An Inconvenient Truth

1

By: César A. Berardini - "Cesar"

Xbox Live Gold is overpriced.

I said it.

Back in the Xbox days, online multiplayer on a console could be considered a value-added proposition—but in this generation, it is just a commodity. The PlayStation Network is vivid proof of that.

It is also worth highlighting that, with this new incarnation of the service, Microsoft is getting lot of money from Xbox Live, thanks to its Marketplace. The success of TV shows, films and other downloads have exceeded Microsoft’s expectations, so it’s not like Uncle Bill is losing money this time around.

But it is easy to criticize without proposing solutions and alternate options.

To prove I’m not the typical make-it-free whiner who is demanding Microsoft to make Xbox Live completely gratis, I’m instead proposing that the two-level memberships should exist as it does now, but with online multiplayer gameplay (as we know it) being free for everyone, while a paid membership incorporates new features. What features, you ask?


Server-Based Online Multiplayer

Xbox Live online gameplay sucks. A weapon like Halo 2’s energy sword or Gears of War’s shotgun offer strong evidence that the user hosting a match—which translates into having no lag at all—has a terrible advantage over the other players.

Paying for peer-to-peer online gameplay is a scam. If we are paying to play online, the least we deserve is a server-based system where matches are hosted on a server provided by Microsoft.



Clan and Party System

Everyone cheered when Microsoft announced that on the Xbox 360 you’d be able to listen to music while playing games without developers having to program such a feature (as they had to with Xbox games). It was a feature that became universal when it was incorporated into the Xbox 360 dashboard.

So, how about also throwing in there a Clan and Party system that lets you play every Xbox 360 game on Xbox Live like in Halo 2? Bungie (which is owned by Microsoft) has already developed the technology, so it shouldn’t be a big issue for Microsoft\'s Xbox division to implement this technology across the entire platform.

What benefit should Xbox Live Gold subscribers get over Silver users? Well, Silver users should only be able to join one clan, yet have no option to create one, while Gold subscribers should have the ability to create their own clans and be a member of as many clans they want.



Dedicated Download Servers

Have you tried to download a big file from Xbox Live? You can leave the Xbox 360 on, go to have breakfast, lunch and dinner, then read “War and Peace” and maybe the download will be completed. Granted, Microsoft is saying that the soon-to-arrive Spring Dashboard Update will help this process in a couple of ways, but…

If we are paying a monthly fee for Xbox Live, the least we deserve is to have dedicated download servers similar to those offered by FilePlanet (which, by the way, is a sister service of TeamXbox).

Furthermore, even if you are an Xbox Live Silver user, paid content should always be pulled off from a dedicated download server differently from those hosting free content. If you’re paying for the content, you deserve a better bandwidth!



Microsoft Points Program

Another thing that is totally unfair for paid subscribers is that paid content costs the same for Silver and Gold users. There should be some advantage for those who are paid subscribers and there should also be some benefit for those who buy more content.

I think Xbox Live needs a “Microsoft Points Program,” something similar to credit-card services or airline-mileage programs, in which loyalty to a service rewards you for buying content. Obviously, only Gold subscribers should be eligible to enter the program—and it could be an addition to the Xbox Live Diamond Card.

That way, even if you pay the same as a Silver user for a TV show, a film or game content, you will get some Microsoft points in reward.



No Ads

If you are paying for your online-game service, why do you have to see ads on those Xbox 360 blades? Furthermore, if you are paying for a game, why you have to see ads in games? I’m cool with ads making content free, but, conversely, paying for content should remove any ad.

It’d be great if Microsoft could a develop a technology that enables game publishers and developers to know if the user playing the game is a paid subscriber. That way, the game will automatically know if it should display an ad (or not) in its single-player campaign or online multiplayer modes.

Microsoft has already acquired Massive Inc., which (along with the other big in-game advertising companies, Double Fusion and the recently-acquired-by-Google AdScape) already has deals in place with most major game publishers. You’d think if they wanted to remove ads for a specific group of players, they could easily do so by signing an agreement and developing the necessary technology to identify Gold subscribers from Silver users.

