A big Microsoft mistake?

The so called console cycle sees new generations of machines released approximately every 5 to 6 years, but having a production life of around 10 years. So the generations overlap. This enables the platform holder to have a two model range at different price points, an older, less expensive,  model and a newer, more expensive, model.

Sony launched the original Playstation in December 1994 and followed it with the Playstation 2 in March 2000, yet they kept the original Playstation in production till March 2006. So for 6 years they were selling both machines. A few months after stopping production of the original Playstation they launched the Playstation 3, in November 2006, and they were back to having a two model range. The Playstation 2 is still selling massively well worldwide, and so it should, it has about 4 years of production left to run.

Now Microsoft introduced the Xbox in November 2001 and deliberately brought out their next machine, the 360, just 4 years later, in November 2005, so as to be first to market with the next generation. They kept the two models as a range for just one year, killing off the original Xbox in November 2006 when it was just 5 years old.

To me it looks like they killed off the original Xbox half way through it’s life. They could have re-engineered it to make it far cheaper to manufacture (just as Sony did with the PSOne) and kept on selling it for another 5 years as part of a two product line. They would have sold tens of millions of additional units if the continuing success of the Playstation 2 is anything to go by.

Now imagine the benefits if they has kept the original Xbox alive. It would have given them market presence in the massive developing countries of China and India were lower incomes favour a cheaper machine. It would have brought millions of new people to Xbox live, helping to lock them into buying future generations of Microsoft consoles. And it would have made enormous profits from the continuing sale of the Xbox game back catalogue.

To me it looks like a very big mistake. Obviously Microsoft are not stupid and must have their reasons, but surely the potential upside of keeping it going would have made it worthwhile to work round any problems.

So do you think this was a big mistake? Or do you have good reasons for them to kill it off so soon? Use the comments to let us know.


  1. I am perplexed by Microsoft’s decision to drop the Xbox. It seems to make no economic sense. Perhaps Microsoft felt that the Xbox would cannibalize 360 sales — there are many who say that the continued success of the PS2 is a big reason that the PS3 has not overtaken the 360 in sales.

    Or perhaps Microsoft, which is essentially a PC software company, sees no problem with a relatively short life cycle for its console. Afterall, PC gamers must upgrade their computers every couple years to play the latest PC games. If Microsoft really wants to dominate the game-enabling software business, short life cycles are useful to it.

    Personally, I applaud Sony for the longevity of the PSOne and PS2. There are really only two big advantages of a console over a PC for gaming: ease of use and stability. People often say price is an advantage, but price is really only a relic of the PC’s lack of stability — most console gamers already own PCs, but cannot use them for gaming because PC game developers love to make games for PCs that nobody even owns yet.

    Personally, I hope that Microsoft does not succeed in driving down the life cycles of consoles. There is already too much technology thrashing in the industry. I would like to see the game developers have plenty of time to focus on creative game content without constantly racing along new platform learning curves.

  2. I was always under the impression that Microsoft made the decision to transition away from the original Xbox and already had those gears in motion just before the system really hit its stride. They seemed to announce that they were killing it off just as a couple of great titles were giving the system a lot of momentum. All of my industry buddies were saying ‘Too soon! Too soon!’

    I don’t think it had much impact here in the states — the Xbox had an image of being big and clunky and not as sexy as was hoped, whereas the 360 (despite nagging technical problems) has a great reputation as being a sexy machine with great games and great online play. I think the bigger impact would be (as you pointed out) overseas — there, I can’t speculate.

    Here’s the real reason I wanted to comment, though: Do you think the console lifespan is lengthening? Seems to me it’ll be many years before developers even figure out how to take full advantage of the 360, much less the PS3, and many years beyond that before the real cream of the gaming crop comes out. Development lifespans are getting longer. Is there any reason these systems can’t flourish for another decade before the next generation is even announced?

  3. Thank you both for your interesting comments.

    Evan, possibly the length of the cycle is the compromise between keeping up with new technology and the enormous costs of developing and launching a new console. So it is unlikely to get much longer or much shorter.

