Microsoft Got Into Gaming To Stop Sony
Console wars are rarely ever an intelligent battle because it consists primarily of each side’s respective fanboys shouting obscenities at each other and making poor arguments as to why their console is better. Ultimately I see it as coming down to a matter of preference because the games are near identical and it depends on which interface and set of of exclusive titles you like more. That said, I’ll wager you didn’t see the rivalry between Sony and Microsoft being as heated as the rivalry between their consoles’ fanboys.
In a surprisingly candid interview with IGN, former Microsoft VP of Windows Sales, Joachim Kempin spoke about why Microsoft entered the console market. It turns out it was all to essentially get in Sony’s face and give them some serious competition. I think that mission has been accomplished surprisingly well seeing as this started off as something of a vendetta.
When asked why Microsoft decided to enter the console space, he asserted that, “The main reason was to stop Sony. You see, Sony and Microsoft…they never had a very friendly relationship, okay? And this wasn’t because Microsoft didn’t want that.
“Sony was always very arm’s length with Microsoft. Yeah, they bought Windows for their PCs but when you really take a hard look at that, they were never Microsoft’s friend. And Microsoft in a way wanted them to be a friend because they knew they had a lot of things we could have co-operated on because they are, in a way, an entertainment company, you know? I mean, at least a portion of Sony is and they had some really good things going there, but as soon as they came out with a video console, Microsoft just looked at that and said ‘well, we have to beat them, so let’s do our own.’”
Supposedly the decision to initiate a console arms race with Sony came from the very top with Bill Gates getting in on it. Gates had reservations that the living room computer (video game console) would evolve to a point where it was something of an alternative PC and that could cut into Microsoft’s dominance over the traditional market. The solution was to tackle Sony head-on and prevent them from stealing business 5, 10, 15 years down the line. Consoles still haven’t exactly overtaken PC’s and everybody who has a console likely still has a PC or laptop but then this was the late 90′s and early 2000′s. At the time most of us were hyped up on Holey Moleys and The Batman Animated Series. I also believed that Canadians came from Canadia for a brief period but let’s not dwell on that.
Ultimately Microsoft achieved success in a new sector and is all the better for the decision but that doesn’t mean it was without initial teething issues. You see, there are huge costs involved in hardware manufacturing of consoles and so with each sale Microsoft and Sony effectively lose money. Sony went from losing a lot of money on PS3 consoles to losing less money. Of course presently with reduced manufacturing costs and cheaper methods by which to produce consoles, the company’s can actually make a profit off of the consoles.
Kempin recalls going out to several PC manufacturers to take on the burden of manufacturing the Xbox to spare Microsoft the losses.
He recounts, “I went out to several PC manufacturers and tried to beg them to do the Xbox thing and keep the device manufacturing out of Microsoft. The guys were smart enough not to bite, because they studied the Sony model and saw that Sony could not make money on that hardware model, ever. So they supplemented it with software royalties, and Microsoft copied that model.”
According to Kempin though, Microsoft never really managed to nail the whole software-supplementation thing, with Halo ending up as the only exclusive software franchise they could depend upon. This meant in the end they had to look elsewhere.
“There are actually two things,” he explained. “First, every developer who now has an Xbox game pays a small royalty to Microsoft for the honour of having it on that system. The other way they make money is that they finally got their act together on the services and actually that’s where the money is being made. So they’re just maybe a little bit above breakeven, that’s all there is. This is not a big money-making machine for Microsoft.”
It’s interesting to see where the Xbox has its roots and Microsoft has certainly made a success of it, becoming one of the biggest publishers in a billion dollar industry and sharing dominance of the console space with Sony.