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"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?

"And XBOX Live is still smoking anyway."

1.4 million subscribers after 4 years, two of them stagnant at 1 million, is not smoking. Let me put it like this: out of the 6.5 million Halo 2 copies sold, only 400,000 are being played online.

And the largest games publisher in the world allowing its games to be playable online on the Xbox ISN'T of relevance? Go look up some Madden sales.

"It played at least a part in Sega's decision."

No, it didn't. The threat of bankruptcy did. After cancelling the Dreamcast, Sega turned into a publisher and spun its in-house development studios off into second-party companies. Microsoft had nothing to do with this, and you're giving the company credit where none is due.

"If you think Microsoft is lil ole Sega,you have another think coming."

I didn't say they are Sega, I said they are going to be in Sega's position: first to market with a highly-anticipated machine on the horizon. In some ways, that's worse than being last to market. Please stop inferring sinister anti-Microsoft comments in the rationale I'm posting.

"I like their chances better than Sony's."

That's fine. Personally, I think Sony's decade-long control of the console market will continue, with Microsoft making gains, but not to the detriment of Sony's overall market share. This is for a lot of reasons, but partially because the overall growth of the console market will allow both companies to gain sales without affecting the overall market share percentages.

"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."

Sorry, but no. Last year, Nintendo continued to profit off the Gamecube thanks to their price cut to $99. This year, Nintendo's profit projections (not actual profit earned--profit PROJECIONS) were reduced because of the diminishing exchange rate between the yen and the dollar. Microsoft is #2 in the US, tied in Europe, and #3 in Japan. They haven't clobbered anything, only found a niche.

"For a console that "lacks quality games" the XBOX managed to do remarkably well in 2004 didn't it..."

Yes, Halo 2 sold a lot. Not many other games did. Microsoft profited so much off of Halo 2 because it is the game's publisher, and it owns Bungie. Would you care to list the other high-profile Xbox-only titles that have been released in 2004? I can name one: Ninja Gaiden. And Ninja Gaiden sure as heck did not contribute to Microsoft's profit margin, given that it didn't sell nearly as well as Halo 2.

Oh, can you list Microsoft's Halo 2-equivalent for 2005? It ain't Forza Motorsport, I can tell you that.

"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."

Having one or two AAA-quality games (Halo 2, Ninja Gaiden) available 9 months apart does not constitute a year that's gone "very well." You're missing the point: besides Halo, what does Microsoft have? The answer is "not much." This is the same concern Take-Two's shareholders had: besides Grand Theft Auto, the company had nothing. Take-Two has since purchased Visual Concepts from Sega and Microsoft's sports games division. Let me repeat this: Microsoft sold their sports games division. This means there will be less Xbox games, not more.

"Where is the "burning" going on at?"

Their overall market share, the percentage of Xbox sales to Xbox Live subscribers, the amount of Xbox-exclusive games released (and desirability compared to PS2-exclusive games), and the amount of third party companies developing games for the Xbox. Like I said before, Tecmo and Bungie can't keep Microsoft afloat.

You can continue treating me with hostility, or you can realize Microsoft has an uphill battle ahead of them. Pick one. You'll hear no more about me on this topic: I've made my points.