    Dave, Microsoft could have downsized the Xbox casing for a second 5 year production run, just as Sony did with the PSOne. I do not think that console lifespan will lengthen. Moores law will not go away and the competition is too stiff. I agree that developers never realise the full capabilities of each platform, but that is one of the prices we pay for continual advancement.

  4. I agree with your opinion 100 percent. I was not happy with Microsoft for pulling the plug on a system that I had purchased just a year earlier. What upsets me more is that they didn’t just stop production of the system, but also the controllers, memory cards, and all forthcoming software. It seems to be the Microsoft motto of ‘Force it down the consumer’s throat’ They are still doing this today with their Windows for games campaign. The 3 year old game for the xbox called Halo 2 was released for the ‘new’ Vista operating system only. This massively anticipated game now required you to upgrade.

    Microsoft has made some very bad economic decisions, and to this day I have not upgraded or purchased a new xbox. I am usually one of those people who stand in line for the new gadgets.

  5. They stopped production on the original xbox because they did not own the chipsets inside the machines. They were paying royalties to third parties on every machine they made and the deal they cut did not allow them to reduce this royalty payment over time, therefore economies of scale did not apply to them. They were losing money on every Xbox sold, that’s why they killed it off early. There was no way they were ever going to make any money on the machine.
    Now they own the technology inside the 360 so they can reduce the costs of making the machines over time, therefore you can expect to see redesigned and cheaper models of the machine in the future…and most likely longer legs. Although, they like being the new kids on the block with a machine so I would expect the next Xbox in 2010 – 2011, just when the 360 hits critical mass at 50-60 million units shipped and has a price point of $150 on the core model.

  6. Although this theory is sound and makes sense, it doesn’t really apply in this case. MS was NEVER going to be able to lower the production costs of the original xbox enough to make a profit per unit sold.
    In an effort to get into the console business as soon as possible, MS designed the xbox almost like you would build a PC. They didn’t (and still do not) own the technology behind most of the main parts in the xbox1. Basically that means that they have no say in the matter of re-engineering the motherboard which is the main way to reduce manufacturing costs. Couple that with a horrible contract with Nvidia for the GPU and a mandatory hard drive that wasn’t going to get any cheaper and it makes complete economic sense for MS to to drop the xbox and quit bleeding money. I’m sure the stock holders would agree…
    MS learned from these mistakes with the 360 however, and that machine will be poised to do exactly what you proposed in your blog. That is, get the manufacturing costs down low enough that they can lower the retail price for mass market appeal without bleeding money.

  7. Thanks for you great comments guys.

    You would have thought that it would have been in everyone’s interests to renegotiate to a level were everyone was making money instead of just chopping production half way through it’s product life so nobody made any money. Alternatively they could have made a new chipset that was backwards compatible. We are talking about tens of millions of lost hardware units here and software units well into 9 figures. All of which could have made profit for Microsoft.

    Jason Maggio,
    What you have said is a great example of people voting with their feet. Organisations sometimes get so big that they lose touch with where the money is actually coming from and the duty they owe for having received that money. This is why I have always liked to spend time in retail, talking to the shopstaff and just observing. It is the coalface of our industry.

  8. I think they droped it because they don’t care.

    IMHO Microsoft doesn’t care about making any money in the console business. Their only motivation is to crush the competition and establish a monopoly.

  9. I’ll second what Jason said. Xbox 1 never had a chance to break even, let alone move into a profitable position as the device was estimated to cost about $400 at launch, but They had to cut prices down extremely quickly to stay in the game.

    Xbox 1 bleed cash it’s entire lifetime, costing Microsoft in the region of $4billion.

    You principle is still sound, I imagine MS will try to do that with the 360.

    And remember, nintendo did the same thing with the Cube.

  10. I won’t comment economically but from a gamer’s perspective.

    While there have been games released at the end of PS2’s life that have been really superb (God of War 2, FFXII, Rogue Galaxy, etc…) they were clearly too late for my tastes.
    They had to be the intro of the new generation, not the “outtro” of the old.

    The hardware cycle that Sony uses is unfailry long.
    They release console that in the first two years have few to offer and in the latest years of the harware, they take advantage of the great userbase to pull great games, but that from technical point of view, the games can’t do nothing to hide the age of the hardware they run on.

