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Stupid, Stupid xBox (ilikecode.wordpress.com)
338 points by cek 1258 days ago | hide | past | web | 176 comments | favorite

"how it is crushing its original console competitors"

Previous gen:

> Xbox sales: 24 million

> PS2 sales: 153 million

Current gen:

> Xbox 360 sales: 76 million

> Wii sales: 100 million

> PS3 sales: 70 million

(all data from each console's respective Wikipedia)

How is it "crushing" its competitors?

Otherwise, I bought an XBox360 recently to get the Kinect for openFrameworks hacking and played a little bit with the console. All the points in the article regarding the UI are spot on - it is TERRIBLE to use. Nintendo's UIs are no reference either, but at least they're functional, while Sony's XMB is actually quite good (although the PS Vita's OS is a horrible thing to behold, which is scary for the PS4).

A few things:

- People buy more games per console (not even including digital sales) on the Xbox which is the real money-maker

- People pay Microsoft an annual fee for XBL which their competitors provide for free

- People spend more money on XBL on top the annual fee compared to their competitors for digital goods

- They actually get ad revenue for XBL on top of the annual fee and digital goods revenue

> the UI [...] is TERRIBLE to use [...] while Sony's XMB is actually quite good

I beg to differ, as the NXE and the Guide are comparatively a joy to use, and while the Metro one has available real estate plagued by ads and feels lacking WRT what it could be (e.g pinned apps should stand front and center), it is enjoyable enough. There are a number of system-wide underused features, like global vibration settings, global racing games and fps mappings...

XMB could be great but pales in comparison due to poor choices, limited development, and is injecting crap I don't want call to actions like Singstar in my Games entries, while the settings area is a complete mess.

Pet peeves:

* It stings a little when I hit the PS button to look at the (missing) time while in game.

* It stings a lot when I have to manually toggle the DST setting

* I cringe every time I have to manage downloads on the PS3

* There's no way to have multiple profiles connected and save progress and trophies for coop games (the Halo series leverages that to great end)

All in all both have their shortcomings, but it really feels like the xBox acts as a modern platform/system whereas the PS3 acts like a PS2/Dreamcast era console.

My guess would be the author is referring to US markets, where the Xbox 360 is outdoing the PS3 by a more significant margin.

yes, apologies for over-stating it generally or under-specifying US as the "crushing it" market. i do mean US and in general the fact that xBox currently has the most "mo" getting xBox ahead of Nintendo and Sony in their native territories was always expected to be a long, uphill slog.

These are just hardware sales. Of all of these the 360 has the most follow-on game/other services sales.

Total sales figures are somewhat misleading here, Sony and Nintendo both in much much worse positions today than they were 5 years ago.

All the other caveats aside, I'm willing to consider those results "crushing", particularly when it comes to Sony. Yes, Sony and Microsoft are close to parity, but think about how quickly Microsoft got to parity. This is their second console, ever.

The PS3 is Sony's third console, ever.

Fourth. The PSP came out between the PS2 and PS3.

The PSP is a console?

If we can include the PSP, we can include Windows too. That's a huge gaming platform.

But then how many people remember that the PS2 (just the previous generation) was Sony's second console ever?

What was surprising about last generation was how Nintendo kicked everyones butt in the beginning.

Sure, and the PS2 generally crushed its competition.

*77 million for the PS3

Nobody seems to remember just how much money Microsoft and Sony have lost on their consoles.

- Through 2005, the Xbox gaming division had lost over $4 billion [1]

- Microsoft took a charge of $1 billion dollars on its June 2007 income statement to account for the cost of replacing bricked Xbox 360s [1]

- Xbox 360 and PS3 losses total $8 billion [2]

Luckily for Microsoft, they've had the cash to burn to strong-arm their way into the market. The units sold is nothing too impressive when you account for losses.

1. http://en.wikipedia.org/wiki/Xbox_360#Timeline_2

2. http://www.vg247.com/2013/01/07/xbox-360-and-ps3-losses-tota...

This is a very moot issue at this point. The $850+ million the Live division is now minting every quarter guarantees a strong profit base going forward for the Xbox.

Their strategy worked brilliantly, and none of their competition has such a strong competitive advantage. Does it matter that it was expensive to acquire all those Live subscribers? No it does not. They made a huge bet on the future, and they had obscene amounts of cash available to do so.

While Sony has spent the last few years trying not to go bankrupt, Microsoft is sitting on nearly $70 billion in cash. While Sony can't make a profit, Microsoft is generating $6+ billion per quarter. Microsoft can afford to make long term bets; Sony cannot easily replicate that approach.

If the PS4 isn't successful, Sony is done in the console business. Given Microsoft's failure in tablets and smart phones, you can bet they'll spend whatever it takes to keep the XBox relevant in the living room.

The latest Nintendo console is going to be a flop (on par with the GameCube), leaving only the PS4 as real competition in traditional console gaming. Microsoft will widen its Live advantage over Sony & Nintendo accordingly, becoming one of the few subscriber kings (along with Apple, Amazon, Netflix).

Yes, we've seen it before: I think every time a console flopped it took a company down with it (at least out of the console business). The same thing happened with synthesizers back in the day.

But I have doubts. Even if the PS4 / WiiU fail and Microsoft does "spend whatever it takes to keep the XBox relevant in the living room", will that be enough? Microsoft wasn't shy about spending money on Zune, Windows phones, or tablets -- but the Zune is gone, the Windows phones have low single-digit market penetration, and the latest tablets don't seem to be doing better (we'll see, but it's not looking good).

Reasons I'm doubtful about the future of the Xbox:

1. It's not competing against the PS4. It's competing against Steam boxes, Android consoles, phones, and tablets. Not direct competition, but competition for our attention.

2. Indie games were big in 2012, and 2013 is looking bigger. Microsoft's platforms (other than Windows) are looking less palatable, especially for newer studios. Larger studios still fail as often as they ever did, but they're not getting replaced. The AAA titles will keep coming, but they're competing with scrappy folk who license the Unity and Unreal engines for prices that are very friendly... until you want to release your game for the Xbox.

3. With every generation of consoles, it becomes more difficult and expensive to produce content that leverages the new technology. It was a long time before people figured out how to produce content that really made the PS3 look better than the PS2, although much of that was due to architectural decisions. It may be that the survival of the Xbox depends more on what the market looks like in 2015 rather than 2014 or 2013. What will Apple have released by 2015? How many indie studios will have edged the behemoths out of the industry?

4. New generations of consoles no longer provide additional media functions that consumers desire. Two generations ago you got a pretty fine CD player with your PS1, last generation you got a DVD player with your PS2, and this generation you can play Blu-Rays or stream content from Netflix/Hulu. What's left? We have a PS3, but much of its justification was as a way to play Blu-Rays, Netflix, and Hulu.

On a side note, every time I've stopped by Ground Kontrol (the local arcade) recently, it's been packed. Even with a cover charge, even when most people have work tomorrow, even when the machines cost 25¢ per play, the doorman was turning people away because the building was at its occupancy limit.

Regarding Live's dominance, Microsoft cant afford to rest on that for much longer. Sony were playing catch-up for a long time but Playstation Plus is VERY competitive.

Live is based around mainly exclusionary practices - delaying demos, preventing you from playing multiplayer or using Netflix. PS+ on the other hand offers discounts and even free games (while you subscribe).

Isn't this how the console market works? You lose money on console units, but make it back in licensing?

Or are you saying that, taking licensing into account, the Xbox still lost money for Microsoft?

2005 and 2007 were a long time ago. Do you know of more recent numbers?

The overall division really did lose $4 billion that year. In 2011 they made $1.3 billion. Overall, I think they're about at break-even for the program since inception.

But in the years that followed that same division has made over $3 billion just in Halo game sales alone.

They also lost more money in years prior. I think they're in the black since inception, but not by much.

It's the way it works now, definitely. In almost any other market this would be considered dumping and anticompetitive practices, it sets an incredibly high barrier of entry to any potential newcomer.

I'm saying they're still losing money. The "lose money on units, make some back on software" model doesn't make economic sense anymore.

The second link has recent numbers.

> I'm saying they're still losing money.

In what world? The Xbox has been turning a profit for most of its life. AFAIK it lost money its first couple of years (primarily due to the fact it was rushed to market), and since then it has been largely propping up Microsoft's entertainment division, which otherwise would be bleeding like mad. (The division lost money last year not because the Xbox was unprofitable, but because it wasn't profitable enough to cover Windows Phone's tab as well as its own.)

AFAIK it lost money its first couple of years (primarily due to the fact it was rushed to market),

That, and the fact that nobody in Japan wanted to buy one.

That too, but it wouldn't have been as much of a problem if they hadn't needed to spend billions cleaning up their mess. They were already taking a loss on the system, then they had to take yet another loss because the systems didn't work.

RROD was much less of a problem than .jp sales, and much more easily fixed.

Y'know, it always seemed intuitively obvious to me that Japanese consumers would not be very receptive to any non-Japan-designed console unless it absolutely smashed the domestic offerings. One needn't chalk this up to xenophobia, but consider the advantage enjoyed by US domestic pickup truck manufacturers...