Recently there have been several online petitions against (Xbox Live) pricing issues, one of which was just on the pricing of the GHII 3-song downloads and talked about on this board. In just three days that Guitar Hero II DLC Pricing Petition got 10,000 signatures before it was closed.

Source

Japanese Failure Dooms Xbox 360


The success (or lack thereof) of Xbox 360 has been a hotly debated topic across both the blogosphere and mainstream media, with an amalgam of sober and utterly confused views depending upon one\'s vantage point: analyst, investor or gamer.

After taking a step back and looking at some objective numbers (taken from Microsoft\'s own financial statements and comparative console sales figures extracted from VGChartz.com and Wikipedia.org), I have concluded that gaming has been a disastrous endeavor for Microsoft, particularly from an investment perspective.

The seeds of this failure are evident from its sales performance in Japan, particularly when comparing its 18-week sales figures (which is about how long the Wii, made by Nintendo and PS3, made by Sony have been out) relative to those of the most successful console releases.

This early failure in the Japanese market has a compounding negative effect on worldwide console sales, as game developers are less willing to invest in high-risk projects for console platforms that are shaky out-of-the-gates, which makes it less attractive for gamers to buy these consoles, and so on.

Let\'s first consider Microsoft\'s Home & Entertainment Division ("H&E"), which includes Xbox 360, Xbox, Xbox Live, Consumer Software and Hardware Products, and IPTV. Making money, i.e., the creation of long-term shareholder value, has got to be the ultimate driver of Microsoft\'s gaming (and H&E) strategy, right? Well, after five years and over $21 billion invested, all they\'ve got to show for it is $5.4 billion of cumulative operating losses, and Xbox 360 doesn\'t appear to be the silver bullet to turn things around.

I think it is also interesting to note that Microsoft\'s actual disclosure shows only revenues and operating losses--I backed into and show expenses below for explanatory purposes. Why might it be that Microsoft has strayed from the classic "revenues minus expenses equals profits (losses)" disclosure? Perhaps because it doesn\'t want investors to focus on the fact that more than $21 billion has been invested in a business that has performed so poorly, with unclear prospects for improvement.

Sometimes these cold, stark facts seem to get lost in the shuffle. Xbox 360 (a meaningful part of H&E) might be a fine product, but if so, why is it so financially disastrous to its maker? I understand the concept of selling a console at a loss in order to lay the foundation for recoupment of original investment, plus operating losses, plus attractive financial return through gaming, but what is it going to take to turn things around? Nothing short of a tectonic transformation in perception of Xbox 360 relative to its competitors.

Sure, the Xbox 360 can be righteous and cool with hard-core gamers, but this is not a sufficiently large user base to recoup the magnitude of investment Microsoft has made in its gaming platform. So if this is Microsoft’s strategy, it’s got a problem. And if the strategy is really more mass-market, then it’s got some serious repositioning to do relative to the Wii, which is both cheaper and more accessible to Ma and Pa and Timmy and Tammy gamer. In short, I am at a loss. Correct that: Microsoft is at a loss. $5.4 billion and counting.

As far as Japan’s role here, consider that over 19 million PS1s and 20 million PS2s were sold in Japan alone, close to the total worldwide sales figures for the original Xbox console. Success in the Japanese market is a key part of getting the game developers to buy into a platform, for which they invest substantial sums and create titles. Plus, people want to buy consoles with better game libraries. Success in Japan is frequently a precursor to success globally, which makes it particularly attractive for game developers who are looking to amortize their development costs over as large an installed base as possible.

If, for instance, the Wii is hot, you get shops like EA turning themselves into pretzels to build their title libraries for the Wii console. And if your particular console isn\'t hot? Well, let\'s just say that developers aren\'t going to be laying out big bucks to invest in the platform.