    PS2 lacked games for the first period while Dreamcast was giving serious games.
    Than, while beautiful, we had things like God of War 2 really too late.
    It was superb for what PS2 was made of, but PS2 harware was seriously aged.

    PS3 again follows the same route.
    They said that next gen was not coimng ’till PS3 wasn’t coming.
    Well, they came one year later, and instead of offering more, still few games, not a KA, not an AAA title, still trying to catch up with XboxLive and on top of all this an expansive hardware motivated more for viewing movies than for playing games.

    So why, as a gamer, should I agree with the life cycle proposed by Sony?
    My idea of a console is a stable paltform that is close to the cutting edge tecnlogy available for games.
    An not just for graphics, since technology means more possibilities to developers to build their dreamworlds.

    5 years are enough for a tecnology in the gaming industry.

  11. Stefano, thanks for your comment.
    A platform cannot be cutting edge and stable. The two are opposites.
    A new cutting edge console is a huge learning curve for developers, I know because I have been there, and it takes several years before it is possible to get the best out of it and deliver the games that it deserves.
    An older console, which is not cutting edge, will be far better understood by the development team so they will be able to extract far more from it.

  12. I agree but only to a certain degree.

    What’s the advantage of reaching the 99% of the console power out from the old hardware when you could have a better game using just the 50% of the new hardware?

    Then you should match all these assumptions with the quality of development tools and the quality of the design of the console hardware.

    In both of these terms Sony lacked.

    Here tools never been plauded, while MS ones did.
    (It’s obvious due to MS other fields of work, but that’s a fact).

    And finaly I totally not agree on the vision of an hardware not coders-friendly.

    What’s the meaning of having a steepper learning curve?
    An hardware should HELP developers to realize their games, not becoming an ISSUE to resolve.

    While I absolutely agree that MS cutted badly Xbox’s life, is also clear that they showed how a friendly hardware with good tolls have been able to allow developers to get out great things from the macine from day one.

    Again with XBox360, while many of us (me included) tough that the first things (Kameo, PGr3) weren’t enough, after seeing what PS3 have been able to deliver one year later we had to agree that, after all, what Sony gives us today is not better from what MS have been able to deliver one year before.

    And what for the rest?
    Now that the Sony base is not so largely dominating, the problems of her not so friendly hardware becomes clear.

    Games delayed, common titles with more porblems,…

    …the hardware is a tough issue, but to reinvent the weel without bringing real advantages is not a bright idea.

    And when PS3 will show all her power in the year 2011 or 2012, probably we’ll be able to buy an Xbox720 with much greater capacities and even a mediocre title will look considerably better than PS3 ones.

    This won’t mean surely better games?

    But that cannont even be said on the contrary.


    BTW: sorry for my poor english but I’m not native!

  13. The main reason may are skipping the 360 gen are exactly the reasons you discuss. I bought the xbox 2 years into the lifespan only to have all the software dry up a year later. I did own all consoles during the last gen and prior but will not use MS console products any longer. Not to mention they nickel and dime every gamer / and their unsuspecting parents each month for a service hardly worth it. And we all know the issues with the RRoD because of crappy engineering. xbox RIP. xbox 360 RIP.

  14. Actually, I bought the original Xbox right around when they dropped the price to $150. Personally, I must admit that they killed it off a little too soon.

    However, I do prefer a shorter console cycle. The only thing bugging me about consoles and especially MS is the backwards compatibility. I can’t play Capcom vs. SNK on Xbox 360….

    The online service from MS is excellent and I do not mind paying the $40-50/year fee compared to a poor service. Let’s face it $40/50 a year is only $3-4 a month!

  15. hey umm most of you must not be serious gamers or serious technophiles because EVERYONE knows why MS decided to cancel the XBOX….un like the PS and PS2 the xbox didnt cost reduce over time because they ddnt own the rights to their internal components IBM / Nvidia did and MS was paying them the right to use their tech. the 360 will be seeing revisiov just as the PS and PS2 over time because MS partners with or owns the right to the internal development and products… soo 4 years into the xbox life cycle is still cost as much to produce as day 1 seems like a wise investment to cancel the system and start fresh……remember in console gaming MS is still an infant and for the new kid on the blow they’re doing hella well.