> it always seemed intuitively obvious to me that Japanese consumers would not be very receptive to any non-Japan-designed console unless

You hear people say this a lot, but based on my experience, it's basically bullshit.

Japanese people love non-Japanese stuff, and indeed, being foreign gives a product cachet.

However, they're also fairly different than American consumers. In particular, they're (1) super picky (in a way that Americans really aren't), about quality, but also style, reputation, etc, (2) not so price-conscious, and (3) maybe a bit more reluctant to take a risk on something unknown.

In the case of the PS2/3 vs. the xbox/360, the PS series had a huge name-recognition / familiarity advantage, and better support by Japanese game makers offering popular series. MS tried to prime the pump by pushing some "Japanese style" games heavily (and paid through the nose for prime placement in shops), but if you're a Japanese gamer who experienced the sheer massive volume of domestic content for the PS series, sticking with it seems pretty sure bet. Moreover, the high price of the PS3 was a bit less of an issue than with very price-conscious Americans.

> but consider the advantage enjoyed by US domestic pickup truck manufacturers...

Look up the "chicken tax" sometime.

> In what world?


> The Xbox has been profitable for most of its life



You just posted a chart detailing a whole division's profits and losses as opposed to the Xbox's. But regardless, it shows that division being a huge loser until two years after the Xbox hits, at which point it magically becomes profitable, until 2012 when the division starts pouring money into Windows Phone, at which point it magically becomes unprofitable again. This is exactly the way I described things. To recap:

"it lost money its first couple of years … and since then it has been largely propping up Microsoft's entertainment division, which otherwise would be bleeding like mad."

That is exactly what that chart shows. The Xbox has been turning a yearly profit since 2008, which means it's been turning a profit for most of its life.

Wong. MS hid the costs of IEB behind revenue transferred in from Windows Media Center (the functionality that allowed Windows Pro & Ultimate to have a higher license fee than Home).

[citation needed]

How about: I co-founded eHome, the business in MS that created Media Center.

A post on this would be very interesting.

They aren't still losing money. MS makes a profit on console sales now and has for the last few years, and their markup on games and especially on digital goods like xbox live and DLC is quite high.

He has a massive point -- "Why can’t I write a game for xBox tomorrow using $100 worth of tools and my existing Windows laptop and test it on my home xBox or at my friends’ houses".

I am wiling to guess that game development will follow the path of app stores. Consoles like the OUYA [1] will start to take over. The cycle from development to distribution will be cut by orders of magnitude. xBox needs to get on it and so do the other consoles!

[1] http://www.kickstarter.com/projects/ouya/ouya-a-new-kind-of-...

This is the promise of things like the Oouya console but they have yet to be proven commercially viable in the market.

There are some interesting forces at work here. The amount of time and effort needed to build a truly cutting edge game console has historically been high, further tools to get the most performance out of the hardware have required similar investments in expensive engineering time. This combined with selling the consoles into a very price sensitive market.

In order to recoup those costs, given the market realities, the console makers have traditionally resorted to extracting a 'tax' out of the game developers. On the theory that charging a few extra $ for your game to cover the cost of the tools / access is possible, whereas trying to fund the tool development on the back of base console sales is not possible.

Historically this has been the PC's "secret" weapon against game consoles for a long time. The cost of building tools was offset by developer fees across a much wider base of developers. "Free" tools were good enough if the hardware was sufficiently over powered, and gamers would spend $3500 on a machine that "normal" people would budget < $1000 for. That makes things flexible.

Then there are the phone games, which like PC games, have the advantage that the phone is useful for other stuff and there are more developers trying to write apps for it.

Ooya's promise is that the existing Android infrastructure / developers will support tool development, and the wide variety of handsets will constrain there efforts to work on systems that are similar to the modest abilities (relative to all android platforms) of the Ooya console.

So to respond to the articles point, the reason you cannot write a game for Xbox using $100 worth of tools is because if Microsoft only got $100 from everyone writing a game for the Xbox you would not have enough money to actually create the tools, much less support them decently. Their best effort at this was XNA but they have since killed that due to lack of adoption, if you are EA you can pay big bills, if you aren't, there are not enough of you to pay any bills.

MS could make development cheaper but still charge a 30% tax on game sales (which would actually be double what they take on a disc game).

what you describe ("if you aren't big and selling enough games, there aren't enough of you to pay the bills") is exactly the thinking I used to see inside Microsoft, not just around xBox, but around various development tools. it is a really really weird mindset today, though I think for xBox in the early days, when you really needed some low-level hardware tools to get the best juice out of the GPU, it still held a bit of whater. but that was then, and now game engines and GPU programming are much much easier. both Apple's XCode and Android development tools are basically free and there is a vast quantity of good quality graphics and physics and GLSL open source to draw on. they need to change their thinking about tools and access. they have to believe that developers will come and make great games and will be willing to give you a cut if you give them distribution, promotion, and access to your huge installed base of consoles.

I just bought a fairly capable gaming PC for around $1,000. It's not the absolute fastest thing but it certainly performs more than well enough for all the indie games I've bought.

" for all the indie games I've bought."

Those are typically not the graphics-intensive ones. I'm not sure what specs your machine make it into a 'gaming' PC, but I have yet to see anyone in the industry call a machine with the specs that 1000$ gets you today a 'gaming machine'.

What's more, this point applies to ANY consumer device today:

"Why can’t I write a game for <device with a CPU> tomorrow using $100 worth of tools and my existing Windows laptop and test it on my home <device with a CPU> or at my friends’ houses"

If as a company you're going to push for any device (game console, tablet, TV-box, phone, etc.), that seems like a number one pre-requisite to significant market share.

Really? The number one pre-requisite? I think you're greatly overestimating how much the general population shares your particular hobbies.

I think you are underestimating how much the general population wants apps

Normally, I very much try to temper my thoughts on what the "general population" wants. I realize that I'm probably an outlier (as is nearly any person considered in isolation).

However, I just do not see the never ending thirst for apps that people act like exists. What I do see is people enjoying well produced, well adapted, easily distributed pieces of software that do what they need, whether that's in the form of a web application, a mobile app, or a desktop program.

I don't see people just flat-out demanding apps. No one says "I'd prefer to type all my documents on my 9 inch touch screen device" when there's a nice, light, ultrabook with a keyboard right next to it (and the same office suite on both devices).

HOWEVER: of course people want their devices to be able to do lots of cool things. However, that's only if you can do LOTS of really cool things and do them well.

Everybody, even your grandmother, snickers at the shoes equipped with a Twitter reader. There are limits, and developers would do well to take a good hard look at those limits.

People would be much more apt to become hobbyist developers if they even knew where to start; we're all curious beings with problems we want to solve. My interest in web came only after I realized how easy it was to look at the innards of a site and go from there. It's not that simple for most software and games at the moment.

Steam boxes should also be pretty open like that. Obviously you can already make a "PC game" that can run on a Steam box but, Newell promised the approval process of Steam will almost completely disappear in the future, so it should be even easier for game developers to put their games on Steam, and then having them distributed to any device that runs Steam.

I'm sorry I didn't mention Valve's steam as a competitor in the post, I am very very excited to see what they come up with. I <3 Valve. I do think Apple and Android have a little more indie developer momentum right now, but not sure how that will play out long-term.

The OUYA is going to fail spectacularly. It won't even dent the market.

Why? Because it's going to be an inferior product with an inferior ecosystem that no average gamer is going to trust to stick around. People stick with what they know and have liked in the past, unless you give them a very substantial reason to change direction (positive or negative).

Some people want OUYA to succeed, but that's not reason enough for it to.

Why do the tools need to cost anything at all?

you're spot on, they shouldn't really cost anything. XCode for iOS development, for example, doesn't cost anything (once you've bought a mac). similarly Android development tools don't cost a thing. charging a small fee like $99/year for the apple developer program or the Amazon store, or $25/year (i think it is) for Google Play is something they say simply helps defray the costs of hosting your apps and icons and in-app-purchase stuff, etc, reviewing apps, supporting you as a developer, and they all say it "helps improve the quality of apps in the store." To be fair, Windows development tools and access to the Windows Marketplace and the XBLGI are similarly free and/or priced (although honestly the tools are pretty stunted in free form). I was really trying to make the point that the cost on xBox for developing games that get real promotion or are easily visible to users are very high and Microsoft gets overwhelmingly strong veto power over your apps/games.

I asked about this specifically because, when I got the book that really started me deep into programming [1], I was hampered by my lack of a C compiler and assembler, and the ~$200 cost thereof ($400 total, in mid-1990's dollars, for the two tools -- kids these days have it easy with binary downloads of Windows ports of gcc and NASM available free on the web). If I'd had that kind of money in middle school, I would have blown it on video games. (I didn't know about GNU, I don't think the DOS port of gcc, the Allegro system, was yet born, and I didn't have any mentors.)

