Gamasutra: The Art & Business of Making Gamesspacer
arrowPress Releases
July 24, 2014
PR Newswire
View All





If you enjoy reading this site, you might also want to check out these UBM Tech sites:


Goldman Sachs Recommends Microsoft Split Off Xbox Business
Goldman Sachs Recommends Microsoft Split Off Xbox Business
October 4, 2010 | By Kyle Orland

October 4, 2010 | By Kyle Orland
Comments
    37 comments
More:



Analysts at investment firm Goldman Sachs have suggested that Microsoft should "carve out" the company's profitable Entertainment and Devices division, including the Xbox 360 business, from the rest of the company.

In a report released over the weekend and excerpted by TechFlash, the investment firm suggested that the profitability of Microsoft's consumer-facing division are being hurt by overhead from the larger corporation, and that splitting the division's products off into a new organization could "unlock hidden value."

"For example, the Xbox products could be an appealing stand-alone entity, given the historical success of the Xbox and the products’ brand strength, and the business could show unlocked value with forced cost discipline compared to as a piece of Microsoft," the report suggests.

"To date the company’s comments suggest that management still sees significant value in combining the consumer and enterprise efforts, but we view a foot in both camps as preventing a successful focus on one strategy, a la Oracle in the enterprise or Apple for consumers," it continues.

Despite enthusiasm about the Xbox 360's prospects in the wake of the upcoming launch of the Kinect motion controller, Goldman lowered Microsoft's overall rating from "buy" to "neutral" in the report, citing the threat of tablet PCs and cloud-based computing, areas in which Microsoft is not dominant.

After years of losses during the original Xbox era, Microsoft's Entertainment and Devices Division finally achieved profitability in fiscal 2008. The division's profits recently grew to $679 million for the most recent fiscal year, largely on the strength of Xbox 360 business.

Aside from video games, the Entertainment and Devices Division also includes Microsoft's Zune music player business and the company's Windows Phone 7 and Windows CE mobile operating system businesses.


Related Jobs

InnoGames GmbH
InnoGames GmbH — Hamburg, Germany
[07.24.14]

Quest Writer (m/f) for The West
InnoGames GmbH
InnoGames GmbH — Hamburg, Germany
[07.24.14]

Backend Developer Marketing / CRM (m/f)
InnoGames GmbH
InnoGames GmbH — Hamburg, Germany
[07.24.14]

Mobile Developer iOS (m/f)
InnoGames GmbH
InnoGames GmbH — Hamburg, Germany
[07.24.14]

Software Developer C++ Mobile (m/f)










Comments


Merc Hoffner
profile image
Hilarious.



"given the historical success of the Xbox and the products’ brand strength"



Did I miss something? Have they earned back 9 billion dollars while I wasn't looking?



"the business could show unlocked value with forced cost discipline compared to as a piece of Microsoft"



So I guess all future loss leading mass investments covered by the larger corporation are out then. That would include what? Any hope for a new console perhaps? Or say, an attempt at a revolutionary consumer motion detector.



I'm all for financial discipline and smart technology investment, but it would basically call for a total inversion of EDD's current strategies and historical MO. How could they possibly suggest with confidence that that approach would turn out well for them if they have close to zero track record in executing a financially conservative strategy. Sure Nintendo's done it, but Microsoft have a recent history of failing to execute on their competitors' strategies. But then, I should expect as much from highly paid 'analysts'. THEY certainly have a track record for shovelling something.

Tadhg Kelly
profile image
Their point is simply that Microsoft is too drawn out over too may business sectors to compete effectively - which is absolutely correct.



Microsoft in recent years hasn't really known what it was about. They used to be focused on languages, then operating systems and applications. Then the web. Then phones. Then games. Then media players.



At every stage they've become more complicated, unfocused and riddled with internal disagreements and politics such that they can only ever do things half right. In recent years they've managed to rein back some of that, such as Windows 7, but they're still pulled between pillar and post because they seem to believe that they need to be in all markets all the time, which is just madness.



What Microsoft need is a direction. They really don't have one, and that's what's slowly killing them.