  16. I bought my XBox1 in late 2005…I knew they would be introducing a new console the next year…I chose the xbox at the time because they were starting to get some games that the PS2 could not have (HL2, Doom3, etc..).

    To me, the Xbox was going to overtake the PS2 in game quality anyway, the superiority of the Xbox was starting to show…Then they killed it, with it they killed any chance of me buying a 360.

    Don’t get me wrong here, I like playing on the 360, but I’m no early adopter and it’s already 2 years in it’s life cycle (and having major issues), I will not make the same mistake again.

  17. I was all wrong with my dates in my previous post…I bought my xbox in late 2004 not 2005…sorry!

  18. Microsoft, as always, dropped the original XBox purposely to force consumers to buy the new XBox 360. That seems to be the nature of their marketing, as they are pushing so hard for Vista-only game development so as to force PC gamers to upgrade to the crap-fest that is Microsoft Vista. DX10 cant be adapted to XP? Please…there are already indie developers out there that can make that happen. So, for anyone who wants to be a part of XBox Live! (which lets be honest, its the only thing that makes the M$ consoles worth their salt) you now must purchase a 360. Its not bad marketing…and Microsoft isn’t stupid…they’re just dicks when you think about it.

  19. XboxOne considerations:

    Software development resources – Microsoft already has limited game develop resources in that they don’t have as many game teams as Nintendo and Sony. Exclusive titles sell consoles so splitting these teams would be ultimately be splitting their resources.

    The manufacturing costs of the Xbox – Microsoft leans heavily on it’s partners for components. It really makes it hard for them to cost reduce over time. They were loosing money on each machine still at the end of it’s life so loosing money on two machines doesn’t make sense. Even to launch into 3rd world countries makes this a bad idea. Modified consoles also were destroying game sales as it turned out to be an un-secure machine for modders. A slim lined re-design was totally necessary but not at the massive expense to all of the MS hardware partners to incur more losses per system sale.

    They got the jump on the competition – It seems that Microsofts 1 year early lead seemed to be the right choice as developers have been generally doing well working on the Xbox 360. Concentrating all of their 3rd party support toward the new console has also allowed 3rd parties to pump out 360 SKU’s as their main target SKU. It’s easily the baseline platform of choice now.

    The console lifespan is extending only because the technology grew faster than the evolution of game design. Now Designers can’t even utilize everything at their disposal because the development would just take too long. Developers/publishers want incremental releases so that they stabilize the revenue stream. This means that they (publishers) don’t like development to take longer than a year let alone the average of 2 year cycles.

    The decision to kill off the Xbox 1 was totally an artificial one. The old Xbox could generally still do most of the things we’d want it to and it’s way more powerful than a PS2 so generally most gamers would generally be happy.

  20. It is quite common for manufacturers to include third-party components in their systems with royalty agreements which allow the parties to take advantage of component cost reductions over time. It is difficult to believe that Microsoft would have been so incompetent with the Xbox third-party contracts that they did not craft such terms into the agreements.

    Plus, as Bruce pointed out, it is generally not difficult to re-negotiate such agreements with third-parties when their only alternative is an end to the product altogether. I still remained perplexed by Microsoft’s decision and a bit wary of Microsoft because of it. It is fine to crank out a new console every four or five years for people who like that kind of turnover, but what about all the customers who bought the console expecting greater stability?