The source is messy and compiler-specific, and many implementations are irrelevant to modern systems. For example, I recall Chapter 14 is about implementing multiplayer over serial cable by directly writing to I/O ports in assembly language to drive the UART. I never did get that to work, but trying to translate the book from the Watcom C + MASM toolchain to the QBASIC + DEBUG toolchain -- without access to a working copy of the former and zero prior C experience! -- actually taught me a lot.

So maybe there is a reason toolchains should be expensive -- to encourage starving students with lots of time but little money to expand their minds by jury-rigging alternatives :)

[1] http://www.amazon.com/Tricks-Game-Programming-Gurus-Andre-La...

>I don't think the DOS port of gcc, the Allegro system, was yet born

It might interest you to know that according to http://en.wikipedia.org/wiki/DJGPP, there's been a DOS port of gcc since 1989.

This is veering a bit off topic, but Apple do a fair bit for their $100/year. Especially in regards to handling overseas tax withholding to ensure that you don't need to keep up with every country's local tax laws. They also stand between you and the customer with regards to processing refunds, volume and educational licensing.

Google Play, as far as I'm aware, don't do this for every country you sell in. Leading to situations where you may be liable for tax payments but won't know it unless you do the research yourself. This is discussed in more detail here: http://retrodreamer.com/blog/2012/03/why-dont-we-have-paid-v...

> or $25/year (i think it is) for Google Play

Actually it is 25$ once and for all.

I've been shouting this for as long as I could: Once Apple (or maybe an Android company or even someone new) enters this market in earnest, Microsoft/Sony/Nintendo should take watch.

Apple has the infrastructure to deliver games, has tiny/medium/large touch devices that can connect via bluetooth in many customers hands (which already play games), and many many game developers familiar with the platforms. Every big studio has an iDevice team and there are hundreds of good iPhone games out there. If Apple can position the AppleTV as a console (maybe open it up to developers) or build something more along the lines of a traditional console, they will crush.

You can already do cool stuff like stream the game to the TV via airplay and use the device for a score/map screen (basically a WiiU) and it works surprisingly well and doesn't need cords or anything.

The only other real competitor here I see is one of the bigger android vendors like Sony or Samsung. If Sony could get the company in shape and stop producing products that compete with each other, they have many of the same advantages as Apple. They have android devices, experience making console/tv/etc hardware and even own game studios. They make every kind of electronic that goes in the tv room. But Sony has had this for years so that seems unlikely. They have already had huge employee slashes and are floundering.

Samsung has the same thing going on. They make everything and they have huge android phone/tablet penetration. I could see them easily jumping in on this and I hope they do. More competition blowing the doors of this stagnant industry could lead to a renaissance of smaller game studios.

EDIT I should add that Valve also has a chance here. There are many rumors swarming about a valve console or something similar. They have the distribution system and the games market experience, but have no experience with how to make hardware. Remember the last time that happened? I believe they called it the "red ring of death". I'm not saying valve can't pull it off but hardware is hard to get right. I look forward to what they do.

>If Apple can position the AppleTV as a console (maybe open it up to developers) or build something more along the lines of a traditional console, they will crush.

This opinion is pushed around a lot, however I cannot really see it happening, and I doubt Apple will ever pursue such a strategy.

For Apple to enter the console market, they would have to compete with the big boys, meaning if it can't push 100 million polygons at 1080p it will never get great adoption (who will want develop for a console with graphics out of 2005, and who will buy a console that doesn't have Call of Halo 7?). This means they have to create a modern console platform AND sell it at the price of an iPad. I'm not sure how the ghost of Jobs will take the news once he finds out Apple is selling hardware at a loss.

Next I doubt they would have anything to gain other than "you can now play CoD on the Apple ecosystem." They would lose money on the hardware, they wouldn't make much on the software if App Store profits mean anything (http://articles.businessinsider.com/2011-07-11/tech/29964545... reports they may have made ~$300 million). It just doesn't seem like a good idea finically. As far as the game console ecosystem goes I don't think MS/Sony/Nintendo will ever have to worry about Apple.

All in all, I am not really convinced that the App Store market will work for any of them. I strongly believe only Valve has the resources (and direction* ) to transition into the digital delivery era, at the expense of introducing yet another company into my living room. Still the question is how do you effectively deliver a magic box capable of playing Call of Duty at 1080p at the price of current consoles sustainably/profitably. Vavle's success so far doesn't worry about hardware. Their customers are either willing to spend $1000+ on a gaming every couple years, or just suck it up and blame Dell/HP for why their laptop can't play CoD.

* If Sony got their shit together, you are right, I believe they would take over the living room. They almost did it with PS2, and if the PS2 had come a bit later, or the PS3 was able to sell as much they might have done it. I think Sony could have built an Apple level brand loyalty (in the sense of having a Sony Computer, Phone, Laptop, Console) and (if they got much better at software development), they could have built a Sony store to manage your content on all those devices (after all they already own most of the movies and music). In another universe Sony may have been a Google + Hardware.

> meaning if it can't push 100 million polygons at 1080p it will never get great adoption

If you look at the Wii sales, you'll notice polygon pushing does not equate sales or profits.

Kind of a bad choice analogy... As per sales figures and TFA, a lot of Wiis might have been sold but their owners aren't using them all that much, and Nintendo is posting large losses.

I'll agree with you on principle, though. While gameplay > graphics every day of the week and twice on sunday, coming to the table with graphics from half a decade ago in this market is rather.. unwise. It's a huge blow to developers, a huge blow to imagination, and a boon to their competitors.

I honestly don't know if Apple will enter this market, but I'm not quite as pessimistic as you are about the profit margin as the reason not to.

I think they could build a next-generation-console-capable Apple-TV and sell it at or below $199 while keeping their 40% margin. They would sell you each additional wireless controller (and it would be sweetly designed, I suspect) for the standard $79 peripheral cost.

The primary contributor to their bill-of-material cost savings vs. competitors is that they already own and/or license at huge volume their CPU and GPU cores and know how to fabricate them in multi-core formats with high-speed cross-connectivity. They can also buy RAM and flash for SSD storage at better costs than anybody else. These are the primary cost drivers (basically money flowing to IBM, nVidia, etc for CPU/GPU and money flowing elsewhere for RAM/SSD/HDD) for xBox, PS, Wii.

Apple would have dramatically lower overall startup costs versus the original xBox/xBox360 and PS2/3 given they already have a toolchain and SMP operating system with sandboxing, an App Store and its back-end, user-accounts and payment infrastructure, and numerous other costs shared with the rest of the Mac and iOS ecosystems.

Apple wouldn't have a lot of work to do to train developers: tell us the screen resolution, how to interact with the controller and any other new hardware capabilities, tell us anything special about the GPU's and let us go to town with the existing toolchain we are using for iPhone and iPad.

So, again, I have no idea if they'll do it, I just think it would be a very profitable business for them.

With Tim Cook's track record of world class supply chain management it will surely be profitable for them.

When the iPod was introduced it didn't compete on tech specs with the other music players. "No wireless. Less space than a nomad. Lame." - the famous last words dismissing the iPod.

When the iPhone was introduced it did have innovative tech but it was secondary to the overall experience.

I'd say when, not if, Apple really wades into the TV market, they should be able to achieve the same kind of disruption. TV's are an obvious choice for Apple, because the TV is one of those consumer electronic devices that occupy a sweet spot between status symbol and the everyday always connected lifestyle.

Thanks for the article. Sony/Microsoft/Nintendo better watch out!

It would be absolutely revolutionary if Apple could do it, and it almost seems too good to be true. If that supply chain was opened to anyone else it would be like getting the power of an xBox 360 at $99, forget the raspberry pi.

Now I am not too keen on the video games industry and an insider might have differ, but I've tried to do my fact checking. In a way the device you described for Apple's target specs is what Nintendo did the Wii - and were hugely successful for. They sold 100s of millions of units, and it wasn't sold at a loss so they minted money. However, despite their huge shipments, only Nintendo enjoyed success. The people who bought the Wii, only bought 1 or 2 games (like WiiFit and WiiSports) and it became incredibly hard for third parties to market big budget games to them. Effectively the 3rd party abandoned Nintendo.

Secondly, if the system is not powerful enough, I believe gamers will reject your platform. I believe this is more important than the "No wireless" issue because gamers are the only ones who will spend $59.99 on a big budget game, and as a result 3rd party companies will suffer. You can't sell Call of Duty at 99 cents, and gamers don't want to play a Call of Duty that looks like it was made in 2002.

So the market, I believe splits into 2 groups - 1.) Average folk, who want the box. 2.) "Gamers", who want the software.

We can already see this today. There are Netflix Machines like the Roku (1.) and consoles (PS3). However I believe that the the console guys (Nintendo/Sony) will eventually win out, because they provided the hardware (the hard part) first. Its relatively simple to get the indie devs on your side - open up the platform. But to get the big budget guys on your side you have to convince them that they won't waste 50 million producing the next CoD because it will be drowned out by the likes of Angry Birds and Temple Run.

