The Xbox 360 needs a 180.

A previous post of mine commented about Microsoft’s drastic action regarding the Xbox 360, and what I believe prompted that action. I also stated that it could be argued they still weren’t doing enough. It seems that’s the case.

Look what’s happened in just the two weeks since I wrote that article:

The above is piled on top of a unit that isn’t yet making Microsoft money. Microsoft’s quarterly results show the Xbox has cost them plenty over its six-year life. Plans to sell as a loss-leader and make up for it with game sales have yet to come to fruition. With the $1B+ hit for the three-year warranty and repairs combined with the sales drop, I wouldn’t be looking for a profit any time soon (2009, anyone?).

I believe Microsoft’s actions were for nothing less than to save the Xbox business. The Xbox is important to MS because it’s not just a gaming box. They’re trying to leverage it as the do-it-all living room device for media entertainment (HDTV, streaming media, movies, music, etc.) so MS won’t give up on it anytime soon, but as I said in my post:

“I could actually argue that Microsoft isn’t doing enough. There are a lot of 360s in the channel, and I’ve seen no call to bring them back. Microsoft knows a lot are defective, but is betting that acknowledging the problem and a 3-year warranty is enough. It wouldn’t be for me. Personally, I wouldn’t even consider a 360 now, and would wait only until I think the channel’s clear (six months or more).”

The latest sales figures seem to indicate I’m not the only one who thinks that way.

Is Microsoft hoping to struggle past these failures and wipe the slate clean when the 65nm Xbox 360 is released? That would be a pretty risky strategy. Obviously, it assumes the 65nm unit will not have the issues from which the new warranty and class-action lawsuits stemmed, yet we have no way of knowing that. Further, it assumes people will be convinced that a product in the market place getting a reputation for failing is now “OK.” That’s not easy to do, especially since current 360s in the channel presumably have the same failure rate that prompted all this action to begin with. There are still many people who will get 360s that fail.

Personally, I don’t want to see the Xbox fail because, frankly, its presence in the living room space keeps Apple, TiVo, cable, satellite, etc. companies on their toes. It should continue to spark innovation/competition in the media living room space. Without a Microsoft force to contend with those companies might grow lax, which is not a good thing for consumers.

3 thoughts on “The Xbox 360 needs a 180.

  1. Xbox 360 sales are down 60 percent year-over-year but a year ago the console was brand new, Q2 2006 was only the third quarter of availability. And it was only competing wih the PS2, since then the PlayStation 3 and the Wii have hit store shelves. The Xbox 360 had a head start, it helps explain why sales are now dropping off. With the high failure rate and old faulty consoles still in the channel, I wonder how the Xbox will do this holiday season…

  2. I found the exact quote:

    “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”~ BusinessWeek, May 25 1998

  3. Nintendo was basically down and out cold with the gamecube – it had a loyal base but Nintendo was only staying aflot due to gameboy sales and pokemon licensing.

    Nintendo HAS NEVER seen Sony or Microsoft as a competitor to keep them on their toes. This is the reasoning for the Wii. It was something TOTALLY different – it doesn’t focus on real looking graphics or movies – instead it focuses on interactivity and retro nostalgia – something no one was really asking for – but seems everyone wanted.

    Steve Jobs said, [Paraphrased] “People really don’t know what they want, they need someone to tell them”

    This is so true.

    A company that reacts to trends or follows trends – ie Microsoft / Sony – will often do ok or break even, but the company that creates the trends will often stand out – ie Apple / Nintendo.

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