Replies

In the interest of brevity, I won't quote, but just reply to each point:

1) That's fine, but it really has no impact on new console games. Consoles have used proprietary APIs and OSes for 2 decades and grew fine. Microsoft using its own OS in its own console really isn't worthy of much mention or consideration.

2) Actually, developers include whichever version of DirectX they programmed with on the game disc itself, rather than coding for a static version of DirectX in the XBox's firmware. Good move by Microsoft--but PS3 is using OpenGL, nullifying that advantage.

3,4) The console market is completely different. Microsoft doesn't make the hardware, and has to deal with outside contractors for that. More parties leads to less overall profits. Sony has an advantage because it's a gigantic consumer electronics company--they spent $2 billion on the R&D for the PS2 alone. Microsoft is a software company.

5) Sony caused Sega to leave the console business, not Microsoft. Microsoft licensed WindowsCE for the Dreamcast's OS--if anything, they had an interest in the console succeeding. In addition, Microsoft didn't enter the console market until the Dreamcast had already died. It wasn't market anticipation of the Xbox that caused faultering Dreamcast sales.

6) It could very well be, but Microsoft needs to tweak its business model regarding the service. EA refused to participate in Xbox Live because of Microsoft's royalty and licensing models. Now when you play an EA game over Xbox Live, you're actually using Xbox Live as a middleman between you and EA's servers, not Microsoft's. I'm sure Square would love to bring Final Fantasy XI to the Xbox, but Microsoft wouldn't cave for their PlayOnline service the way they did for EA's. This has to change.

7) Xbox2 is slated for the Christmas season of 2005, or so the rumors go. However, it's not the PS2 Microsoft is competing against: it's the PS3. Microsoft will find themselves in Sega's position back when they launched the Dreamcast: they'll be the first to market with a good console, but Sony will have mindshare, and their newest console will launch a few months after Microsoft's. Nintendo is showing off their new console, code-named Revolution, at E3, and Sony's rumored to have a PS3 presentation set for E3 as well. This will not be easy for Microsoft. If they revise their business model, Xbox2 could indeed be profitable. However, it's going to take software, not hardware, to truly make money off the Xbox2--and that's the Xbox's biggest failure, a lack of quality titles.

You have to stop looking at the videogame market as an extension of the software market. It's nothing of the sort. Microsoft is a software company that's found itself in the position of a hardware vendor. Microsoft obviously approached the gaming market the same way they did the operating system market (example: their Xbox Live royalty structure) and they got burned. It's going to take more than new hardware to win the console wars.

"1) That's fine, but it really has no impact on new console games. Consoles have used proprietary APIs and OSes for 2 decades and grew fine. Microsoft using its own OS in its own console really isn't worthy of much mention or consideration"

Oh yes it does.
FACT: You need an OS top run your vid game console.
FACT: If Microsoft didn't have Windows, they'd have had to develop an OS for their console from scratch, same as Sony and Nintendo did at far greater cost to Microsoft.(Linux is out, Microsoft wouldn't use it for obvious reasons).
FACT: Having a ready made, very good Windows 2000 OS to use cut down drastically on the cost and time to market of the XBOX console.Microsoft developed their console much faster than Sony did with their Playstation.
Its IS very relevant.

" Good move by Microsoft--but PS3 is using OpenGL, nullifying that advantage"

My reply to that is the same as above.
It still saved Microsoft a great deal of costs and time to market of the BOX.
I don't care if Sony "nullified" any advantage or not.
It was Sony that was already in the market.Microsoft was the challenger.
It was up to Microsoft to nullify any advantages Sony had.
Using Direct was one of the ways they did just that.

"The console market is completely different. Microsoft doesn't make the hardware, and has to deal with outside contractors for that. More parties leads to less overall profits. Sony has an advantage because it's a gigantic consumer electronics company--they spent $2 billion on the R&D for the PS2 alone. Microsoft is a software company"

I don't even know where to start on this one.
Not a single one of your points makes much sense.