Lastly, I am not sold on the fact that Apple will be able to push the same numbers as Sony on Apple TV without "big boy" support. If EA is not going to support your system I don't think the Apple Box will sell as much. (the Apple TV only sold 2.7 mill while PS3 sold 10 times as much). While Apple is known as the company that can sell a brick to the masses, I am not sure they can sell 25 million consoles without some big franchise names at launch.

Apple has never shown itself to have the wherewithal to correctly interface with game development, and I doubt they have any appetite for doing so. They're already doing gangbusters on iOS without any particular help offered, but the market realities of consoles (and, to a certain extent, PCs) are very different.

Microsoft's huge win on both PC and Xbox has been their active and aggressive devrel for games, which was where Sony stumbled hard on the PS3 (Cell processor development difficulty abound).

This would be the one sticking point for me: it seems Apple has never really cared about games, so it is unclear they will start caring.

Maybe I'm wrong but my impression was that Apple never understood or cared much about gaming and largely lucked into their ios game success due to being a popular portable mobile device with opengles and a decent virtual application marketplace at the right time. I have a hard time seeing them get into consoles.

I'm vaguely imaging a scenario where they don't sell anything resembling a console, but expect you to own some sort of iDevice to go a long with your AppleTV, or maybe sell it with a iPod touch?

But yeah, I could see your scenario happening. It would probably be amazing either way

Oh wow, good point I totally forgot about valve holy crap. That should be soon!

I'm not sure Apple will/would do it, but I think they have the muscle. They aren't competing with CoD, they are competing with Tetris. They want you to buy and play games on your media device, not watch media on your games device. Hugely different market which is ripe for picking.

Apple would probably not build a device they lose money on: that isn't their game. They are a hardware company and they make their money on hardware. This is why I assume they would build something similar to the AppleTV with maybe a bit more juice: rely on the iPad to deliver the CPU juice and the AppleTV (or whatever) to show the content. "Everyone" already has an iDevice, leverage that and jump in.

If Apple is competing with Tetris, then Nintendo/Sony/Xbox won't have to worry about them. The people in that space are Smart TVs, Rokus, and Apple TVs, which already exist and aren't eating Nintendo's lunch.

If your console cannot play Call of Duty and Mario like the big boys, you aren't really competing in the same space, and as long as Mario and CoD are popular, your average person will simply just buy the iDevice and a Nintendo. Now if the Nintendo has the advantage of doing everything the iDevice can do, most people will simply opt to buy the Nintendo, especially if they are being sold at the same price.

Think about the long term though. Apple has already convinced millions of people to put the AppleTV in their homes. With a simple update they could enable iDevices and an App Store to allow developers to do crazy stuff. Then at next iteration they unveil offerings more tuned to hardcore gamers. They liked the first one, now they want more. Apple is already deep in the gaming market, they have the patience.

So yeah at first Apple will compete with on delivering simpler game experience like Angry Birds or Space Team or Letterpress. But so what? People love those! Don't forget that "hardcore" gamers are no longer the focus here, other markets are much bigger. Apple can wait to focus on bigger titles.

What you are describing has already happened though, just the other way round. Nintendo convinced 100 million people to put hardware in their homes, and then with a simple update included Netflix. However just because people liked the first one, doesn't mean they would want more. The Wii U is selling as well.

It'll be interesting to see what happens when the OUYA becomes available. A lot of major developers have already committed to support it. I can't wait to get my Kickstarter unit in a few months.

I met with them last year when they were talking about possibly acquiring Bionic Panda Games (which unfortunately didn't happen) and they seem to have an interesting business model. Every game will have a free version, either a full but limited version or a playable demo, and they'll have their own store similar to Google Play.

The only deficiency is that they don't have a motion controller like the Kinect or Wiimote.

I wish it well but my assumption is that it will fail :(

Hardware is hard; software is hard; distribution is hard; but they want to do all of it all at once. I wish them the best but I don't see them lasting unless they get acquired

It'll be interesing to see what Sony reveals next week when they unveil the Playstation 4; one hopes this device will be capable of downloading something in the background.

I have to say I find a lot of Apple stuff maddeningly quirky as well, and don't think they have a magic fix for this space. But they could certainly shake the space up if they choose to enter it, and I wish they would since more competition is good.

I am super curious. Sony is at a huge turning point here. They are faltering badly and sort of stumbling around. For example, they released the new PSP and the Xperia Play last year which are basically direct competitors. They have all kinds of products but no real clear strategy as to how to put them together. It boggles the mind that they sell everything in the home but haven't found a way to actually get it all together. They literally sell everything from laptops to televisions to receivers to speakers to phones to consoles and more. Just imagine if they had a strategy as coherent as Apple's across all those products.

The modern round of game systems are quite flawed from a UI/UX perspective, as the author here points out.

My Playstation 3 forces me to do various updates to watch Netflix (which is what I use the system for 90% of the time). All of the systems ask you to input text in a super-awkward way to setup various aspects of the system (on-screen keyboards really suck for typing in complex WPA2 passwords).

The XBox 360 is the most annoying by far, as it constantly bothers me about signing onto Microsoft Live. There were some fraudulent transactions on my account (which I thought was super-odd, because I use lengthy/unique passwords on everything), which Microsoft (after a 30-day period) refunded to my bank account. But I haven't been able to sign onto XBL since, and haven't really bothered to call Microsoft for support. The PS3 doesn't constantly bash my head in with sales and random junk when I just want to watch Netflix. Also, Microsoft seems to think that UI changes every 18 months is a great idea. They don't seem to add much value.

Sadly, the Wii has been turned on maybe three times. It kinda feels like a dinosaur at this point. I use my Raspberry Pi more these days for gaming...

Surprisingly, I've found the UI on the Wii U to be generally pretty good, even great at times. There's a lot of consistency between different parts of the OS and the underlying concepts are all totally sound.

It makes me wonder whether this will be the generation where consoles can no longer get away with having poor UI design.

Seriously, the fact that I can't plug in an old keyboard to the PS3 for the occasional password or search drives me nuts.

You actually can use USB keyboards on PS3. I'm fairly sure it works in any OS-provided text fields, but I'm not sure about support in games and other apps.

Unless they've changed something you should be able to use a keyboard with the PS3. I used to have a wireless USB keyboard/mouse that I used with my PS3 for web browsing.

Yea, it still works- but its clunky as my only extra USB keyboard in the house is a huge Unicomp one.

Though I can't speak to the internal politics of Microsoft, I can say that as a gamer I don't remember ever getting upset at the pain points the author listed. Granted, I'm coming from a technical background (as are most people here), so I'm obviously not in the perspective of the small child the author sometimes takes in the picture captions. However, I feel there's a tension between the complexity of an application and the affordances it provides. To use one of the author's examples, choosing where to save an update (a useful affordance to have, I think) requires that the user suffer a bit more complexity. In my experience, the xBox doesn't manage this complexity poorly.

That being said, the author has a strong point in regards to the indie game market. Game development could and should be as simple as it is on Android because the platform's support is there... it's just locked behind layers of legal and financial obstacles. I'd love to see an xBox Live market where indie games are strongly promoted, and I can't imagine the cost to Microsoft would be strong enough to outweigh the revenue gains they'd make if they took a percentage of sales.

Really? Every time I try to use my Xbox, I have to deal with the idiotically slow UI. Seriously, if I press the Xbox button, it pops up a grey rectangle, and takes several seconds to load in details. The dashboard is cluttered with ads (although only one tile is labeled so).

Browsing games to buy on the Xbox itself is painfully slow. Many, many, seconds, just for simple screens to load.

This guy totally nailed the reason I don't start up my Xbox as often as I'd like: It's annoying to get into. Once I'm in a game, it's _usually_ OK, although the slow saving thing is jarring. But the thought of it starting up, asking to update and reboot (usually 2 or 3 times in a row) - ah screw it.

This is a very revealing article:

- It gives official confirmation of the (somewhat obvious) idea that the XBox was a defensive move against general living-room entertainment boxes.

- It shows that he has a very distorted view of the gaming landscape, if the truly thinks that the XBox is the dominant platform, or that mobile games are a genuine threat to console gaming (they most certainly are not).

- He singles out Apple of all companies, as the biggest threat to mobile gaming, despite the fact that Apple doesn't seem to be too interested in anything other than simple 99¢ iOS apps, dismissing the companies like Nintendo who, for all their recent troubles, have a long and storied history with gaming that Microsoft can only hope to compete with.

- He brings some good points about the interface though. But that's honestly not the XBox's biggest problem.

Apple wasn't at all interested in cell phones either, in case you don't remember.

Ask Blackberry how far not worrying about Apple got them.

"- It shows that he has a very distorted view of the gaming landscape, if the truly thinks that the XBox is the dominant platform, or that mobile games are a genuine threat to console gaming (they most certainly are not)."

The threat of mobile gaming on the PC/Console gaming landscape has been recognized by some of the largest stars in the industry, eg: Gabe Newell states Valve wants the PC in the living room but the biggest competitor is Apple.

[1] Dice 2013 Keynote with Gabe Newell at 7:30 minutes in. http://www.youtube.com/watch?v=PeYxKIDGh8I

Pardon my skepticism.