Mark Harris
profile image
Good points here. This is why having a single CEO directing all of these efforts is such a bad idea.



MS either needs to spin off some separate companies or adopt a model granting SIGNIFICANTLY more autonomy to the various divisions. One person can't effectively direct such a diverse offering of products.

Merc Hoffner
profile image
Actually, in line with what Tadhg was suggesting, one person directing a clear strategy with a unified direction across all of their product range is EXACTLY what they need. Basically they need a Jobs, or an Iwata. Ballmer is a boring visionless middleman sitting in between the pile, when the leader should really be on top. You guys are totally right that they have a complete fragmentation of focus (Kin practically writes the book on how not to align product strategies). It's painful to watch (though amusing - kind of like a slow motion car crash), and a result of cultivating an environment of overly antagonistic internal product competition. I often wonder how so many smart people can be so dumb. This is how.



But I will say, Xbox and the positives it brings should be integrated better into their overal product range, rather than isolated out. When you're competing with a company as unified as Apple, you're going to have to. Moreover, when you're competing in a hardware based industry that demands significant capital investment, having the mothership's financial backing gives you a much better chance than going commando - no one expects the likes of Psion, or even Sega to be capable of a serious foray into gaming hardware ever again - even for Panasonic to succeed seems VERY unlikely - a more or less independent Xbox company wouldn't have a chance to make a real splash in the hardware game without Daddy Warbucks' billions, or an innovation prodigy at the helm. I assume that's what they meant by "forced cost discipline".

Mark Harris
profile image
Neither Apple nor Nintendo has anywhere near the breadth of products that MS does. I wholeheartedly agree that a dynamic, visionary leader could do a much, MUCH better job of directing the company than Ballmer could ever dream about. For me, though, it just seems that the company still wouldn't have the agility it needs to compete across the board. There are just too many levers to pull from one spot.





If MS is to maintain its vast range of products I think there needs to be much more autonomy in each division, regardless of whether or not they can find themselves a kick ass CEO.

Will Anderson
profile image
While I agree with your assessment of Microsoft currently, I disagree that they should simply split off the Entertainment and Devices division. I think a lot of development capital they receive comes from the parent company. And splitting off the division would limit their monetary resources to do things like NXE and Kinect.



Personally I think Ballmer needs to be replaced. He's a great front man. A good salesman. But not a good Captain. I think a lot of the focus in the ranks was lost when Gates left. They need someone new to lead.

[User Banned]
profile image
This user violated Gamasutra’s Comment Guidelines and has been banned.

Chris Melby
profile image
I really hope this happens.... Then the Xbox would sink faster than the Titanic, since the only thing keeping it afloat is the Windows' division.

Camilo R
profile image
Apparently the xbox is profitable now,

"Microsoft's Entertainment and Devices Division finally achieved profitability in fiscal 2008. The division's profits recently grew to $679 million for the most recent fiscal year"

Chris Melby
profile image
Maybe things are for the better, but right now their profit to loss is like a yo-yo with more time spent in the down.



This was from earlier this year;

http://www.businessinsider.com/chart-of-the-day-microsoft-operati
ng-income-by-division-2010-2

Camilo R
profile image
Of course Windows and Office produce more profit, but $679 million profit for a year is not bad either. It may not top Windows but it's still more money coming in for MS. It's been over 2 consecutive years profitable for the 360 so far. With no price drop and lower costs, MS has found another way to be profitable.

Amir Sharar
profile image
The yo-yo effect is largely affected by other products in the same division, including the Zune. The billion dollar cost for the 3 year warranty extension also affected one year drastically.



Other than those things the 360 and its software has sold consistently well.

Sherman Luong
profile image
Why we listening to Wall Street?

Alan Rimkeit
profile image
Microsoft is not. Obviously, because they are never going to cut loose the X-Box Entertainment division. That would be madness.

Anton Maslennikov
profile image
Coming from Goldman Sachs, I wouldn't think it over too much

Roberto Dillon
profile image
right.... and, maybe, since they just downgraded it, it may actually be a good time to buy MS shares ;)

Brian Burwell
profile image
Since when do companies spin off their profitable devisions? This sounds a little bewildering to me. If I didn't know better, I would say someone is using Sachs to position themselves to be able to buy some portion of Microsoft.