It is instructive to look at where the last major console releases were 18 weeks after launch in Japan. Basically, if you did well in Japan during this time frame, you had a chance to have a blow-out product. If you didn\'t, well, you didn\'t. The Xbox did better than the Xbox 360, and even the PS3 has done better than the Xbox 360. But success in Japan is not a guarantee of a runaway success, as the GameCube proved. Without question, Japan is an important and critical market for building a globally successful gaming platform, and an early read of the tea leaves does not bode well for the Xbox 360.

And this is clearly not lost on Ballmer\'s Boys in Redmond. Microsoft\'s vision of the gaming console as the window into the living room is a big, big bet, and one that clearly hasn\'t paid off thus far. The emphasis on HDTV as being a key factor driving broad-based console sales kind of misses the point. Is the Wii successful because of its zippy graphics and technological superiority? No. It is successful because it is fun. And because it appeals to a broad audience. And because it is comparatively cheap. The Microsoft strategy sounds more like a niche strategy for hard-core gamers, in which case it\'s investment in a console strategy should be smaller and more targeted.

Microsoft needs to take a long, hard look at its gaming strategy--and, in fact, its entire H&E strategy. At what point, regardless of its virtually endless financial resources, does it say "enough is enough"? Would we have been better served by returning the extra cash to shareholders rather than investing it in a franchise that seems to have questionable prospects for turning around? These are the kinds of questions Microsoft management should be asking. And hopefully, for shareholders\' sakes, they are.

3

Yes, there are "fanboys", many who drastically exaggerate the facts, and who will blindly support whatever it is that they are a "fanboy" of, but there are many consumers who are simply pointing out real facts, one of which happens to be that there are real limitations to having games on DVD9, just as there was when games were on CD:ROM. Imagine what it would have been like had the PS2 or the original Xbox been released with only a CD:ROM drive… well, that is pretty much what we are seeing with the X360 being released with only a DVD drive.

That said, as others have mentioned, it\'s not the size of a game that determines its quality, and that many "small" games are absolute classics and a joy to play, and I\'m sure there have been many "massive" games that were terrible games, and a waste of time to play.

That said, no amount of spin is going to hide the fact that DVD9 has been around for over ten years, and some game developers were using up its limited capacity as far back as four years ago. And all anyone has to do is track the history of game development for consoles and the physical data size of games over the last 10 years and one quickly sees it is following a similar formula of growth as determined by Moore\'s Law and thus current and future games are most certainly limited by DVD9.

In fact, as seen from Resistance: FOM, Lair, Heavenly Sword, Killzone 2, MGS4, GT5 and other PS3 games, developers are already developing and releasing games using 2-5 times more disc space than those on a DVD9.

Yes, developers could release a multi-disc set, but with today\'s non-linear games, that would drive gamers crazy... which is why there have been almost no 2-disc games on consoles.

Others might argue that, like some PC games, they could release multi-discs that you would then copy onto your console\'s HDD, but first you would have to have a fairly large HDD, and then you\'d have to be willing to spend a very long time copying it to the HDD. And unless you had a huge HDD, or very few games, you\'ll also have to be willing to spend countless hours deleting and re-installing your games off the HDD... thus why I seriously doubt we will see many, if any multi-disc games for the X360.

There are a lot of things you can say about the X360, much of which is very good, but one thing it will always be remembered for are the many sacrifices Microsoft made, incuding the lack of any next-gen blue laser optical disc drive, in order to get a one year head start on Sony and to cut as many costs as possible, including its design.

Considering the X360 has not come close to matching the sales of the PS2 along the same product release timeline, and with its current sales pace, may not even match the sales rate of the original Xbox. And considering that Microsoft has lost well over $6 billion dollars already in their Xbox endeavors, and is expected to post another $1-2 billion dollar loss by the end of the year, suggests that their gamble not only hasn\'t paid off, but has made things much worse as far as recouping their significant investment.

It is for these reasons and others, why many MS investors are furious with Microsoft, and are calling for an end to future Xbox endeavors... at least in terms of hardware. In terms of software, MS is in a position to make a killing, but it\'s their hardware that continues to drain them of cash.. and the whole purpose of the X360 was to change that, and instead it made things far worse for MS...