Notice how Gabe is talking about how Apple is a threat not to consoles, but to PCs moving into the living room (i.e. his company's plans). To people who don't know the industry well, this might not be easily differentiable, but the reality is that the two come from fundamentally different lineages.

The thing that sells gaming platforms is not "natural progression into the living room", not an "upgrade cycle", not "development tools". It's the games.

If Apple takes a similar approach to living-room gaming as they took to the iPhone, with an open development platform, or an "Apple TV" that plays games, but is not primarily focused on games, you'll see roughly the same quality of games come out there as on the iPhone. And notice how no iPhone apps sell for more than 99¢ these days.

Apple has no history of game development. It's not a part of their DNA. And the gaming industry is a difficult business to succeed in. So to take any other approach would be monumentally difficult for them.

The biggest threat to console gaming is not Apple. It's the consoles themselves.

Consider the case of the iPhone vs. handheld consoles. The iPhone was released in the heyday of the Nintendo DS. The DS sold like hotcakes throughout its lifecycle, and didn't slow down at all even as the iPhone's app store exploded onto the scene.

It was only once the 3DS came out that handeld consoles started to have difficulties. Of course now everyone starts blaming smartphones for taking the market away from them, but look at the console: it has a lineup of games that's mediocre at best, it focused on 3D features that nobody cares about, it had hardware flaws like a terrible battery life, and it was very expensive at launch. No wonder it disappointed.

If consoles end up failing, they will fail on their own merits. It won't be because of an app store.

he also left Microsoft 14 years ago, 2 years before xbox has shipped.

I see a couple comments here, including the highest voted top level comment, questioning how the xbox can be "crushing" their competition given that a straightforward reading of console sales indicates things aren't so cut and dried.

However, the xbox is crushing its competition, in several ways, and let me explain why a naive reading of unit sales is misleading.

Many consoles sell at a loss, especially initially, or on a very small margin, console sales alone are meaningless. Console sales themselves just serve to expand the player base, enabling follow on game and service sales where the vast majority of the profit to the console maker and of course to the game makers comes from.

Here's where things get interesting. Nintendo has always sold everything at a profit, so they've never lost money on incremental console sales. However, again that margin is still fairly small, what they need is game sales. And for the Wii that's been a disaster. They sold a huge amount of consoles but a lot of the people who own them don't play them very much, and they don't buy many games. This is a big reason why Nintendo has stopped making a profit overall as a company the last few quarters, which has been rather disastrous for them.

Now let's look at Sony. They started off with a crazy console design, which is almost an experimental prototype device, this is not the sort of thing one usually does with a console. The result was that the hardware of the console was hugely expensive, which meant that they were losing a huge amount of money on every console sale, about the same as the cost of a Wii. This meant that Sony needed to have strong follow-on game sales to make up for such huge loses. However, because the console was so difficult to develop for they struggled with game availability for a long time. Eventually these factors started to become less of a problem. Multi-platform game engines eventually matured sufficiently to where it wasn't a huge problem to target PS3/360/PC releases for most games, and that has helped PS3's game library tremendously, in addition to a very small handful of excellent exclusive titles (such as Little Big Planet, Heavy Rain, etc.) Also, eventually Sony managed to reduce the hardware cost of the PS3 down to a point where they weren't bleeding money on each sale so horrifically. However, despite all of this improvement it's questionable whether the PS3 has made a total profit for Sony overall, and if it has it's likely not very large. Worse yet, a lot of Sony's big efforts such as the playstation network and the Sony Move have not taken off and not garnered much enthusiasm in the market.

And then we get to the 360. This console certainly has its fair share of problems and debacles. At launch it was definitely sold at a loss to the company. It struggled with reliability problems and expensive warranty extensions through many of the early hardware iterations. And sales in Japan have always been weak. But, somehow it managed to come out ahead. The 360 never sold at as much of a loss as the PS3 and it didn't take long for them to get to a point where they reduced hardware costs enough to make a profit on console sales. Even with the expensive $1 billion warranty extension their balance sheet on pure hardware alone is far, far better than Sony's, which means that MS actually needs to sell fewer games per console to come out ahead in total profit. As it turns out, people who own 360s are far more active gamers than people who own other consoles. They play for more hours per month, and they spend more money on games. Of all of the consoles currently on store shelves, the 360 has the highest multiple of average number of follow-on game purchases per console. But it doesn't stop there. The Kinect add-on has been one of the most popular consumer electronics devices in history. Also, whereas every major competing online multiplayer service is offered for free (Steam, Origin, PSN), Microsoft's Xbox Live Gold service costs money. On its own it has subscription volume and costs similar to the most successful MMOs in existence (such as WoW). That's a testament to the sheer volume of people who think that Microsoft's service offering is valuable enough to pay cold hard cash for, but it also, of course, goes straight to Microsoft's bottom line, to the tune of around a billion dollars per year. And because it's a digital service the development costs are fairly low. But wait, there's more. In addition to game sales, xbox players are also more likely to purchase DLC packs and other digital content such as xbox live arcade games. Again the incremental costs on these digital goods are fairly low so Microsoft (and the game publishers) make a much higher margin on them.

What does this all mean? Several things. First, in total Microsoft has been far better at consistently extracting significant profits from the gaming market over the lifetime of the current console generation. Second, Microsoft has far more momentum in terms of game sales and customer loyalty and enthusiasm than the other console players. Third, Microsoft is making far more headway than other console makers in earning revenue from digital goods and services, where the profit margins are the highest. Fourth, many game makers find that they make a lot more money from the xbox versions of their products, which helps ensure that exclusive games that aren't on the xbox are a rarity.

And this is precisely why this year we will see all 3 companies release new consoles, and why Nintendo has already done so. Because without a significant disruption in the status quo the result is that the xbox will continue to outpace everyone else, and continue to gobble up more and more market share and gaming revenue. Nintendo is trying to give themselves a chance to stay relevant. And Sony is trying to put themselves on a new footing. And Microsoft is trying to hold onto what they have or extend their lead.

Note that I intentionally left out a lot of complicating elements such as competition from PC and mobile/tablet gaming, introduction of new console makers, etc. That may play a role in the future but it hasn't played a significant role in the fight between the different home consoles so far.

I am just curious - where are you getting the console costs from? From what I know this information is highly sensitive and even most insiders don't have an access.

Also, what scale do you use to compare costs? From the fact that you call Kinect (sold ~18M [1]) "one of the most popular consumer electronic devices in history" and Move (sold ~15M[2]) "has not taken off" it appears that either you are using some kind of highly non-linear measure or are better informed than almost everybody else.

[1] http://en.wikipedia.org/wiki/Kinect#cite_note-18-million-1

[2] http://en.wikipedia.org/wiki/PS3_Move#cite_note-15_million-4

I have no idea on the concrete numbers, but the two sources you cite appear to be separated by almost one year (jan/2012 for the Kinect and nov/2012 for the Move one)

Indeed, the sales figures are not synchronous. This is why I asked if GP has some special data, because the publically available one does not confirm his/her assertions.

Found a newer source than the wikipedia citiations: http://www.hypable.com/2013/02/12/kinect-sales-reach-24-mill...

24 Million Kinects and 76 million XBoxes!

Thanks. So even with the most up to date numbers Kinect does not seem to be crushing Move.

The figures for the PS3 are well known. And the Wii/Wii-U's profitability per unit is also well known and publicly admitted. With any console you can generally just look at the parts list and compare costs to retail.

>The figures for the PS3 are well known.

From what source?

>And the Wii/Wii-U's profitability per unit is also well known and publicly admitted.


And Xbox, I figure, is also "well known"?

>With any console you can generally just look at the parts list and compare costs to retail.

True, if you know the costs of parts you can do this.

That's comparing the number of Kinects sold to total Move controllers which include people buying multiple controllers and the Navigation controller.

Totally anecdotally, as cliche as it sounds I feel like what my parents (and other people who don't care about games) mistakingly call video games is a good indication of the current market.

When I was a kid, every video game was "Nintendo"

During the PSX/PS2 era, every video game was "Playstation"

Now, every video game is "xbox"

(Also a PSP is a "DS")

I imagine they pick up the words unconsciously over time from TV/news/papers/passing conversation, which could be a pretty good indication of where the brands stand next to each other.

You've got to pick parents with the right level of awareness for this. My Mum is the same, but my Dad calls his phone a Gameboy, and refers to all other non-TV electronic devices we own as "The Machine".

Thank you for this insightful commentary.

I wanted to add that there is a general vibe in this overall thread (not your comment - the vibe that you have responded to) that Microsoft essentially muscled their way into the console industry and achieved market dominance, largely because of their financial abilities.

Certainly, their financial abilities allowed them to shoulder the losses on hardware, but as you have pointed out, it is a common practice to implement a loss leader [1] strategy on hardware to achieve market share for other services (e.g., subscription gaming services, games, etc.)

Back to my point regarding financially muscling their way into the console market and why I do not believe that this is an entirely correct assessment.