Mike Lopez
profile image
I was thinking that maybe Goldman thought that stock from a profitable stand alone game h/w and s/w company would trade at a higher P/E ratio than a stock from a profitable mega conglomerate/ OS/applications software company and that increase would be the hidden value they referenced. I'm not agreeing with them, just trying to figure out their loose thread of logic.

Amir Sharar
profile image
Yes, that seems to be what they are saying. There are other factors to, like opportunities to reduce some costs and at the same time tighten their belt to run a bit more efficiently (cost wise).

Tim Tavernier
profile image
Actually, right now, no-one can prove that the Xbox-division has run any kind of profit because of the Xbox, because said division is also responsible for the retail sales for Windows and Office products. Which means that the very high profit margins from Windows and Office products sold at stores are going trough this division's numbers, inflating it massively positive. Since MS deems it necessary for the Xbox-division to be responsible for those two products since 2009...something is up with the any kind of profitability of the Xbox-project.



Also, there's still the massive 15-18 billion dollar black hole that the entire xbox-project has costed up to now. The truth is simply, if xbox was just a company on its own, it would have gone bankrupt in 2003-2004. This report is another indication that a succesor for the Xbox360 is becoming quite unlikely if stockholders and investors have their way. Considering MS's stock situation and dependence on investors, those two are likely to have their way.

Amir Sharar
profile image
Tim Tavernier said: "Actually, right now, no-one can prove that the Xbox-division has run any kind of profit because of the Xbox, because said division is also responsible for the retail sales for Windows and Office products."



That isn't true. In fact, MS splits up the Windows and Office divisions. The revenue is split up among the divisions regardless of whether sales were done at retail or not.



The entertainment division includes the Xbox as well as Zune. For many years now the Xbox itself has been making MS profits, and it has been the Zune (as well as the billion dollar cost towards fixing the 360's RROD problem) that has hurt it in some years.

Vanessa Moore
profile image
Can't understand why people pray for the XBox to fail. Competition is always good and makes the offer grows better. I can't lie, I have one and absolutely love XBox, but Micro$oft would be more successful if investing on new ways to improve LIVE and it´s products.



This mentality of paying for access, in my opinion, is awful. The more you facilitate access to your products, the more you sell. Come on guys, live with piracy and get some benefit of it. It's, wrong but you won't be able to exterminate it, so deal with it. People buy exclusive content, games and more everyday, so why not make it easier?



Guess they would think about it =D

Mark Harris
profile image
There is a major update for LIVE coming this fall, as happens pretty much every year. That is all paid for by LIVE fees. I also suspect that it will coincide nicely with the Kinect launch to add certain functionality that the add-on requires.



As long as LIVE is popular the fees will continue, and right now it is going gangbusters. I've used every single console online and I've found LIVE to be the most functional, the most reliable, and the most versatile. PSN is free, but it isn't as good, in my opinion.



Regardless, LIVE has consistently been upgraded over the years specifically because it is a huge money-maker for MS. Revenues for the last fiscal year breached $1 billion for LIVE alone (between subscription fees and DLC purchases).



I don't see MS changing their business model for LIVE any time soon. It is a popular, high quality product and exceptionally profitable.

Fiore Iantosca
profile image
@Vanessa

Because bitter people love to see failure. Having Sony, Microsoft and Nintendo in this race is a good thing indeed.



The Xbox is going no where because the Xbox Live service blows away anything Nintendo or Sony offer and Sony's is FREE.

Tim Tavernier
profile image
"The Xbox is going no where because the Xbox Live service blows away anything Nintendo or Sony offer and Sony's is FREE."



Yeah...this is so a reason for investors and stockholders...absolutely! Oh stop deluding yourself. Is competition a good thing? Yes! But it should be proper and fair competition, not MS's strategy of trowing billions into the fray so it can outmuscle others buy giving products below cost. Also you do not have a say into the survival of Xbox, none, zilch, the same as I have. That does not detract from the tendens that indeed investors and stockholders want MS to eject the Xbox and its division.