  21. I want everyone to know that Microsoft did not bail on the original xbox because they didn’t care! Microsoft sees itself providing an invaluable service to gamers, primarily through xbox live (best gaming community hands down), and they made a wise decision to drop support of the XBOX. Everyone has quoted, rightfully, that they did not own the chipsets to allow them to make a profit, I also agree it would’ve been a horrible mistake to continue production of the XBOX, even under new terms. MS would’ve never been able to make the kind of profits SONY is making on their PS2, and the PS2 had already sold over 100 million, MS had only sold 30 million and most of those were because of games like HALO. I don’t believe they could’ve even sold 30 million in ten more years, and if they did under new terms of agreement they might break even. Yet they will easily sell 100 million 360’s in ten years. MS was so smart to start over with the 360 and because they put all their effort into the 360, it will sell 100 million and SONY will be at about 70 million. It used to be that everyone developed their games for Sony and then ported them to the 360. Now MS has companies making games for them, and then porting to the PS3. MS has better development tools, and the 360 is easier to develope for. NOT ONLY THAT, but the 360 will always be cheaper because it doesn’t require a Blue-ray player that most Americans can’t take advantage of. YES, the majority of Americans don’t even have HDTV’s yet. Between July and Christmas MS is realeasing games like Bioshock, Halo 3, and Mass Effect. Those games are exclusive to the 360. What will Sony be launching?? Metal Gear Solid 4-No Final Fantasy 13-Nope?? A new God of War game?? And why aren’t these games ready?? Because Sony is still supporting the PS2, development tools suck, and nobody wants to launch games on a system that has such a small user base. I guess it just makes me mad that Sony has lost touch with me … the gamer. At least Nintendo and MS know what I’m looking for.

  22. Do you any of you think Microsoft should have introduced a VirtualXbox application for Windows that made all capable PCs compatible with Xbox games? Microsoft could have repositioned Bruce’s proposed XboxOne as an entry-level console and even allowed OEMs to use the spec for set top boxes and PCs.

  23. By dropping support for the Xbox is forces all developers to focus on the 360 only instead of splitting their time between two platforms which equates to more and better games. Everyone knows it’s games that win over hardware in the long run and the 360 is clearly ahead of the pack when it comes to killer titles.

  24. Initially, I was pissed when MS killed the XBOX…I promised myself I would not own another MS product and I’ve been pretty good it about it…I’m a pretty loyal customer but when you treat me like that, I do not forgot and I’ll just move on to the next best thing (Wii)…I’ve been having a great time with the Wii and after the prices fall really low, I’ll probably buy a PS3…

  25. Whilst you guys are here why don’t you look at some of the other articles? There is lots of inside industry stuff here that you don’t get on the consumer sites.

  26. Indeed it is true that Sony hasnt really made their PS3 worthwhile as of now, but they thought of the future with it. In a year or so, PS3 will really shine with its capabilities, and in 4 years some developers will actually tap into the true power of PS3. Got nothing against 360, but I do hate Micro$oft.


  27. This reminds me of a comment I heard a few years ago. I don’t remember exactly, but a Sony executive, after Xbox appeared, stated that console life-cycles were going to be reduced thanks to MS. Somebody remembers?

    Anyway, it doesn’t surprise me at all. This was MS strategy all along. They are not in to make money, they just want to overtake the console market and join PC and Console games into one. Like they did in the OS world.

    Xbox, whether you like it or not, has a DirectX architecture and porting games between PC and Xbox is a snap. If it were to become the predominant game console, all games will be produced under DirectX, and that means $$$POWER$$$ for MS. Monopoly. Suddenly its OS/2 vs. Win 95 all over again. They haven’t made it this far, 5 billion and six years later, but they are still trying.

    Console gaming is under threat…

  28. @ Lars Hadland Coleman

    You may be right as the 360 has a better software advantage as they have a lot of really good games out for their system and that may be from them getting a 1yr head start on the Compition but in the end I think it hurt more because as we all know the famed RROD (Red Rings of Death) has curbed it’s chance at dominating. So many people including myself have not bought the system for fear of it breaking down. Now yes they have extended the Warrenty but that doesn’t instill much confidence in their system I think it is more just to cover their butts. I still can’t believe that some people who have bought the 360 and it has broken down on them 2,3 or even 4 or more times still are loyal to Microsoft. Everyone says that Games make or break the System but that really doesn’t matter if the system constintly breaks down on you. If the Hardware is sound then yes Software can make or break it. It really shouldn’t be the other way around but also back to the point of the games. Most systems all
    made by the Major Hardware Manufactures (Nintendo,Sony & Microsoft) never have good games in the beginning of the Console cycle but, now just like Microsoft they are coming out with great games from all different kinds of Genres such as

    Heavenly Sword,Lair,Uncharted Drakes Fortune,Motorstorm,Folklore,Ratchet & Clank Future:ToD,Little Big Planet, MGS4 and many multiplatform equals

    From this it seems Sony is coming to it’s own and has many IP’s from the Previous generation which I am sure it will take advantage of such as you Mentioned

    God of War
    Kingdom Hearts
    Final Fantasy
    Socom U.S. Navy Seals
    Sly Cooper
    Twisted Metal etc etc etc…..

