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Satya Nadella is Microsoft's new CEO
- Thread starter Castef
- Start date
Most of Microsoft's income comes from Windows, so why wouldn't they be threatened when computing device sales shift from Windows devices to non-Windows devices?
brotkasten
Member
Isn't it Office and Server?
zerokoolpsx
Member
Not even close to either.
It's not really about whether the company has the resources, or that they would necessarily throw it away quickly. But it is true to say we have heard the great epic battle within Microsoft of the people who want hardware as a delivery mechanism for their other core, and those who want "software & services" minus the devices. It's a very real battle taking place within the company.
Nadella's ascension, and Elop's expanded services team, make one naturally willing to question just how much soul searching will be done about a device that for the next five years might be a money loser or only offer tepid profits; or a device that is unlikely to gain headroom against systems that can actually compete at the global level.
Do I think it'll happen this gen? No, I think they will ride it out. Do I think they will follow this path in perpetuity? No. I do think they have a limit for this, because it's not just about having enough resources. Microsoft has enough to go probably 10 gens of straight money loser consoles. All that growth you mentioned happened in a single gen, it's almost guaranteed to be a major retraction this gen. They weren't even number one last gen - Wii was, and PS3 now surpassed 360 worldwide. So it was third place. Yes they grew, but if they suffer a major retraction in their console business this gen and Oculus or Sony VR get the heads up on Microsoft's "Road to Fortaleza" project next-gen, it's going to be increasingly difficult to justify just existing in a space they only entered because they wanted to dominate the living room. If that goal is unlikely to be met through a console ever in the future, they have no reason to stay and drain profits or be a bare scratching success.
TheFeedingHand
Member
Wow, Indians really know how to climb the corporate ladder. Tons of Indian CEOs in America.
I believe that's a limited perspective, looking at just the Xbox device, on what's clearly been a broader digital entertainment play they've been desperately trying to get off the ground for years now. Their ambitions have looked beyond the living room since before Xbox Live Anywhere was talked up back in 2006, clearly demonstrating a vision of a game service across every screen available. Then Zune came around, eventually getting merged into Xbox as Xbox Music and Video, available on Windows devices. The Xbox One was designed around games, TV/movie services, Skype, and cable TV. Additionally, they just invested 8 billion in Windows Phones and have already invested billions in Surface, which are both clearly consumer products. What more proof do you need to say there's more they're after than just a box under your TV that plays games?
It's quite obvious they want to be an all-in-one digital entertainment store and services provider. And who could blame them when their strengths are in software and there is a shit ton of money to make from buying, selling, trading, and renting entertainment media? But how would they stand a shot at drawing people to buying into Microsoft devices and the ecosystem if they give up one of the major screens? I maintain they'll ride it out until they give up on entertainment all together, which seems highly unlikely given the billions upon billions on the line.
It doesn't matter if Wii and PS3 eventually beat MS, that wasn't the point. MS managed to make themselves a major presence in NA, doubling their install base generation over generation, handily beating the PS3 in NA even to this day, while making a profit. It showed they can be a market leader and draw people into the brand with game experiences.
Missteps aren't unique to them. Sony completely wiped out the profit they made from PS1 and PS2, but they learned, rode out an entire gen, and are back with a killer product...and they were/are broke! And Nintendo is struggling. Both Sony and Nintendo are less poised at this time to take advantage of an all digital future (even though Sony seems to have a good idea of what to do) than Microsoft.
Recall they entered the living room because they thought it was a doorway for competitors to eventually threaten Windows. Ballmer didn't have the foresight to see the emerging mobile and tablet spaces being more prominent threats. It doesn't matter anymore what the plan was 13 years ago or what's happened since. It's not about the console business only any more and hasn't been for a few years now, it's about digital entertainment sales and services to protect the entire Microsoft ecosystem.
Nadella's approach to focusing on core innovation is where killer apps and software could help propel its devices and digital productivity and entertainment ecosystem forward. More Windows Phone and Surface users means more people to buy Office 365, Xbox Live, Xbox Music, build their TV/movie library, etc. and hook them into MS products for a lifetime. They're not going to give that up easily, not when Apple and Google are chasing the same idea, which poses a far greater threat to Windows, Servers and Tools, Office, Xbox, etc. than Sony ever did.
freenudemacusers
Member
some cool looking rooms there.
The weakness at this point, with Gates in play seeming to mean Nadella is definitely existing management's pick to placate investors rather than investors' pick to go all in on enterprise, is that a traditional console doesn't make much sense as a way to push services. Reading X360's success as "we can conquer the US/UK if everything goes right!" has its appeals, but it ignores the problem that the Anglosphere will probably be smaller than continental Europe this gen, and smaller than East Asia next; it also ignores the problem that the console gaming market is shrinking in the absolute, and the "HD twins" market will likely shrink due to the increasing popularity of PC at the same time as PC goes OS-agnostic (Minecraft runs on anything, Valve's titles on the big three, League on Windows and Mac).
"Chasing Apple and Google" is the key point here, and the endgame of THAT is future Xbox devices resembling the Apple TV a lot more than the PlayStation. It's a wide-open niche, it will be very healthy for the industry if MS is expanding the market rather than fighting billion-dollar advertising wars with Sony over whose name is on the same-y AMD box, but from the perspective of someone in that shrinking console gaming niche it will seem like a retreat.
I did not know this, thanks for the information.
You're right the business hasn't really taken off for ten years now. Sure they have many fans but the Xbox division is not highly lucrative and has lost a lot of money over the years. And there's no reason to believe it will change, especially with the way they do their business and constantly bleed money.