And after the last couple weeks, where investors saw Microsoft lose $25 billion dollars in stock value... MS investors are not in a good mood!

Unfortunately though, ... extended warranty wont cover the overwhelmingly large number of their customers who are having other serious problems with their X360 consoles that require repair or replacement. If Microsoft decides to cover these issues as well, then we can expected additional expeneses of upwards of $3 billion dollars.

So even if by 2008, they have a quarter that is finally profitable, say they make $100 million in profits for the second quarter of 2008, that would mean they would need 80 similar performing quarters to just break even on their investment... that\'s twenty years!

You are going to be very hard pressed to find one single investment analyst with a shred of credibility that will be willing to predict that the X360 division will ever earn enough profits to wipe out all the losses MS\' Xbox division has had over the last five years and continues to have from their Xbox endeavors.

There are already cases studies on this at some MBA schools... that\'s how bad this is for Microsoft.

As a company, they (Microsoft) are of course very profitable, and are on pace to exceed last year\'s annual net income of over $12 billion dollars - you have to love those profit margins from software sales!!!

The problem though is that they have nearly 10 billion outstanding shares, thus have (or I should say "had") a market capital of $300 billion dollars. For a company with that kind of market capital, investors need to see even better profits than that if they hope to see the stock value rise.

Instead, in just the last two weeks, Microsoft has lost over $25 billion dollars in market capital due to investors dropping or cutting down their investments in MS from their portfolios.

Even a company as successful as Microsoft, simply cannot afford to keep financing a division that is losing well over a billion dollars every year, and has no reasonable prospects for ever breaking even on its investment.

While I do not expect MS to simply cut bait, and end their endeavors in the console market. Instead, I think it is quite reasonable to expect them to pull out of the console hardware market in relatively short order, and stick to what they do best and what is most profitable… software. So for the console market, that means games.

Now what might prevent that is just pure stubbornness, and not wanting to admit they failed, and having the necessary cash flow to make up for the losses, no matter how bad they get. The problem with this though is that Microsoft is not a privately held company, and if investors continue to get angry over the losses from the Xbox division, and that anger is translated to selling stock, or worse, an actual investor coupe whereby MS top level management is forced out. Well then it won’t matter how stubborn the board of directors for Microsoft want to be. In that case, the group of investors holding the majority of shares will decide what actually happens in the end.

4

Are some of Xbox 360\'s top \'exclusives\' really exclusive?  If exclusive means the game will only be featured on the 360 than no,  most top Xbox 360 games like Gears of War, Bioshock and Halo 2 are not exclusive as they are all on the PC format.  And because they are on PC and belong to the FPS genre that means players will be given the option to use a keyboard and mouse,  something that is preferred for FPS games and not available on the Xbox 360.

Regardless of how you look at it, in terms of numbers, and in terms of a stand alone console, which it is, it hasn\'t sold well in terms of offering developers a large target audience for games that might be designed to take advantage of its 120GB HDD.

... the apparent saturation of the market for new X360\'s. Sony has sold 120 million PS2s and counting. At the current sales pace for X360, it will take them over 40 years to sell that many X360\'s. And just to be clear I\'m not any kind of blind PS3 fanboy, or any kind of fanboy (which should already be clear to anyone that has read my many negative comments about Sony as well). As a point of fact Sony\'s PS3 sales are currently at a far slower pace than even the X360.

So if X360 sales are truly drying up, and the Elite isn\'t making up for those low sales, and they aren\'t profitable with their current customer base, these are more indications that MS may very well have to release a completely new Xbox (one that is far more reliable and supports games on HD DVD or Blu-ray, as well as some other progressive features and capabilities missing from the current Xbox 360), and/or seriously cut back all future development for the X360 and future games, or as many are starting to believe, cut bait and call it a day. Considering that they are very much a publicly owned company, large corporate investors will likely be the ones to make the final decision on the future of Microsoft\'s Xbox division.

Yes, XB360 has significantly more units than both the PS3 and the Wii, but it has also had a full year head start, and more to the point, despite having 10 million users, they are not only still losing money, but because they effectively cut all support of the Xbox, they ONLY have that 10 million user base, while Sony has sold over 100 million PS2 of which not only is it still supported, but PS2 hardware and software have continued to outsell XB360\'s and its software.

So in terms of the actual console market, Sony has a 10 to 1 advantage over Microsoft, and because the PS2 sales have a much higher proft margin, Sony is able to generate a great deal of profit from it.

So while Sony is still a long way away from seeing PS3 profits, the money they are getting from PS2 software sales more than makes up for it, and will keep that division in the black until revenue from PS3 software sales generate operating profits.

Adding to Sony\'s advantage is that they already have a console that is capable of playing games over 7GB all the way up to 49GB. Considering developers have already released and are making games well over twice the capacity of any XB360 game, with some games like MGS4 and GT5 that may even require a 50GB BD-ROM disc - the writing is on the wall and MS will have little choice but to release a competitive product... Which will cost them several billion dollars to design, build, distribute, and market... and will alienate many angry XB360 users, of which some were already upset that Microsoft abandoned support of the original Xbox so quickly.


Basically MS is damned if they do, and damned if they don\'t.

If they try to continue to charge for XBL and high prices for add-ons and additional content, they risk upsetting enough of their customers that they decide to stop supporting XB all together.

If they don\'t though, they will continue to lose money at a very alarming rate.

If they release a new Xbox that supports high capacity games, it will cost billions to launch, and will alienate many of their current loyal XB360 owners, and risk the chance that they might also stop supporting XB all together.

If they don\'t though, then again they risk losing more of their customers who want to play these games and will have no choice but to shift their support to other formats.

Basically, as many industry and financial analysts will agree, Microsoft is in a very bad spot. Their Xbox division continues to lose money, and as pointed out above, any change they make in their business strategy could potentially put their financial position and market growth at even more of a serious risk... and yet they cannot afford to continue on the same path they are on now.

[clips]

for future reference...NOBODY reads posts that are this long....at least i don\'t....just say what needs to be said and get to tha point....

Clowd desperately at it again..........yawn

i don\'t see why people hold such a deep emotional investment with an electronic toy.

enjoy your console and stop dogging the competition just because you only want to own one.

[Evi]

clowd...

...you\'re an idiot.



What\'s even more gay is you used the name of Al Gore\'s movie for your thread title. You just took it right in the ass with that idea.

Who are the people he quoted from? Are they just forum members?

[GmanJoe]

YEAH CLOWD! You tell these xbot haterz!

Extremely long. Can\'t be bothered to read it.
Thanks tho\'!

Jesus man, go out and get laid or something, trust me, its far better than copy and pasting shit from other forums.

[Paul2]

there are better things to do in life than being obsessed with a console.  Don\'t you have any other hobbies, or physical activities that you enjoy?  Or at least do some good deeds like helping the environment or do choirs at home or something.

[Jumpman]

July Hardware Figures
Wii 425 k
Nintendo DS 405 k
PlayStation 2 222k
PlayStation Portable 214k
Xbox 360 170k
PlayStation 3 159k
Game Boy Advance 87k

These Xbox fans...they try and forget that little island called Japan.  (not to mention the PSP and PS2 are whipping the Xbox)

July Japan sales:

Wii: 397k
Playstaton 3: 92k
Xbox 360: 18k

Overall for July,  US + Japan

Wii: 822 k
PS3: 251k
360: 188K

The Wii\'s strong sales surprise muah.  Looks like alot of fat people want to get in shape

And now it\'s time for the cherry on top.  PS3 is outselling 360 10-1 in Denmark.  And it outsold the 360 in Canada 15k to 13k

2nd place is about to change hands

And if you want to know about my personal life,  well,  me and the PS3 have become close friends.  We\'re not ready to take that next step,  though.  I can get honeys anytime I want to,  but PS3 gets jealous if I spend too much time away