For example:

1. Microsoft included a NIC in the XBOX at launch. It was baked-in; this was not an add-on. Sony had to step up and compete by offering the PlayStation Network Adapter, initially as an add-on. Also, Microsoft launched XBOX Live approximately 4 years ahead of PlayStation Network... 4 years!

Before that time, Sony essentially relied on game developers and publishers to support networked gameplay via a server infrastructure that was not controlled or offered as a subscription service by Sony. That service did not occur until Sony offered PlayStation Network.

2. Microsoft included a hard disk (a console industry first) in the XBOX, for storing downloadable content.

These are two examples of why it is not entirely correct to say that Microsoft achieved success solely by financial ability alone.

It was Microsoft that had the vision to launch with a unified, subscription-based gaming service with XBOX Live and a hard disk for storing additional content. They ultimately delivered a superlative networked gaming experience out of the gate, particularly with the quintessential launch title, Halo: Combat Evolved.

[1] https://en.wikipedia.org/wiki/Loss_leader

Well put, and although I may be somewhat biased, I agree -- financial muscle only gave us the ability to get on the field, it doesn't help you win or have a long-term strategy. The original hardware profile (PC-like so tools were available) and including a HDD was what allowed us to get game developers on-board quickly. Including the HDD and the NIC were also the bets, and as I tried to say in my original post, these were the innovations and the bets on the living-room Trojan horse -- we could afford to include these things because the console business model involved an audience size, a higher bill-of-material and a payback model which things like set-top-boxes and WebTV did not. Securing a few awesome first- and second-/third-party games exclusively to the console was also a critical tactic early on. I remain somewhat surprised that outside Halo there are no longer standout exclusive titles. I don't know why that effort has been dropped, that's stupid, too.

I think pursuing exclusive titles is a bit of a wild goose chase. They're necessary more to prop up a struggling console than to further benefit an already successful one. If the system is doing well then you don't have to convince anyone to target it. Especially in today's world where the big game engines target multiple platforms so easily, deciding to target only one is just leaving money on the table, even if your studio has strong preferences towards a specific console. Generally the only way to ensure an exclusive is to buy or pay off a game studio, but that can be self-defeating because that money offsets the increased game revenue.

But if you're relying on your console being a solid default favorite platform for games because it makes financial sense there's nothing wrong with that. It may not be as satisfying a "win" as exclusivity, but it's precisely the sort of win that you want. And it should still be flattering that developers are targeting your console merely because they think it's a good system rather than out of any backroom dealings.

Of course, you can change the equation with custom hardware, as the Kinect has done, and that has generated a few decent exclusive titles. We'll see what MS does with the hardware with the next console rev, maybe they'll be able to deliver more on the promise of the hardware and bring more major developer attention than it's gotten so far.

I think you are right, pursuing big name exclusives is often a fool's errand, and also that temporary hardware advantages like Kinect can cause exclusives to just happen, at least for a while.

But I also think that a thriving indie dev culture, as the OP is calling for (or rather, chastising MS for thwarting) can do the same thing: it can give a platform exclusive titles (games, but the same could be said of non-game apps) at least for a while, just because small indie devs can often only target one platform, at least until their indie title is a hit bringing in the cash to target other platforms.

(Had a little bit more but will have to leave it there as my laptop's reserve battery power warning is getting very insistent.)

It's very interesting to take this spot-on assessment of the game console industry and compare it to the mobile phone industry.

Microsoft and Apple are dominating in very similar ways when it comes to gaming consoles (Microsoft) and mobile (Apple).

Yet Microsoft hasn't been able to replicate this winning strategy with its own phones. It seems to me that if one department at Micrsoft is "killing it", it would be Xbox. Yet that's the last thing anyone talks about.

If there's one division at Microsoft that's killing it, it would be server and tools, which at $5.2 billion (latest Q) in sales is nearly as big as the Windows division now (and within 4 to 8 quarters - as the Windows 8 bumper dies down - will probably surpass it).

The $20 billion / year in sales server and tools does, is three times the size of the XBox + Live group.

It isn't fair to compare server products with gaming ones, because server products are bought by people with big money, and the lock-in potential is much bigger. You need much more popular product, and you must be consistently good across versions.

Microsoft does well when it starts with an advantage and the main issue is avoiding making huge mistakes.

In phones MS has been ahead, then utterly disrupted, then made valiant come-from-behind efforts. But the problems they are faced with are different than they're used to. With phones they're fighting against the network effect of competitors. They need to not just be a little better than the competition, they need to be a lot better. Also, look at how much money both MS and Sony spent buying up game studios and exclusive content for their consoles and compare that to the relatively weak outlays in the same vein for mobile content.

Not that I disagree but just so I can back myself up when I go repeat this to friends and colleagues where's the data to substantiate these claims?

In particular that 360 has made more money for 3rd party devs than Wii.

It doesn't really matter if Microsoft makes more money per gamer than Nintendo if Nintendo is still more popular. As a ludacris example I'd consider consider a company that sold a million $1 items more successful than a company that sold one $2 million dollar item. One has market. The other just as a customer.

I'm not suggesting Wii is more popular than 360. I have no idea since I have no data. I'm am suggesting that the profit of Nintendo vs Sony vs Microsoft is irrelevant. What is relevant, I think, is which console is making money for 3rd party devs because that's the console that seems like it would have the most support in the long run. I'd love to see real data as to which console that is.

According to wikipedia (http://en.wikipedia.org/wiki/List_of_best-selling_video_game...), there have been 618.24 million XBox 360 games sold, and 863.53 million Wii games sold as of December 31st 2012. Nintendo is bigger on the 1st party games, though, so who knows whether it's made more for 3rd party devs or not.

All you need to do is look where the big money is invested. Of all the major publishers bar Nintendo, the majority is pumped towards the 360/PS3.

You also have to consider average selling price and DLC sales. Higher ASP + DLC could easily make a 360 version far more profitable for devs than a Wii version, even at half the units.

Marginal cost for a software copy isn't high enough to make a $10 price bump and some DLC result in twice the profit. I don't think DLC is that big a factor except on the mega-hits that people play online for a year after purchase.

I fully agree. But I think that this is, what the original blog post called:

" Touting strategic and market success when you’re just experiencing your competitor’s stumbling failure[...] "

The problems of the PS3 where the exotic hardware, the problems of the Wii were the exotic HID. Because of this, Microsoft won this generation, but actually it does not tell us anything about the next generation of consoles. And I think it is a bit disappointing, that this round of the console war was not won by doing anything right, but by fumbling least.

Oh yes, it very much is, for the most part. Some things MS does which are legitimately better than the competition, and that helps along with in general just making fewer mistakes than Sony/Nintendo.

However, if you look at, say, Valve/Steam vs. Microsoft, especially now that Valve is moving into the console market, that should terrify people at Microsoft. Valve is starting at a disadvantage, but the future of gaming on any platform is digital distribution and they have by far the most experience and the most connections in that area. Most importantly, they have a long history of helping game publishers squeeze the most revenue out of games through sales and promotions. At the end of the day game publishers follow the money (indeed, one could describe that as an almost darwinian process), and the most profitable platforms for 3rd parties are going to be where the development effort and player base will end up coming to rest.

Thank you for the thoughtful and spot-on response. I completely agree. My draft was nowhere near as well-put, I have discarded it post-haste.

If you look at what Microsoft has actually said about it's gaming division it has lost a lot of money that's yet to be paid back. (Not to mention plenty of internal cost shifting that makes things even worse.) Based on the size of there investment in both R&D and other company's it's been a horrible investment that's unlikely to ever be paid back when you include basic opportunity costs.

If you really want to look at sales, games are far from the only revenue source, accessory, downloads, XBOX live are all significant. Nintendo has made a lot of money reselling legacy games. They may be cheap but there is no R&D costs and they get everything not just a tiny slice of a 3rd party game.

As to loyalty, that's next to non existent in the console market. You get a slight bump on the next generation and that's about it.

PS: From a pure ROI standpoint Nintendo crushed the completion this round. Unfortunately the Wii U does not seem to be making the same headway.

The idea that Nintendo always sells at a profit is a long standing one, but with Wii U it's known to be false.

Nintendo themselves have confirmed it:

"With Wii U, we have taken a rather resolute stance in pricing it below its manufacturing cost, so we are not planning to perform a markdown."

1 - http://www.nintendo.co.jp/ir/en/library/events/130131/04.htm...

If that's the case, either MS and Sony take MASSIVE loss or hardware is going to be incredibly disappointing this generation.

The Wii U has 2006 PC level hardware at best. If you need to take a loss to sell it at these prices this is going to be really bad (unless the controller is taking the lion's share of the cost).

The Wii U controller does seem to be the bulk of the cost, but Sony were willing to take a massive hit on the PS3 cost at first to make Blu-Ray the standard disc format, so we'll just have to wait and see how much the next generation costs

I think it's funny how Nat capitalizes "xBox". The official capitalization that was finally settled on was "Xbox". It annoys the marketing people to no end when people capitalize it wrong.