Again, you have no say, zilch, none, zero. So why do people keep avoiding that issue? Why do the "professional" analysts, here and otherwise ignore this issue which is very real. More real then any kind of Apple vs. Nintendo battle or similar wishful thinking.

Mark Harris
profile image
Mainly because the Xbox division has created the only positive brand recognition for MS until Win 7 came out. The breadth of consumer interest in the Xbox brand significantly countered the Vista PR mess and helped MS limp through those years with a relatively neutral consumer brand image. Even the RROD fiasco couldn't diminish the impact of the Xbox in the modern cultural vernacular.



The Xbox brand is ubiquitous here in the US, consistently mentioned by journalists, celebrities, athletes, news shows, you name it. It is the defacto pop culture name for "video game console" in America right now (importantly supplanting "Playstation"). Even the Wii and DS, which have vastly outsold the Xbox, aren't mentioned anywhere near as often.



That kind of positive brand recognition is worth billions, and for that reason MS is probably quite reluctant to give up on Xbox. Investors worth any salt should understand that the balance sheet isn't the only indication of product success. Are Target investors pissed because they give profits to charity? No, because it builds positive brand image. The same thing is happening with the Xbox. As far as I know, it is the sole successful consumer hardware product (outside of PC accessories like keyboards) that Microsoft has ever produced. You don't just cut a brand like that loose.



The Kin sucked, the Zune is a quality product but hasn't taken off, the Xbox has sold 40 million world wide, is now profitable, and has contributed significant positive brand image for MS. Why in all hell would they get rid of it?



*edited for clarification in several areas*

Merc Hoffner
profile image
You think?



Xbox's brand recognition is worth exactly what Microsoft paid for it - about $500 million in the case of the first Xbox. That mindshare you talk about is only worth it if it translates into consumers getting on board - and that really ain't happening considering the investment level. You're talking on scales of 40 million units pushed in 5 years when MS is traditionally interested in toll-gating hundreds of millions of consumers. You're right, it's A LOT of brand power, that somehow only penetrates a relatively small number of eyeballs. Considering the 8-9 Billion dollar hole it's burned, and the fact that in 10 years it's utterly failed to cross leverage ANY of Microsoft's other products (many think it's been a active detriment to their PC games business), investors would be well placed to ask whether it's been worth it. In the face of Nintendo's low cost dominators which "aren't mentioned anywhere near as often" it's particularly painful - and probably a good reason for the recent executive excisions.



Marketing noise which remains noise is just an artifice. If the only people in the crowd screaming were you're own shill firelighters, what's the point? I'm exaggerating, but you catch my drift.

Jonathan Gilmore
profile image
@ Merc Of course it's worth it, the brand has never been stronger and has been profitable for two years now, even dragging along other limping divisions like Zune and Kin, et al. Plus, again, it gets MS in living rooms and generates a ton of good publicity and good brand recognition from the public.

Jonathan Gilmore
profile image
@ Mark Exactly, even more than getting MS into the living room, the XBOX brand has buyoed[sic] the whole company's brand image. The XBOX brand, even when they were losing money on the original hardware, has been invaluable in improving the image of the company, especially as it's monopolies on software and operating systems will inevitibly continue to erode.

Camilo R
profile image
MS's approach has been more conservative than Sony's given Sony has bought many more studios than MS. I don't understand the hate for MS in the game industry given all that they've brought us (improved online system, standard HDD, technology race, etc..). Should we be so lucky that all three MS, Nintendo and Sony keep doing well enough to continue. More competition, more employers, etc, there's no downside.



Management has a say in the survival of the xbox and they don't take sunk costs into consideration. They take probably profits and losses into consideration when making their decisions and the xbox is making profit for them.

Mark Harris
profile image
Brand recognition is pervasive and ongoing. Positive brand recognition from the Xbox division helps all sectors of the business. Deflecting some of the Vista crap and other negative MS brand image (teh evil empire, oh noes!) and protecting the core margin business of the OS is easily worth a good portion of the "8-9 billion" they've sunk into the EDD division over the last decade. As an aside I'm curious where everyone is getting their numbers. You say 9 billion, Tim says 18 billion... where are we getting these? I'm not trying to be a jerk I'm honestly just curious.