    As for the development tools I can’t comment too much as to how tough it is since I’m not a developer but some are able to do it and others can’t some like EA complain & complain about how hard it is while others actually do it and make it happen. I’m not denying in anyway that it isn’t more difficult for them but i think that when it comes to it being more difficult it sounds like some are saying it’s just too hard this is all we can do and seem to give up instead of trying to figure it out and make it the best they can or at least similar to the 360.Sorry but that sounds like lazy developers to me.I personally agree with Nintendo’s Miyamoto when he said something to the effect of….

    “A Bad game will always be bad but, a delayed game may someday be good”

    So in the end I don’t mind that a lot of the PS3 games get pushed back if it means they do need more time to make them the same or better than the 360 that’s fine with me. I rather wait for a delayed good game that pay the $60.00 for a bad game.

    There is one thing that Microsoft has done right thru out all this that Sony hasn’t and that is it has developed a standard where Online must be included & Achievement implented in every game. Sony on the other hand has not said to developers This feature needs to be standard so a lot of games lack these extras. Not to get off topic but the same pretains to the Blu-ray VS HD-DVD war. HD-DVD Hardware has certain Standards while Blu-ray is everchanging it’s specs and hasn’t said to Hardware Manufacture’s this need to be standard. If Sony starts to implent such a policy I think it will help a whole lot.

  29. I agree with Darkoon, some developers will find the true power of the PS3 with in the next 4 years or so, or even sooner, I think that Rockstar games will bring out the true power of the PS3 with grand theft auto 4.

  30. While many have very valid and thoughtful comments, and I don’t disagree with many of them, however, one thing has been forgotten, well actually, several.

    If you check the books by renouwned New York Times writer and now Mercury Times writer, Dean Tackahashi, you see the true idea behind the discontiuation of the 1st-gen Xbox.

    As early as 2003 the Xbox 360 was in the pipelines of developement, even though the 1st-gen xbox had only been on the shelves for less than 6 months, which was released in Nov 2002.

    At the time, it was seen that the 1st-gen xbox was “simply a move into the market place, not aimed at being a long-term placeholder”. It was MS’s way of getting a “foot-in-the-door” as they say. It was always scheduled for a short life-span from day one. And there were working with a seven year plan, which included the release of it’s succesor in late ’05, which was being worked on only weeks after the release of the 1st-gen xbox.

    They had estimated that by the end of the seventh financial year, coming up soon, the platform “might” just break even, if the 1st-gen console was farmed out, to allow developers to concentrate on new-gen titles, rather than split their already floundering studios resources.

    They had “estimated” it could loose as much as $US9.3 billion should things NOT go right for them, as a worse case senario. This figure was known to them on the outset of the 1st-gen Xbox, and even Bill Gates and Robbie Bach signed off on that figure, reluctantly at first, but it was shown that in the long term, it would pay off.

    Ed Fries worked closely with all the developers on both the 1st-gen and the early stages of the 360’s life. Ensuring they (Dev) had tools and services that they could rely on, without to much fuss, and to a level they (dev) wanted. MS Xbox-Div, via Ed Fries, worked closely with the developers to ensure they (Dev) got what they wanted. It was the developers more than anything else that wanted clear patterns of work loads, so they could concentrate solely on one acrhitecture, rather than two which were completely different to each other.

    This is why the two games, Perfect Dark Zero, and Kameo were ditched as 1st-gen games, even though PDz was almost fully complete, and Kameo had but months to go before being completed. Their (MS Xbox-Div) choice to then ditch all the code and begin again, promted them to move Halo 2 to a later release date in ’04, and Ed Fries actually tried to get that extended a further 9 – 12 months, but was only given a repreve from April ’04 to Nov ’04 for its completion and release. This was to be followed up with Halo 3 some time later, well into the 360’s life-span. Which is a complete story in itself.