I always thought xBox looked cooler.

It totally does. I always thought the official was "XBOX"; "Xbox" looks like the way someone uninformed would write it or that it was an afterthought of a product.

Meanwhile, in reality, Nat looks uninformed for writing "xBox" because it is incorrect.

I'm not saying "Xbox" is necessarily the best, or that I even have an opinion, but it does happen to be the correct capitalization.

Using correct English capitalization rules makes someone "uninformed" now?

Given that it's a proper noun and the pronunciation is "X Box", I would think the pseudo-initialism "XBox" would be more proper English.

Given enough time, everything becomes assimilated to look "normal". Consider the words RADAR (RAdio Detection And Ranging) and LASER (Light Amplification by Stimulated Emission of Radiation) -- what started as initialisms became normal words after people started using them regularly. It can presumably happen to newer words like "Xbox" and "Gmail" too.

The logotype is set as "XBOX", so yes, writing it as "Xbox" looks uninformed.

The segment about terrible error messages really resonated with me. I was actually just thinking yesterday about how, after so many years, Windows errors on personal/home computers still tell you to talk to your "system administrator". Microsoft has never understood the basics of the personal market. Bad UX is in their blood.

"...experiencing your competitor’s stumbling failure (yes, Sony, Nintendo – you are, I’m afraid, stumbling failures)."

Can someone explain how Sony and Nintendo are stumbling failures in the console market? How extreme their failure must be, to feel comfortable stating it as a common fact requiring no explanation! I must be way out of touch.

See InclinePlane's comment, above - http://news.ycombinator.com/item?id=5210998. (s)he said it better than I was trying to.

My Xbox is the only product/service I use where I feel that I am directly interacting with Microsoft. For me, the Xbox is the last area where Microsoft is relavent.

I don't know if people on HN are following the rumors related to the next-gen consoles, but it looks like MS is going to be addressing at least one of these issues: UI fluidity. If the rumors are accurate, then MS has a multi-pronged approach to making the UI a lot more fluid. While the 360 reserved 32MB of RAM for the OS, rumors suggest that MS is reserving 3GB (out of a total of 8GB).

Furthermore, MS is apparently using a hardware-based display plane system where there are 4 independent display buffers that can be refreshed/displayed at different resolutions and framerates. 3 of the display planes are for the game to use (one for the HUD, 1 for foreground, 1 background) and 1 plane dedicated to the OS.

I do 110% agree with the author that having a more app-store like ecosystem would be absolutely huge, and if MS were to properly implement, would let them compete vs Apple.

If I had the money I'd buy both MS and Apple stock, because one of them is in the best position to win the living room in the next 5 years.

The arguments he is making are about UX, not UI fluidity.

Unfortunately, I'd say that the UX has actually deteriorated in the years I've owned an XBox. As they've tried to push more and more non-game content, access the games has gotten worse.

The other things, like the settings screens, are just as bad as ever.

I wouldn't award Sony's crossbar interface any points either. After a few years (on two systems), I've learned where to go hunt for the 2 or 3 things I usually use... but that's not a complement.

The Wii, despite being sluggish, at least had a UI that made it very quick to launch games. I haven't used a Wii U so I don't know if it's any better. Based on my 3DS, I highly doubt it's objectively "good".

Since it isn't clear in the article, ilikecode.wordpress.com is Nat Brown: http://kotaku.com/164683/a-brief-history-of-the-xbox

He's commenting on this thread too as natbro.

Developing for the console seems really harsh.

Somewhat related, an indie company managed to get a fighting game out on PSN and XBLA. It just got an update on PS3, but it can't get updated for Xbox because the patch is bigger than 4MB. [1]

Keep in mind, these are free updates that fix bugs and stability issues, not paid DLC. Even so, patching is really, really expensive. [2]

[1] http://shoryuken.com/2013/01/08/skullgirls-xbox-360-patch-de...

[2] http://kotaku.com/5884842/wait-it-costs-40000-to-patch-a-con...

The console industry used to sell high-end wedding cakes. Now they sell wedding cakes, some sheet cakes, and occasionally a pre-boxed slice if there are leftovers. These are your only options for snacking in the living room. You order a wedding cake, go pick it up in a few days, and hope it tastes good.

They are about to find out what happens when piping hot cookies are hand-delivered in 30 seconds or less to the living room, for free.

The only thing Microsoft, Sony, and Nintendo have going for them right now is that the iPhone and iPad are drawing away virtually all of Apple's not-inconsiderable attention.

Here's how it will work: Apple will release a $99 controller. It'll look like a SNES controller mated with an iPhone 3GS: 4" standard-resolution multitouch screen, D-pad, four buttons, two shoulder buttons, and a Lightning port. (Inside is NOBODY CARES. gyro, bluetooth, Wifi, iOS SOC, battery.) And, naturally, it will be the least embarrassing looking item in your living room.

You'll take it out of the box, type in your Wifi password, log in to iCloud, and THAT IS IT.

The Apple TV (of which there are millions already installed) leaps into action. All the plumbing is silently set up, the App Store icon appears, a free showpiece game immediately offers to install itself, and Apple connects a half billion users to the television overnight.

Most of the Wii U's best controller ideas are co-opted, the overall controller complexity is a scant third of anyone else's, it retains all the power of touch controls, it requires no complicated setup whatsoever, all the game state is cloud-backed, dozens of touch-resistant game genres suddenly find a home in the lowest-walled garden of any shipping console, customers can add more controllers if desired, and the whole panoply of mobile software can infiltrate the last screen standing.

The Apple TV is a freaking trojan horse, if Apple wants it to be. Nobody else has the UX to stave them off, or the ability to hit the price points Apple can, or their sheer distribution power, or their sheer brand power, or anything.

Free cookies. Not nut-and-raisin filled wedding cakes. Which one is your kid going to reach for?

I think you are sort of right. I think that maybe apple's console entry could become a bastion of $1, low budget casual games. Not because it couldn't handle the hardcore games market, but because the store will be setup with the same problem all apple stores have of low visibility and freemium garbage dominating the storefront. Also a ton of devs will port their already existing casual freemium stuff to this device. This is partially Apple's fault, but largely it is a problem of the wider market that Apple hits. They hit a ton of non-gamers with their products and those people then use the store and push farmville/zynga poker garbage to the top. Apple could address this with their store but I doubt they will. If they wanted to they already would have by now.

The other issue is that Apple products generally sacrifice usability for style, and in this instance that will probably mean a controller with no real buttons or something ridiculous in that vein.

This is fine and it will probably be successful, but it is not even going to be the same market that the xbox, steam box, or ps4 are hitting.

No, it'll be going for a vastly more lucrative market: everyone who is wildly overserved by the existing console market.

Consoles had three decades to break out of niche and they failed. It's time for the final disruption of the living room.

These are two different markets that we are talking about. I don't think the goal of the xbox, ps3 or steam box ever has been to distribute a bunch of low budget $1 casual games.

This is a potentially lucrative market, but it hasn't existed for 3 decades. I'm not even sure it has existed for 1. Changes in technology are only now making this possible, and tbh I hope all the console makers don't join this freemium casual game race to the bottom.

two and a half men and insert generic crime procedural are the most popular tv shows. Would you say CBS is disrupting tv right now by peddling a bunch of cheap garbage to the lowest common denominator audience.

The thing about $1 casual games is that they're now $0 casual games capable of drawing substantial income after the initial "sale".

Pre-paid boxed game software is not a growth industry, and post-paid digital is. It's not theoretical, this is happening now. It's not potentially lucrative, it's currently lucrative. The industry as a whole needs to adapt.

None of that is going to happen.

Apple is horrific at the gaming business, and that isn't going to change any time soon. Why? Because it's not a priority, and isn't going to be any time soon.

The substantial infrastructure pieces that Microsoft, Sony and Nintendo have built up in gaming - Apple has none of that, and it isn't going to magically appear. Apple would have to make gaming a top priority, and they will never do that.

How are they horrific at the gaming business when they're moving billions of games a year? And what infrastructure pieces are they missing?

GPU-rich devices installed and networked, check. Friends lists, check. Local multiplayer, check. Networked multiplayer, check. Distribution, check. Billing, check. In-app billing, check. DRM, check. Ad story, check. Developer program, check.

All they need is a controller if they want the living room.

Why not? To quote The Lorax "business is business and business must grow." Apple can't ride the iphone wave forever and will need to find new paths to replace the dying/dead ipod revenue stream.

Why can't you write software tomorrow and have it available to xBox customers the next day? Why can't that other malware author have his Trojan ready to install on millions of xBoxes?

If you are going to sell to console users you have to accept that the platform will live or die based on how easy it is for consumers to use, and how safe they feel using it. The platform will need developers, but it doesn't have to cater to their every whim to survive.

Developers are only important as far as providing reliable and trustworthy applications is concerned. The gatekeeper of the market needs to ensure that software sold through their market doesn't hurt their customers.

Believing that making life easy for all developers (altruistic and malicious alike) is The One True Way to platform popularity is placing far to much emphasis on the small group of people responsible for supply, and nowhere near enough emphasis on the customers.

