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Resetting Xbox

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Re: Resetting Xbox

#311

Post by skeeter2020 »

mattalex wrote: post #207
rockyj wrote: post #24

This is a total mess IMHO. - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous). Some points - - They are huge business even now - 5 bi…

150M at 5B revenue is not great: that's 3% margin! The bigger issue is that console manufacturer revenue is highly cyclical. This is hard to see in e.g. Xbox and Sony since they are both part of a larger conglomerate, but really obvious for nintendo. You generally have a cycle of - "Launch": high marketing costs, low/negative HW margins - "Mid-cycle": lowering manufacturing costs, large game sales, high margin DLCs -…

>> 150M at 5B revenue is not great: that's 3% margin!

and yet everybody - including Microsoft - is in a big rush to sell us AI services, which could look an awful lot like a historical utility business. 3% will be a dream return in that scenario!

Re: Resetting Xbox

#312

Post by blks »

_verandaguy wrote: post #234
mattalex wrote: post #207

Earlier quoted context omitted.

150M at 5B revenue is not great: that's 3% margin! The bigger issue is that console manufacturer revenue is highly cyclical. This is hard to see in e.g. Xbox and Sony since they are both part of a larger conglomerate, but really obvious for nintendo. You generally have a cycle of - "Launch": high marketing costs, low/negative HW margins - "Mid-cycle": lowering manufacturing costs, large game sales, high margin DLCs -…

> 150M at 5B revenue is not great Considered as a raw percentage in a vacuum, sure, I guess, but we're talking about... - A company which has undertaken a concerted, long-term effort to consolidate the industry under its umbrella (something they themselves call out as a problem in this post), reducing consumer choice - A company which has captured a significant chunk of the console market. They're one of the big thre…

I thought it was 150M per quarter?

Re: Resetting Xbox

#313

Post by sylens »

protimewaster wrote: post #42

Xbox has an interesting opportunity going forward, that I expect they'll fumble. Interest in physical media has actually been on the upswing, and, with Sony announcing their plans to abandon physical media, it feels like MS has a chance be the "good guys" like what Sony did to MS when MS threatened to ruin physical media prior to the Xbox One release. However, I'm expecting Microsoft to simply follow Sony's path, bec…

The problem with the physical media for today's consoles is that it is the game in name only. The version on the disc is quickly outdated by launch day patches, follow-up patches, add-on content, etc.

I do think there is a market for a return to an XBox 360 model where the tech behind the games is artificially constrained to allow for games to be published solely on DVDs again. No installation required, no patches required, smaller budgets, quicker release time lines. But Microsoft is not the company to pursue that approach

Re: Resetting Xbox

#314

Post by skeeter2020 »

spenczar5 wrote: post #245
_verandaguy wrote: post #234

Earlier quoted context omitted.

> 150M at 5B revenue is not great Considered as a raw percentage in a vacuum, sure, I guess, but we're talking about... - A company which has undertaken a concerted, long-term effort to consolidate the industry under its umbrella (something they themselves call out as a problem in this post), reducing consumer choice - A company which has captured a significant chunk of the console market. They're one of the big thre…

> This is still $150M of pure gravy every single year. The issue is rate of return. They are evidently spending $4.85bn on Xbox per year. The US federal interest rate is 3.5% so if you just put that money in US bonds you would get about $175M per year of much purer simpler gravy.

Russ: "Anyway, next thing you know, we IPO, stock triples in a day and AOL gobbles us up. All of a sudden, I'm 22 years young and I'm worth 1.2 billion. Now a couple decades later, I'm worth 1.4. You do the math."

Richard: "Okay. Well, that's a gain of $200 million over 20 years. Um, 16.66 repeating. That's less than 1% return. Inflation is, like, 1.7. I think CDs are 2%. So that's less than a CD."

Re: Resetting Xbox

#315

Post by throwaway63467 »

I think now a console like the Ouya could really be successful, I find when they tried this 10 years ago it was the worst moment possible as game hardware was cheap and competition strong. Now with the AI boom eating all hardware capacity and indie game development going up like crazy it seems like a perfect moment to build a new hardware platform on affordable last gen hardware that runs indie titles.

Re: Resetting Xbox

#316

Post by ramijames »

hbn wrote: post #16

It was pretty rich seeing armchair video game industry analysts act like the new CEO was gonna usher in a new age for Microsoft's gaming division because she got to announce the updated logo and some games that would have obviously been in development long before she became CEO. Microsoft is never going to figure out gaming. It's more art than engineering and they can barely manage the engineering with all the interv…

It's not just appetite. The market is crazy right now and people don't have money to drop $600-800 on a new console.

Re: Resetting Xbox

#317

Post by jrmg »

chrisfosterelli wrote: post #120
rockyj wrote: post #24

This is a total mess IMHO. - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous). Some points - - They are huge business even now - 5 bi…

With due fairness, these are two different sets of leaders and two different strategies. A lot of the strategy you outlined -- buying all these studios, replicating netflix, giving away day one games, raising game pass -- was a strategy put in place by Phil Spencer. Phil pushed for this investment with the promise it would pay off later for MS. He's talked publicly about having to convince Nadella to put up ungodly a…

I never understood the esteem Phil Spencer was held in, seemingly both by fans and industry insiders. I never understood Phil’s strategy.

Buy a plethora of studios. Pay an order of magnitude over the odds for the big ones - just to be sure you get them! ‘Rescue’ smaller ones of questionable financial value - as part of Xbox they’d somehow be successful enough to justify the price paid. Heavily manage the studio heads - but, uh, also give them total creative freedom - and allow them to make niche games. Sell hardware at a loss - but also make the games available on all platforms. Don’t allow any software that takes advantage of your most powerful hardware, because it also has to run on the other, less powerful console you are also selling. Also, the future is streaming! But, uh, maybe not!

Not just the strategy, but almost every aspect of the ‘strategy’, was incoherent - as current management is very close to outright saying.

Re: Resetting Xbox

#318

Post by shaewest »

Flere-Imsaho wrote: post #305
nkrisc wrote: post #214

Reading this made me remember why I stopped playing my Xbox One: never-ending updates. I never played it very frequently so I disabled the sleep mode so it wouldn’t just stay on in my media cabinet heating my house. But of course that meant any time I spontaneously felt like using it there were 10 minutes of updates to download, so I would get annoyed and just do something else. Oh it can also play movies? Sorry movi…

> Reading this made me remember why I stopped playing my Xbox One: never-ending updates. My experience with Steam is very similar (I don't have it run on startup because I like my PC to do other things from playing games). Online updates really have ruined gaming for a lot of people. Just like vinyl, humans seem to prefer a physical "thing" they pick up - put in the machine - and instantly have access to the "thing".…

I don't think you could say humans prefer a physical thing, as for a majority of mediums, digital is the winner, by a significant margin.

Of my friends who own vinyl collections, they almost always use Spotify/Apple Music 90% of the time.

Re: Resetting Xbox

#319

Post by jnwatson »

WorldMaker wrote: post #284
abtinf wrote: post #259

Earlier quoted context omitted.

It’s potentially a gross misallocation of capital. Right now, the 5 and 10 year US treasury rates are 4.2% and 4.47%. The 30 year is 4.99%. A business with a return on invested capital less than that is in fact operating at a loss. Unless there is reason to believe the situation will change in the near-to-mid future, such a business would literally be better off liquidating everything and just investing in treasuries…

Who needs goods and services when you can just buy infinity US treasuries?~

This is exactly how the Fed influences the business cycle.
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