This isn't enterprise or OEM level product like operating systems or productivity software so you can't compare on scale. Selling 40 million units of a consumer direct product to a somewhat limited market among established names like Sony and Nintendo is pretty successful market penetration. The Xbox is still ahead of the PS3, the successor to last generation's runaway winner. MS saw a trend not only in the growing revenues of video games but also in the integration of media consumption. The Xbox is billing itself as the family media hub, and is well positioned to take that space. The brand recognition is especially important when looking toward the future. MS wants home consumers, not just OEMs and businesses. They felt the best way to get there was the gaming console/media hub, and they might be right.



MS has always looked at things from a software/service perspective, so they're pushing into living rooms to sell their software and services through whatever loss-leading box they can sell you. Their strategy goes way beyond gaming, but since gaming is becoming a much more popular and accepted form of entertainment it is a critical feature of the box. There is already easy and instant network communication between an Xbox and any Windows PC that allows you to put your movies/picturesup on the screen or play music through your surround sound.



Really, it's their best shot so far at a consumer hardware product, and it is working well for them. Nintendo is outselling them now, but MS is still selling plenty of hardware and software units with a stronger brand image. I think that brand image and recognition could help them in the long run in the race to dominate the living room.



As we know from history this can all fall apart and turn around at any given time. Even just looking at how MS has pushed into the gaming market (at significant cost) shows how quickly the landscape can change. However, with the ever-increasing functionality of LIVE, strong software partnerships, the exceptional brand popularity, and the resources to take risks I think MS has a chance to not only remain successful as a consumer entertainment company but also show solid growth.



I won't ever discount Nintendo, since they've shown incredible resourcefulness, persistence, and a knack for disruption. The DS, the Wii, possibly the 3DS, their next wunder-console. They are very creative but I think that they run the risk of falling behind if they stick to gaming only and don't start to offer more of the multi-functionality that you see in the Xbox and PS3. Sony, of course, has resources and intelligent people, a solid legacy brand and software partnerships, so we can't count them out any time soon.



I think the whole game industry dynamic right now is incredibly exciting and is driving exceptional experiences for consumers.

Merc Hoffner
profile image
OK, a lot of points to respond to here! But here I'll go:



For reference: http://gamrconnect.vgchartz.com/thread.php?id=57802&page=1

has accumulated earnings going back to before the Xbox division was rolled into EDD. It accumulates to just over 9 billion in 2008, but they have earned back some since then - As far as I remember, they're hovering in the 8 billion range. Yeah, it's hard to know what the financial effects are of the other EDD components, but we do know that they're almost certainly dwarfed by Xbox, and the others like Zune at least aren't intended to be sold on razor and blade models - i.e. they should be profitable ventures after R&D.

Though you and I can never get an answer on this either way, I question the mindshare help that Xbox offered to their other products. Vista was a disaster under the 360's tenure. 7 seems to be succeeding. Are the successes/failures of these two business really connected? How much damage did the RROD fiasco create? Have MS actually shaken the Evil Empire vibe? I say no, you may say yes. We can agree to disagree.



Onward!



Sure, it's not an apples to apples comparison. What I'm suggesting is that the brand spend and brand coverage is disproportionately large compared to, say their OS businesses, or to competing products after similar things in similar sectors. As you say, their spend and coverage almost certainly dwarfs Nintendo's, and yet they've been pushing far less business. I wish we had numbers on Apple's marketing spend, but I'm certain Apple's hitting far higher sales per marketing dollar spend on say the Ipod Touch. And again, that's a great example of cross leveraging Apple hits that say Xbox doesn't - Ipod and Iphone now share hardware, look, marketing, market platforms etc. Wouldn't an Xbox PC be cool? But they can't/won't do it. For those very 'don't compete with our own partners' reasons, the Xbox 360, just like the Xbox before it has largely failed in the 'media box under your TV' market. And that was supposed to be the route for the PC to move from the study to the living room. Instead the 'home network' dream is immediately marred in the real world by things as simple as skimping on Wifi. In MS's own fragmentary wording, the 360 isn't a media centre, it's a 'media centre extender'. Xbox live was supposed to extend to mobile phones back in 2007. Instead Apple has dominated on Microsoft's dreams before they've even made their first move. Their software cross platform advantages have gone nowhere (games for windows live is evaporating as we speak, kin is dead and the universality of XNA seems to be exactly not that). What the hell happened?



