scenario where Xbox has any more success than they did last generation?

No clue.. no one really can tell where the "console" market ends up in another decade.. everyone could be out... Sony could be the last man standing.. or Microsoft could simply win out by bleeding the competition dry. It honestly really depends on the definition of "winning" For all we know the cloud streaming thing takes off and the technology becomes so "great" that its near instantaneous to play. So much so that the whole "console" thing is looked back as some quaint idea. You and I certainly don't have the answer.. But I do know that right now there is no chance Microsoft gives up on the Xbox. Even at Convergence this year it was plastered all over the place lol.

re: Ballmer like most CEO's had his ups and downs..

For example.. Avaya hasn't sold a PBX to a customer with more than 1000 users in 2 years.. Microsoft Lync is now in 90% of Fortune 100 companies and recently most CTO/CIO's have listed Unified Messaging and Collaboration as a top priority. When Microsoft first introduced Office Communications Server "people" laughed at them and now its a $1B division and growing double digits every quarter.

I'd say that is a perfect example of Microsoft "will power" where they will continue to sink money until they dominate a market. I would guess in 10 years Lync will dominate the UC market like Exchange does the Enterprise Messaging market.

Also watch out for Office 365. It's destroying competition..it's now Microsoft's fastest growing business EVER.

All under Ballmer's watch. The street wants explosive growth and wont ever reward Microsoft for steady profits.. They certainly dont have near the "sexiness" of Google and Apple, but Microsoft has many solid business units to leverage for years to continue to plug away at the Xbox.

Microsoft continues to do extremely well in the B2B and enterprise markets, but their forays into new consumer markets have been in the range between meh and disaster. It'll be interesting to see if Microsoft follows in the footsteps of IBM and shifts their focus away from consumer products.

http://techcrunch.com/2014/03/09/con...

I have a feeling that the AA market place is going to die (as we know it) and we'll see the rise of the independent studio again. Much like what existed in the 90's and early 2000's before pretty much every independent studio was purchased. I think we are going to reset the clock. Mimicking Hollywood will be proven to be bad for the games industry.

Ulairi wrote:

http://techcrunch.com/2014/03/09/con...

I have a feeling that the AA market place is going to die (as we know it) and we'll see the rise of the independent studio again. Much like what existed in the 90's and early 2000's before pretty much every independent studio was purchased. I think we are going to reset the clock. Mimicking Hollywood will be proven to be bad for the games industry.

Do you mean Hollywood now or Hollywood of old? I'm having trouble finding parallels between gaming and Hollywood of now, but there are definitely some strong parallels to the (failed) studio model of the past.

Ulairi wrote:

http://techcrunch.com/2014/03/09/con...

I have a feeling that the AA market place is going to die (as we know it) and we'll see the rise of the independent studio again. Much like what existed in the 90's and early 2000's before pretty much every independent studio was purchased. I think we are going to reset the clock. Mimicking Hollywood will be proven to be bad for the games industry.

As much as I think it's hilarious Microsoft named their console something that can be referred to as the Xbone, seeing it in that article made me want to stop reading immediately.

ChrisLTD wrote:

Microsoft continues to do extremely well in the B2B and enterprise markets, but their forays into new consumer markets have been in the range between meh and disaster. It'll be interesting to see if Microsoft follows in the footsteps of IBM and shifts their focus away from consumer products.

Windows has done alright in the consumer market. I mean its no Linux but still.

I may be thinking incorrectly here but I always felt that the calls for MS to sell of the XBox division was just as much about how disconnected it is from MS's real profit centers as it was about how much money it was making.

MS makes its money from enterprise software and services and to some degree consume software and services. The Xbox doesn't really tie into those things at all, it doesn't use Office or their other big software suites unless you count Skype and Bing (which I don't).

I'll wait until more reputable news outlets with more to go on than the borderline useless and increasingly irrelevant NPD report steps up. I suspect none will. A lot of that article reads as spinning stats in convenient ways in order to form and support a doom and gloom narrative. In other words, TechCrunch article is TechCrunch.

garion333 wrote:

Frankly, I wouldn't be surprised if Nintendo releases the Wii U Pro with a more powerful cpu, ram and storage space (plus an actual Ethernet port, but whatever). It will still be a Wii U, but it'll bring it more in line with the other consoles. And I could see Miscrosoft and Sony doing the same in the future. Upgrade their internals, but still keep it the same architecture (assuming that is beneficial, in which case they won't).

