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Re: [News] Microsoft's Reach for New Markets Highlight Financial Woes

Mark Kent <mark.kent@xxxxxxxxxxx> wrote:
> 
> Or have they reached a break-point where they can afford to reduce the
> price?  Without sight of their business plans and real costs &
> cash-flows, it's hard to be really sure about what they're doing...

I suspect that lowering the price was always part of their business
plan (the the timing and amount was probably always subject to the
realities demonstrated in the market).  Gaming is one of those areas
where you can always depend on a loyal core of fans to pay a premium
to be an early adopter.  Microsoft knows this.  As we get closer to
a PS3 release, I suspect you might even see another round of price
cutting.

The real XBox revenue stream is in game royalties, subscriptions,
and follow-on sales via XBox Live.  If they can make the install
base large enough, the ongoing revenue generated by Live can
compensate for the huge pile of cash they lose on sales of the
XBox itself.  This is just one of the ways they are using their
Windows and Office profits to try and lever their way into new
markets.  Time will tell if they can pull it off.  So far, they
seem to be making some smart moves.  If Sony really screws up the
PS3, MS might run away with the console market.

Later,

Thad


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