    If the developers had two different platforms to develope for, their tasks would be multiplied at least 3 fold, as working with a new style of architecture, is like doubling your workload, if not more.

    The 1st-gen Xbox had a finite life-span, it was on schedule to be “retired” at the time it did, and was supported by MS until they knew it was no longer a viable thing for both developers, publishers and themseves as a manafacture.

    Additionally, they didn’t own the rights to the 1st-gens hardware, this possed probelms for them, so when they asked for tenders for both the CPU and GPU, one of their stipulations was that they (MS Xbox-Div) wanted to own the rights to the components. Something the ealier CPU manafactures did NOT want to do, but ATI and IBM were willing to do.

    This gave them control over how and where the items could be built, and a level of costing to bring the initial price down on manafacturing, and reduce the time between initial launch prices, and the first level of price reductions due to continual redesigning of the components. Which, as we all know, is common with all hardware being built these days.

    Their aim was to break even, or at least have a “component costing” below their inital figures by early or mid ’07. Which btw they succeded in doing by early in ’07, with a surplus of $US75 in the costing of parts. This didn’t include production however, so they still ran/run at a loss once that factor was taken into account.

    To do this, they needed to concentrate on just one line of product, and thus allow all manner of accessories to be made for it, where they are able to make a greate rprofit margin btw, by both 1st and 3rd party companies. To have both consoles would mean developers, manafactures etc would need to concentrate on two platforms for MS, as well as other major companies, such as Sony and Nintendo. Stretching their already stretched facilities and resources.

    Many of which were showing negative readings in their annual reports, and having their stock shares dropping and the companies were running at a loss. Carrying that over into yet another platform, as well as a previous/current one, would only take them further into debt. Something MS and the 3rd parties didn’t want. They (MS Xbox-Div) wanted the dev etc to concentrate soley on the 360, which they have done, and in doing so, now have a listing of over 370 games coming out on the platform over the next 18 months, not including any games yet to be announced during that time. A listing that far exceed any other single console platform currently available.

    I have compiled a list of in excess of 340 Xbox 360 Retail disc based games already, NOT including any XBLA games. If this was to have been split between both the 1st-gen and the This’Gen console, the number of Newer games would be far less, and be of lesser quality or innovation.

    All of which makes perfect economic sense in the great scheme of things. But unfortunately, not many gamers look at the bigger picture – these days, and have a tendancy to be somewhat short sighted on such things, and are more into “instant” or “right-now” gratification. And the loss of an object, even if it was scheduled from day one, was seen, by their accounts, as a “silly (read *&^% dumb) thing to do” . . . .

    But when you see WHY it was done, you can understand the reasoninng behind it. The two books in question are Opening The Xbox and Xbox 360 Uncloaked. The latter touches on the 1st-gen’s life and origions, as well as the 360 beginings. The former does go into the future of the Xbox brand, which includes their vision which included a Next-Gen Xbox.

  31. Thank you everyone for your comments. This is a fantastic response. Anyone reading all of this will have a far better idea of what has happened in the cycle which should help inform them as to what will happen going forward.

    Please look at the other articles here such as What is Sony? What is Microsoft? What is Nintendo? Which try to further analyse the building bricks of this industry. Considered comments to these (or any other article) is very much appreciated. The wider the variety of input the better the understanding.

    Thanks again,


  32. Several of the readers here had this right. To summarize, the original XBOX, in terms of it’s design, was nothing like Sony’s PSX or PS2. Originally, Microsoft thought that they would leverage the economies of scale of the PC industry by building the original XBOX to use PC components. They thought, rightly, that the large volumes in the PC space would make these components cheap. However, it was a double-edged sword. The components used in the XBOX were already “costed down” when they were used in mass production.

    Sony has always used their own customized ASICs in their Playstation line. This has allowed Sony to continue to integrate the various chipsets in the PSX and PS2 and migrate to smaller geometries over time. That was how they were able to transform the original Playstation into the PSOne and the PS2 into the PSTwo mini.