Even the entertainment side of Apple's business is better handled overall. Apple don't pay off content providers for content, but you still find a huge variety of entertainment inside Apple's ecosystem and the whole thing has been profitable for all parties involved.
Chasing Apple and Google is about an online ecosystem available across every screen. Xbox One, Surface, Windows PC, Windows Phone, and your Microsoft Account.
Substantial growth of Microsoft's entertainment division (Xbox) depends on increasing the install base of Windows tablets and mobile phones (and I believe I read that WP is gaining traction internationally). Removing the TV component just puts a big hole in the strategy on multiple accounts, seeing as how the TV is still a major screen where people buy the most premium experiences and that Microsoft has a ton of work to do (and a long road ahead of them) before Surface/Lumia tablets and Windows Phones capture a larger audience.
If they're really aiming to be an all-in-one digital ecosystem then they have to be able to provide a range of experiences, from premium to simple on-the-go types. They simply can't cut out the TV portion as long as it's a major screen that consumers demand.
Even during launch quarter, the Consumer Hardware division was in the black, and that is without software sales and Live revenue which is counted in another division. The Xbox is profitable for them.
badcrumble
Member
A major problem for consoles in general is that console generations can't keep up with tech elsewhere (despite the availability of major software and service updates). When the PS3 and 360 and Wii came out, the iPhone and iPad hadn't even been announced. Now think of how much things will change during this new generation.
Consoles just aren't agile enough to keep up with innovation and new product categories elsewhere.
Consoles just aren't agile enough to keep up with innovation and new product categories elsewhere.
The big losses they made in the past out weigh the recent profits, so in the whole the business has not been profitable for Microsoft. And there is a rumour is that they are using the Entertainment division to cover up for the Xbox division's losses. Since some of the other units in the division bring in more profits.
http://www.gamesindustry.biz/articl...osses-hidden-by-patent-royalties-says-analyst
Products like Microsoft Azure, Lync, Exchange, SQL, SharePoint, Server and Office do generate more income than Windows.
Android royalties would fall under Devices and Consumer Licensing, where Windows Phone licensing revenue currently falls. XBox is no longer calculated in those divisions. Devices and Consumer Hardware is where XBox hardware sales are located, along with Surface devices. Devices and Consumer Other is where software sales and XBox Live revenue is located. Both of those divisions that have XBox products were in the black during launch month.
Do you have stats that indicate that an individual business like Exchange makes more income than Windows, or just the entire division that it sits in?
I think things like Office and Exchange are contingent on Windows being the dominant computing platform anyway. The most popular office software on Android and iOS are not the gimped cloud versions of Office, after all.
jhmtehgamr20xx
Banned
I actually seriously doubt this will happen. If anything, the "HD twins" market will grow in size from last gen, just like how it grew in size last gen from the gen before. A lot of people seem to think the core/hardcore market shrank going from PS2 to PS360, but that's a distorted non-truth created thanks to the Wii's success.
I don't know exactly what the numbers for PS360 were around the time Wii dropped off the cliff, but all I know for certain is PS2 was around 100 million by the time the 360 came out, and right now 360 and PS3 are about 160 million. We know the PS2 served a good portion of the Wii's role in its gen, and PS360 did not start to pick up Wii's audience (who were left, anyway) until around 2010/2011. All things considered, keeping pace w/ PS2's sales, I seriously doubt PS360 sold 60 million more units in 3 1/2 years. Which would suggest the core/hardcore market grew. Even if they did manage that, it'd only show that market was holding steady, not shrinking.
Whether PCs become a main go-to for gamers comes down to what happens with Windows, and (barring the worst) Linux or Valve pick up the slack by a good amount. Personally, I don't see that happening. PCs will probably have their place as enthusiasts gaming machines, but likely as some sort of half and half between console designs and PC architecture, as they are right now. Those two markets and architectures will probably fuse together.
CadetMahoney
Member
tbh I see MS marketshare shrinking in the gaming division.
They lost all inroads they made in Europe in one fell swoop, with no chance of a comeback. Are irrelevant everywhere else in the world as usual and have gone into a distant second place (by two years time) in North America.
The HD twins market might increase but MS' will shrink compared to 360 and you can take that to the bank.
Very well said.
Mid to long term, I think it is much more Google that keeps up MS at night. They are out M$ing MS in mobile and if they wanted to, they could jump into every market MS is doing well in and take a serious chunk of share. They were worried before Chromebooks actually started making a dent. Apple on the other hand is slowly losing profitability and hasn't been able to make the serious setbox move and will be doing the fitness/watch thing first.
And then there is Amazon. No one wants to compete with them cause they purposely keep their margins thin. And they've decided to get into a slice of gaming.
Epic battle within the company or two board members who are on the board because they happen to own enough shares? I think this battle you speak of is overblown.
The vision for MS is devices and services and hiring internally reinforces that vision.
Satya asking Gates to assist with devices is stronger clarification. It means he doesn't want his services focus to be a blind spot when dealing with devices.
"Looks American"
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jhmtehgamr20xx
Banned
Oh, I can believe that happening. That market in itself will probably grow, but it's no secret MS's messed up a good deal w/ XBO already. There's no reason they needed to overship to the U.S and U.K as they did for example.
So that means either explosive PS4 sales, or someone else steps in to eat at MS (and maybe Sony's) marketshare.
Megadragon15
Member
Edit: Woops. Thanks for the heads up Castef. I didn't know.