Follow the money, take care of the people supplying it. If some developers get upset along the way because the world doesn't work the way they want, just shrug and carry on.

I would have no trust for a market that would let me publish the software I write. I write crap :(

ha! i guess i write mostly crap software, too :) i really wasn't trying to imply that you should simply open up the market to self-publishing with no restrictions or oversight. that would screw the customers and therefore the brand very quickly. we did this poorly at microsoft with windows in the early days, and they are still doing it. it's tragic how easily malware still spreads on windows. it's amazing to me that android has so much malware, that google didn't think through security and sandboxing well enough. or revocations, etc. if i were to make a recommendation for xBox development, it would be to build a developer program where I could develop on my console and a few other (100?) consoles (so i could test), akin to how we can do iOS development, and apps would have to be submitted to a store and approved with a little less weird oversight than Apple uses, but quite a bit more oversight than Google or Microsoft uses, to make sure they aren't doing something evil or stupid or aren't malware. it's not so much a belief that making life easier for developers is the most important thing as it is the belief that a free market will allow customers to get great apps and will prevent artificial barriers in distribution and promotion from blocking innovation. customers will spend money where there is innovation.

I don't think Microsoft is charging developers on the order of tens of thousands of dollar per game update, just to check if they maybe put some malware in there.

For the love of all that is holy, please make the font darker.

(sorry that is a lame font, let me find the knob on that gizmo)

Having recently fired it up again the xbox experience (outside of xbla) remains decidedly old school:

- You still need the correct dvd inserted to play.

- You can't turn the xbox off and expect it to save your progress.

- Some games are tightly integrated with xbox live, good luck not paying for it.

- It takes forever between the xbox boot time, initial game load time, copyright notices, in game menus, and save game load time to actually start enjoying a game.

- Installing games to the hard drive for a slight load time bump is very, very slow.

Since picking one up I've been really spoiled by the ipad mini. Just pick it up and play, don't sweat the details.

I hate the Xbox 360 because they make it so hard to stream video to it. What the hell, Microsoft? The PS3 is a great DLNA renderer right out of the box.

To add to OP's usability gripes, as a new Xbox owner (bought it over Christmas) with a grand total of 4 bundled games and a Kinect:

Kinect menu interaction needs to be improved. Kinect Adventures has it right for its age group, showing a full mirror image of the user on its menus, but Kinect Sports is a mess of deeply nested menus, which my 4 year old, who has been able to navigate an iPad since age 2, can't get right yet. Dance Central uses an un-intuitive swipe from right-to-left, that took a while for me to figure out. I suppose controllerless UX is still in its infancy, but still...

Then we get to the sign in system: the sign-in, sign-out is very confusing, and in Kinect Sports, almost useless - I never know who the second player is going to be. I also have a very weak mental model of how Kinect ID facial recognition works -at what point are you signed into a game?

I still don't really understand XBox Live vs XBox Live Gold. Why should I subscribe for utility apps I already have, or to use a clunky web browser?

Oh yes, and no NTFS support, on a Microsoft platform.

Ern I believe we purchased the same xbox package deal for christmas. My pet peeve WRT kinect is the agony I feel when I have to wave like a lunatic 25 times for 2-3 minutes to navigate a simple menu of songs when there's a perfectly good hand controller that could have done what I want in seconds.

One undiscussed economic effect is free trial/demo games and their impact on the market. Before I tried the demos with the kids, I'm planning on getting kinectimals and not getting minecraft... after the demos its intensely the other way around.

After letting the article percolate for a bit. Just think about what the industry will look like in 10 years.

- internet game distribution is going to change content delivery just like it changed VHF/DVD rental stores. The game stores will be gone, walmart will not display/sell them.

- those who can provide a pipeline like netflix for games are going to destroy the current establishment. It will likely be worse than what netflix did, simply because the development of games is easy compared it TV/Movies.

- the idea of xbox, playstation, wii might be gone. There might be a generic console with an online pipeline connected to it. Or maybe you will have a xbox, playstation, wii portal that will connect you to the pipeline just like what netflix does for movies?

Maybe I'm just talking out my ass but it looks like things are going to massively change.

The dawning horror for the console vendors is that the change is already happening around them and on every iPhone, iPad, Samsung, Android, etc device. These already have digital-only distribution. These already have very high-quality GPU's that push almost as many triangles as an xBox 360 or PS3, and are on a faster product-iteration-cycle. Some of these - iPad3 and Samsung Galaxy Tab's - already have higher-resolution screens than your 60" HDTV and many people are using them more hours per day and spending more dollars per device than they ever did on consoles. Yikes, if I were still in the console biz, I would push like hell to move a little faster than updating hardware every 7-8 years and doing poorly with software.

The dawning horror for the console vendors is that the change is already happening around them and on every iPhone, iPad, Samsung, Android, etc device. These already have digital-only distribution. These already have very high-quality GPU's that push almost as many triangles as an xBox 360 or PS3, and are on a faster product-iteration-cycle. Some of these - iPad3 and Samsung Galaxy Tab's - already have higher-resolution screens than your 60" HDTV and many people are using them more hours per day

You could argue a very similar point by replacing mobile devices with PC in your argument. But I console vendors don't look in horror in the PC market.

You are also missing a fairly big aspect of a game console, the games themselves.

many people are using them more hours per day and spending more dollars per device than they ever did on consoles

Do you have a reference for this? Sounds interesting, but I haven't seen the comparison before.

well, xbox 360 kinda had digital distribution since it's launch.

Sounds like a SteamBox. http://au.ign.com/articles/2013/01/18/the-promise-and-potent...

Game consoles are irrelevant from point of view of gaining/retaining big chunk of consumer market. There is a reason why Apple avoided this market (instead of focussing on music, then phone and of course tablet), while Microsoft was busy competing with Sonys and Ninentendos in early formative years of Xbox. In less than five years, this whole game console thing will be a feature in TV/tablet etc.

I have heard people still there arguing that the transition of the brand from hardcore gamers to casual users and tv-uses was an intentional and crafted success. It was not. It was an accident

Oh common man, YES it was intentional. MS worked its ass off on transitioning to casual users. Changing the ENTIRE UI, the addition of Avatars (MS's version of Nintendo's Miis), the advertising and marketing.

i'm honestly not sure if you're being sarcastic or not. if you are: heh, good one. if you're not: there's nothing wrong with putting some of your wood behind encouraging casual gaming and expanding your market, but putting ALL of your wood behind it? what else did they get accomplished in this time period? not enough other things if you take a look at how many people and how much money was being spent on R&D in that division.

This article is spot on. Why are indie developers not racing to develop apps for Xbox? Xbox should treat all apps, games, music, radio stations as equal, be they from indie developers, microsoft or from big name publishers. Provide a seamless tile space navigable via touchscreen.

Oh, no wait, Apple is doing this already, and when it comes to the TV, we'll stop wishing Xbox could do it.

I've also been yelling this to my friends for some time. I actually can't figure out why Apple hasn't yet released an Apple TV with a more powerful graphics and some active cooling, plus a controller.

Allow iOS games and you have a serious, serious competition crushing game platform with a TON of existing games and content. Instantly.

The problem is most if not all games on iOS rely on touch controls, and transferring that control across to a portable controller isn't easy ... although a portable touchpad might be the way to go.

No storage. Where is the AppleTV supposed to keep the gigabytes needed to run some of these titles? Is it going to stream off the cloud every time you run it?

yes, it would have to be a new Apple-TV with at least some more local storage. the current models have 8GB, I think. tweaking that up to 128GB or 256GB would open up a lot of possibilities without making a $199 price-point impossible. but hey, what do i know.

another friend had a similar complaint: graphics and how there isn't a fan.

these are not the things to focus on. add some hard drive space, better graphics, and a fan, and whatever else "stands in their way", and they could kill it. all of that's implied.

i personally think you'd also need a really good/new controller, but fundamentally i agree. i would develop for such a console in a heart.beat.

It seems obvious to me that the next Xbox will support small developers via some form of the Windows App Store. No point having a unified App Store if that wasn't to be the case. I feel there's a strong chance that many existing apps will Just Work on the next Xbox.

I think it's interesting that to note that the article stated a 60% YOY decline even though their stock price hasn't reflected this. For the past three years the stock has stayed relatively within the same levels. But nonetheless a very interesting post.

Mark my words in 5 years time it will be Valve and Apple in the living room. Sony, MS, and yes, for real this time, Nintendo are done. The wave has crested and basically Samsung and Google are the only other companies who are trying to ride it.

Does Steve Ballmer ever read articles like this?

Apple isn't making much money at all with the 30% cut of app sales. Their margins are huge on the iDevices. Since XBox is sold near cost, the move to 99c games and apps will just increase the costs needed to approve games while providing little profit or benefit to MS. Increasing the cost of hardware is another option but that's not easy either. Staying at the niche of high end games and including lots of media content is probably the better option.

> the move to 99c games and apps

Steam has plenty of games in the 5, 10 and 20 $ price range.

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