I agree with the main thrust of your post ("fun with stats"), but I would be astonished if Nintendo did this. It would serve no purpose, as developers would still have to code to the less powerful original Wii U console. Nintendo is not the type to allow people to only make games for the "new" Wii U, and they would see no point in splitting SKUs and spending more on both R&D and manufacturing unless they got a real tangible benefit out of it.

Minarchist wrote:
garion333 wrote:

Frankly, I wouldn't be surprised if Nintendo releases the Wii U Pro with a more powerful cpu, ram and storage space (plus an actual Ethernet port, but whatever). It will still be a Wii U, but it'll bring it more in line with the other consoles. And I could see Miscrosoft and Sony doing the same in the future. Upgrade their internals, but still keep it the same architecture (assuming that is beneficial, in which case they won't).

I agree with the main thrust of your post ("fun with stats"), but I would be astonished if Nintendo did this. It would serve no purpose, as developers would still have to code to the less powerful original Wii U console. Nintendo is not the type to allow people to only make games for the "new" Wii U, and they would see no point in splitting SKUs and spending more on both R&D and manufacturing unless they got a real tangible benefit out of it.

I know the argument was made ad nauseam elsewhere and I didn't want to rehash that so much as point out that it's a possibility. Like I said, I was spitballing and it wouldn't surprise me if someone took that route. One disc, it just plays down rezzed or something on the "older" hardware, much like a PC.

garion333 wrote:
Minarchist wrote:
garion333 wrote:

Frankly, I wouldn't be surprised if Nintendo releases the Wii U Pro with a more powerful cpu, ram and storage space (plus an actual Ethernet port, but whatever). It will still be a Wii U, but it'll bring it more in line with the other consoles. And I could see Miscrosoft and Sony doing the same in the future. Upgrade their internals, but still keep it the same architecture (assuming that is beneficial, in which case they won't).

I agree with the main thrust of your post ("fun with stats"), but I would be astonished if Nintendo did this. It would serve no purpose, as developers would still have to code to the less powerful original Wii U console. Nintendo is not the type to allow people to only make games for the "new" Wii U, and they would see no point in splitting SKUs and spending more on both R&D and manufacturing unless they got a real tangible benefit out of it.

I know the argument was made ad nauseam elsewhere and I didn't want to rehash that so much as point out that it's a possibility. Like I said, I was spitballing and it wouldn't surprise me if someone took that route. One disc, it just plays down rezzed or something on the "older" hardware, much like a PC.

Uh, doubling the QA requirements is stupid. If you want to make sure that nobody makes a game for your system, sure. That's the reason why no major AAA games actually required the 360 hard drive, even late in the cycle.

And "I'm just sayin" isn't an argument.

Parallax Abstraction wrote:

I'll wait until more reputable news outlets with more to go on than the borderline useless and increasingly irrelevant NPD report steps up. I suspect none will. A lot of that article reads as spinning stats in convenient ways in order to form and support a doom and gloom narrative. In other words, TechCrunch article is TechCrunch.

Fun with Stats 101 is what the article should've been titled.

NPD is pretty useless to me anymore as what I want to know is how many hours and in what ways are people using their systems? For instance, as the PS4 outsells the One and Wii U are people actually using it more than the other systems? If not, will that factor into future sales as the word of mouth becomes "nothing to play on PS4" but "tons to do with the One"?

I think we're in a transition of sorts, but I don't believe it to be the apocalyptic scenario some claim it to be. If long-use consoles are outdated thanks to the yearly mobile release schedule it doesn't mean consoles are dead, they can adapt. Frankly, I wouldn't be surprised if Nintendo releases the Wii U Pro with a more powerful cpu, ram and storage space (plus an actual Ethernet port, but whatever). It will still be a Wii U, but it'll bring it more in line with the other consoles. And I could see Miscrosoft and Sony doing the same in the future. Upgrade their internals, but still keep it the same architecture (assuming that is beneficial, in which case they won't). I'm spitballing here but People like to think that companies aren't willing to adapt and if there is market contraction, which we may very well be in the middle of, then they will be forced to adapt or die.

It's entirely too early to claim consoles are dying in the same way people claimed the pc was dead for years. It's like we haven't learned anything...

I updated my post so we can get off this tangent that I had no intention of backing.