I agree that, particularly if they sacrifice hopes of overal profitability, then Xbox should at least confer a strategic advantage, and media convergence could be it. But it's been 10 years and they're running on the spot. They've sold 40 million units but only half have have connected online - even less actually use the features. This penetration is pretty poor considering many even within MS regarded this as the future progression of the PC in the lives of real consumers. And even if it succeeded, the translation into actual overal cross platform profits would be FAR from realised.



Essentially Microsoft should have built Itunes. Should have built the App Store. Should have built the Iphone and the Ipod. Should have built the Wii, and Facebook, and Google etc etc. They're half executing on all of these years late and fragmented all over the place. Zune isn't PlayForSure compliant for christ-sake. No amount of Xbox branding is going to cross leverage this mess, let alone solve the underlying problems. Xbox simply isn't a strong enough cement to hold this foundation together, but at least I would say it's a start.



I very much agree with you on Nintendo, and am hoping that the 3DS in particular really pushes with the 'extra curricular activities' you speak of. Nintendo's shown a little willingness to adapt, at least with their handhelds. I think they recognise the problems - we just have to see if they're brave enough to compete with the OEM bigboys - it's not something they're experienced in. Sony's another matter. They have the technical capability, but their financial and strategic position is so weakened in gaming atm, that it would take a Nintendo sized miracle to turn the business around.



I just realised we're conversing on two fronts!

Vanessa Moore
profile image
@Jonathan Gilmore



Totally agree with you. I'm only concerned about the other side of this coin, I mean, that the not so good reputation Winodws has building for some years now may harm the XBox brand. I'm completely sure that XBox is a good thing for Microsoft... but Windows isn't a good brand to be kinected (ha!) to XBox...

Mark Harris
profile image
MS has enough issues for us to converse on fifty fronts, but I digress. :)



I think you actually brought both points together here and that's good. MS is unfocused and has been slow to market with ideas that they easily could and should have pioneered. As the most successful tech company in the world you would think they would have the lead in developing cutting edge products, but that is sadly not the case. They have been beaten by smaller, more nimble, more focused companies in search, consumer electronics, cloud services, end product online services, you name it. These are all areas where the size and bureaucracy of MS has been a weak point. Hence the original article and the call for breaking up the company. I think that's a bit extreme but they are addressing a very real problem. MS is consistently losing out to smaller, more focused companies and something needs to be done.



Much of MS is a mess of competing ideas and half-baked products that are late to market and barely feature complete. Their failure to integrate across platforms is probably a direct result of their failure to integrate as a company. Competing interests, shifting attitudes, chasing new markets, whatever; it's slowly killing them. Having a strong central vision and direction is important, which you advocate above, but I think this needs to be tempered with autonomy for each division. They need a more agile model, similar to agile development where autonomous groups of developers share a strong central goal.



Now, despite the fact that most of MS has produced a stable of late-comers and me-too products over the last couple of decades the Xbox has done it differently, and because of that has succeeded while many products have failed. Unlike Bing, Zune, or Kin the Xbox has successfully penetrated an established market with powerful competition. Xbox has built a strong, positive brand image by doing exactly what the rest of the company has failed to do. They have done something interesting, new, and innovative. The integration and subsequent support of LIVE has changed the industry, and is the reason why Xbox succeeded. You make a great point above, that the positives of the Xbox have not been integrated well with the rest of MS. I couldn't agree more. I also think the LESSONS from the success of the Xbox haven't permeated the rest of the company. The LIVE service is still leading the online console and connectivity space. They were the first to integrate Netflix, first to integrate social media, first to integrate ESPN service, etc. ESPN functionality is huge, especially if the dedicated offerings increase or MS can realize a pay-by-the-channel model down the road. I would cancel my cable subscription in a second if I could buy the ten channels I actually watch on my Xbox for less. They obviously haven't done all the innovating in the game space lately (hello big N), but they have innovated and it has served them well.