    Microsoft put themselves in a bind when they took essentially off the shelf parts from Intel and NVIDIA and licensed them for use in the XBOX. They did not own the CPU or the graphics chip nor any of the other controller ICs in the box; they even included a harddisk which was an added cost component above and beyond what the PS2 offered. I applaud Microsoft’s inclusion of the harddisk; however, try as they might, they could not cost down the system using the same strategy that Sony employed. In fact, there was no way to cost down the XBOX significantly at all. So while the PS2 continued to go down in cost, XBOX was losing money out of the gate and each time Sony dropped the price on the PS2, it was costing Microsoft even more money to drop the price of the XBOX and stay competitive in the marketplace. Sony was really bleeding Microsoft dry in the last generation.

    Microsoft really had to take a few pages out of Sony’s playbook to construct the XBOX 360 so that they would not be placed in this situation again. By doing so, Microsoft chose to go with new custom ICs, which they hold the intellectual rights to. While this will allow them to cost down the 360 over time – think Falcon which is the 65nm shrink of the current 90nm chipset, it also meant that XBOX 360 would fundamentally not be backwards compatible to the XBOX.

    Sony achieved backwards compatibility to the original Playstation by building in the physical PSOne chipset onto the PS2 motherboard. They could do that because they owned these ASICs. Over time, they were able to integrate that functionality into the PS2 emotion engine or integrate key hardware while using some software emulation. You can see this in the PS3. The original launch PS3 included the hardware PS2 emotion engine on the motherboard. That was an expensive way to go, but now that Sony has started to get a handle on software emulation of the PS2 emotion engine, they’ve pretty much dropped the IC on current production PS3s.

    Since Microsoft didn’t own the CPU nor the graphics chipset that powered the XBOX, they’ve had to do software emulation for XBOX titles on the 360. All in all, I’m very impressed with the list of XBOX games that Microsoft has managed to make compatible with the 360, and they continue to work on title compatibility to this day. Given the incompatible nature of the hardware, it was probably right for Microsoft to kill off the XBOX. They wanted first party and third party developers fully focused on the next generation. Not letting go of the XBOX would have created a double whammy for Microsoft – continued and increasing losses for each XBOX sold, and less attention of developers to support the new 360 platform. We as consumers may not like it, or understand the reasons, but it was a smart business decision.

    And despite the hardware issues on the XBOX 360, many people still continue to support the platform… why is that? It’s because of the games. Can you imagine what might have happened to the 360 in this generation had developers not been fully focused on the 360 and there were not as many amazing titles available for it?

    In the end, I believe Microsoft killing the original XBOX was the right thing to do. Why? Because they ensured the survival of the XBOX brand and lineage and ensured that Microsoft would continue to be in this market instead of letting Sony dominate it unchallenged. This provides consumers with more choice by increasing competition in the marketplace – which are all good things.

  33. I honestly don’t care they buried the Xbox.
    I bought mine at launch, and played tons of games on it for what feels like many years.
    Right now at the gamestores, Xbox games are all dirt cheap, so I don’t see why anyone is upset. MS wasn’t making money on it, and it was the right time to go nextgen with a 720p console.
    I want to continue seeing a new console every 5 years.
    For the $399, I feel I get my money out of it over the lifespan. For the price of 1 car payment, I get a game machine that is current for number of years that impresses me with it’s graphics. When I stop being impressed by the visuals (and that is the main way games are conveyed), it’s time to move on. Just like wives. lol.

  34. It was not a mistake. It was a smart move; one of their smarter moves. The Xbox was virtually dead, having been kicked in the face, beaten to a pulp and tossed in an abandoned alley by the PS2. Even the SEGA Dreamcast eventually admitted defeat and seeing a similar fate Microsoft decided to pull the plug. Why should it focus resources: time and money on a dying (if not dead) console.

    I agree with Grant. Microsoft wedged its foot in the door to the game industry with the Xbox which created an opening to the gaming market. It was eventually enough that Microsoft would be able to pry the door open from Sony’s grasp and enter house with its portly self.

    Sony is able to overlap console generations because the previous generations were successes. The original Playstation had a large fan base and the PS2 still has an overwhelming market dominance. It would be stupid of Sony to brush off such a large market and source of income (something the orginal Xbox lacked).

Comments are closed.