To start off with, If anything the fact that its hardware makes my point even more valid.
Lets take Windows NT for example.
Microsoft started writing NT in 1987 when they brought in David Cutler and his gang from Digital.
It wasn't till 1996 when NT 4 came out that Microsoft actually started making any real profits on NT. That is NINE solid years!
Today, without NT, Microsoft will be in very deep trouble indeed.
During all that nine years, the cost of developing NT kept going thru the roof every year as they took on more programmers and as they paid the original programmers even more money.Some of those guys writing NT were making $500,000 per year at the time, plus stock options.
If you take the XBOX which is being made in China at very low cost, if anything the cost of making the console keeps going down every year..
Comparing NT or the original Windows to the XBOX, Microsoft has been able to turn it round much faster than most of their big software projects, in part because their cost of production for the hardware keeps going down every year, whereas costs for their software projects had always gone up.
The fact that the XBOX is hardware helps buttress my point rather than distract from it.
As for your talk about Sony being "a gigantic company" spending $2 Billion on R & D alone as you put it, it just made me laugh.
Microsoft is spending to the tune of around $6.8 Billion on R & D per year right now. Makes Sony's $2 Billion look like tiddlywinks doesn't it? :)
http://news.com.com/Microsoft+plans+to+boost+RD,+jobs/2100-1016_3-5053516.html

Second point of course is Sony is in deep trouble.Their consumer electronics business like TV's, VCR's, DVD's, camcorders etc etc are barely making a profit if at all, and they are taking a beating from Samsung in all of those products.
In Sony's latest results reported on Jan 26, their sales were down to the tune of 7.5%.
Microsoft quarterly profits are currently running at over twice that of Sony.

Extract from Sony's results:

"Sales for the quarter dipped 7.5 percent to 2.15 trillion yen (US$20.9 billion; euro16.07 billion) from 2.32 trillion yen.

Sony said its electronics sector suffered as sales of TVs and portable music players dropped.
.................................
In recent years, Sony has suffered from competition from cheaper Asian rivals such as Samsung Electronics. It has also fallen behind Japanese rivals such as Sharp Corp. in liquid-crystal display TVs and Matsushita Electric Industrial Co., which makes Panasonic brand products, in DVD recorders. "

Sony is in deep doodoo.
They are in no position to fight a nasty knuckle down price war with Microsoft when the net generation of consoles come out, while Microsoft is financially stronger than ever.

"Now when you play an EA game over Xbox Live, you're actually using Xbox Live as a middleman between you and EA's servers,"

Most games played on XBOX live are played on Microsoft's own titles like Halo and Halo 2.
EA is of little relevance right now on XBOX Live.
And XBOX Live is still smoking anyway.

"It wasn't market anticipation of the Xbox that caused faultering Dreamcast sales. "

It played at least a part in Sega's decision.
Product pre-annoucements have been affecting rival products for years.
That is why Microsoft's rivals accused Microsoft of using pre-annoucements to freeze rival products during the Microsoft anti-trust trial.

"Microsoft will find themselves in Sega's position back when they launched the Dreamcast"

If you think Microsoft is lil ole Sega,you have another think coming.
Microsoft is one of the toughest, fiercest, smartest competitors on the planet.
Plus Microsoft has more money than anyone else.
Plus Microsoft's market share for the XBOX went UP last year against the PS2 and Gamecube, and ended the year selling more XBOX's than PS2 and Gamecube for the holiday season.
I haven't even mentioned Sony's weakening position in their core consumer electronics business, where they are getting a clobbering from South east Asian rivals like Samsung.

I'll back Microsoft in this war any day.
I like their chances better than Sony's.

"Nintendo is showing off their new console, code-named Revolution"

Nintendo has been in the vid game business for over 20 years?
Microsoft has been it it for just 3 years, and they still have managed to clobber Nintendo in their very first attempt at selling vid game consoles.
Lets not forget that Nintendo's profits were down a staggering 43% in their latest quarter, due in part to sluggish Gamecube sales brought on in part by the XBOX.

http://www.bloomberg.com/apps/news?pid=10000080&sid=auAoykaxHB00&refer=asia

If you think Nintendo which got clobbered by Microsoft's very first XBOX console is going to beat Microsoft in the next generation, I got a winter skiing slope in Florida I wanna sell ya.

"However, it's going to take software, not hardware, to truly make money off the Xbox2--and that's the Xbox's biggest failure, a lack of quality titles. "

Yeah?
For a console that "lacks quality games" the XBOX managed to do remarkably well in 2004 didn't it, accounting as it were for some three of the top 10 games sold in 2004, with Nintendo's Gamecube, which apparently has all these "quality games" accounting for exactly ZERO of the top 10 video games in 2004.

http://www.gamespot.com/gba/rpg/pokemonred/news_6116499.html

"You have to stop looking at the videogame market as an extension of the software market. It's nothing of the sort"

Umm it is.
Read your own post above, dude.
All those "quality games" you keep going on about is software, and that is where the profits are, and that is exactly where Microsoft did very well last year.

"Microsoft obviously approached the gaming market the same way they did the operating system market (example: their Xbox Live royalty structure) and they got burned"

Umm Microsoft just announced profits for the XBOX, record sign ups for XBOX Live, record games sales etc etc.
Where is the "burning" going on at?