The route to the living room is clearly easier through the game console than through the computer. There is a vast leap between a cable box and a computer sitting under the TV. Not so great a leap between cable box and game console. Consoles operate on the small, separate chunks of functionality that drive the successful "app store" model on cell phones and are a much easier and more intuitive interface for the mass market. As gaming becomes more popular the demand for an "all in one" box that handles your games, TV shows, movies, and music will increase dramatically. I think this is where MS has what you have identified as a "strategic advantage", not only because of the functionality of the Xbox and its successors but also because of the popular and positive brand.



The vision is far from realized, man do I ever agree, but when I look at MS I see Xbox as the only real innovative and culturally interesting product. That's why I responded initially to Tim. Xbox is way too important to MS, despite the overall EDD losses and disproportionate brand spend, for them to give up on it because a few shareholders can't see beyond next week. It is important as a positive brand, and more importantly as their best hope to enter the living room as the driving force in our daily multi-entertainment lives. The Xbox is integrating multiple entertainment features under a clear, unified system, in direct contrast to what MS has done with their product offerings.

Tadhg Kelly
profile image
"The Xbox is billing itself as the family media hub, and is well positioned to take that space."



It's really not. None of the game consoles are.



The Xbox brand overall is green and mean and is largely associated with hardcore games in the eyes of the public. Xbox is Grand Theft Auto and Halo. It physically can do stuff like movie rentals and ESPN and Last.FM but my guess (judging from the poor availability of movie content and such) is that these services are seeing very little actual usage.



Its primary media function is as a dumb player of files from a host PC. In this it does a pretty good job (if you know how to share a Windows Library etc) but even that is confused by having not one, but two entirely separate media player solutions on the remote control (WMP and WMC).



No, what Xbox does really well is play videogames. That's what the public buy it for, that's what they expect of it. All the rest of it is just tassels that Microsoft attach to it to try and compete in the so-called battle for the living room, but they're screwing all of that up with such half-hearted moves. Google TV, Apple TV and so on are clearly going to supplant game consoles in the living room battle because they're vastly cheaper and will be vastly simpler to use.



The sooner Microsoft stops trying to be all things to all men and focuses on doing a few things well is when they'll turn this corner.

Mark Harris
profile image
We'll have to agree to disagree on this one. The consoles' ability to play video games is their differentiating factor and is a significant value add. Google TV (barring an explosion of OnLive service) will never play games like an Xbox or PS or Wii (well, maybe as well as the Wii, har har). The consoles aren't full featured media boxes right now but I don't see any reason why they can't do most of what Google TV can do with the right software updates. The next iteration of consoles will assuredly be equipped to mimic the G TV functionality.



People are willing to pay a premium for added features, hence the significant growth in the smart phone market. If the value of playing videogames matters then there is no reason someone would choose G TV over a console. If someone (or his/her kid) wants a game console and it can do everything G TV can do why buy both? Just buy your game console and be done.



Now, I have made one large assumption: that people will continue to want complex video games that require dedicated hardware. That is up for debate, it seems. "Social gaming" and browser based gaming and app gaming are becoming more popular. Is that where all growth is going to happen? If so then you are right, G TV and A TV, with their app stores and low cost are going to win out. However, if console gaming grows along with those other sectors then I see a definite possibility for consoles to carve a solid market share in the "media hub" space.



Honestly, what would really drive consoles into living rooms would be pay-by-channel service through your internet connection. If the consoles could provide that and totally replace the cable box they would easily dominate. I fear that is a total pipedream for now, though.



* edit * - uh, yeah, MS needs either more focus or more freedom for their various business units. They are stifling themselves and it's pretty sad.

Todd Boyd
profile image
EWC did it in the Caribbean to more effectively manage their globalized organization; I see no reason why Microsoft shouldn't do the same. The fact that their products and services are largely dissimilar has no bearing on the business strategy, IMHO.


none
 
Comment: