05.31.10

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Former Microsoft Manager Knows That Xbox 360 is Failing, Ballmer Admits It

Posted in Finance, Hardware, Microsoft at 8:10 am by Dr. Roy Schestowitz

Titanic in jar

Summary: The naked Xbox emperor becomes less able to hide his nakedness and vulnerability; chief staff flees, Microsoft expresses pessimism, and money is still a problem

MICROSOFT is sometimes gloating about Xbox 360, not letting reality get in the way. The matter of fact is that Microsoft lost billions of dollars selling and repairing failed units and the selling of physical media (games) from companies that just target Xbox and help sell more units of it (i.e. good for Microsoft) suffer from counterfeiting [1, 2, 3, 4]. This is an area where game partners of Microsoft are hurt more than Microsoft itself. If anything, fake games add to the appeal of Xbox 360 while hurting the bottom line of some game studios.

“Xbox Boss Quits Microsoft Games Divisions,” reminds us this new article. Almost every Xbox boss has already left in recent years. We gave some examples and giving a complete list would take a longer time.

Here is another item from last week’s news: “PS3 to outsell 360 globally in 2010 – analyst”

If a new analyst report turns out the be on the money, Sony will sell roughly 3.5 million more PS3s this year than Microsoft will Xbox consoles, which mark a turn of tides in the current-gen battle.

Another news item: “PS3 Increases Global Marketshare to 31 Percent”

The PlayStation 3 has jumped from an 18 percent market since last year at the same time, to a 31 percent share. Microsoft better watch out.

Ouch. There are other articles which speak about Sony’s edge over Microsoft and Michael Pachter, a respected analyst in this area, has tough words:

i. Pachter: Microsoft Wants to Own the Internet

ii. Pachter: No browser for 360 as Microsoft wants to “own internet”

Speaking on the latest version of GameTrailers show Pach Attack, Wedbush Morgan analyst Michael Pachter has explained why he feels Xbox 360 will never have a browser. It’s all down to ownership, apparently.

In response to a question on the subject, Pachter said:

“The 360 doesn’t have a browser, and never will, because Microsoft’s vision when they made the original Xbox was to own the internet. The way you own the internet is to make sure all traffic that passes through your box is controlled by you.”

Pachter opined that adding social media content to Live is acceptable to Microsoft because it still doesn’t allow open browsing.

“Microsoft [said], ‘You are not getting out of this box unless we control your access.’ So when you replicate Facebook, Twitter, Nextflix on the 360 it’s not the same. You aren’t actually going to those sites; you are going to a Microsoft-controlled site where they know exactly what you are touching.

Analysts may be biased, right? Well, how about this new article?

Former Microsoft Exec Says Natal Will Fail

In an interview with Retro Gamer, Scot Bayless, a former studio manager at Microsoft, said that he believes Project Natal will fail.

Bayless experienced the failure of the 32X peripheral for the Genesis when he was a Senior Producer at Sega and told Retro Gamer that he believes Natal could see a similar fate.

“When I met with Microsoft in 2008 to look at Natal I asked: ‘When will you integrate this into the 360?’ Their response was: ‘We’re probably going to wait and see on that.’ To which I said: ‘Then you’re going to fail.’”

Bayless believes that Natal will fail because it will split consumers between those who have the peripheral and those who don’t and will act as a disincentive to developers. “Plays like this always fragment and the disincentive to developers is powerful; when I’m spending tens of millions on a game, the last thing I want to do is lose 90 per cent of my market.”

People are already complaining about the expected price of Natal [1, 2, 3, 4], possibly showing that scepticism was worthwhile. Why did the leadership of Xbox leave just months before Natal even had its début? Are they not excited? Were they overwhelmed by impatience? The matter of fact is that Natal merely replicates what other consoles already have and it costs almost as much as a Wii console. It makes no sense. Natal will change nothing and the name is terrible too. What was Microsoft thinking? Rumours that it’s renaming Natal are afoot [1, 2]. Even Ballmer is unhappy.

It seems that Microsoft CEO Steve Ballmer is dissatisfied with the dreary performance shown by the company’s non-core business. This was evidenced when the company axed two of its top consumer product executives in games and mobile.

Over a year ago Ballmer called the Xbox business “funny” because he admitted that they hadn’t figured out a way to actually make money from it. How come a lot of the mainstream press misses this simple factoid? Dabbling one’s toes in many ponds does not guarantee more success; it’s about profitability. It is possible that Microsoft will quit the consoles business within years as it carries on shrinking.

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