He probably doesn't know much about the gaming industry. The 360 is already an unqualified success. It's unquestionably reached status as an iconic platform in the history of console gaming, right up there with the NES and the PS1/2. To outsiders it may seem as though Nintendo is leading this field but that's somewhat misleading. Nintendo opened up a new market and has been able to sell console gaming systems to a whole new group of people who wouldn't have bought them before. This is fabulous for Nintendo, but in a very real sense it means it's no longer operating in the same market as Microsoft and Sony (though there is some overlap).
The 360 is the go-to console for any major game developer. Partly because 360 owners buy about 50% more games than either Wii or PS3 owners. Given that games are responsible for the bulk of the profits related to console gaming that's an enormously significant figure. The 360 console is raking in cash for Microsoft and continuing to grow in popularity. It's one of Microsoft's most successful ventures of all time.
Xbox is successful in that it has a large mind-share in the hard-core gamer community, but financially the project is still a failure. Had Microsoft decided not to begin the Xbox project 10+ years ago, it would easily have a few more $billion in the bank today.
Contrast that with the Wii, which, along with the DS, has added billions of dollars in profit to Nintendo's coffers over the past few years alone.
Now that Xbox has established itself, the next decade will show whether or not the system is net-profitable, or whether the project never should have started to begin with.
No, Xbox has largest market share in the gamer community period, with > 25 million units shipped worldwide. And they will be profitable overall on their gaming unit by the time this console generation is over (2015?).
Nintendo is operating in a different market. They are a toy company, first and foremost. And it's better, conceptually, to think about the Wii and DS as toys. They have a completely different audience - and completely different revenue model. People buy toys for a short-term entertainment value, or novelty - and then the novelty wears off.
This describes the Wii exactly - people buy one, they play a game or two, or maybe Wii fit, and that's it. You aren't seeing serious time spent with it - and the tie ratio demonstrates that.
BTW - I think I'd classify Guitar Hero / Rock Band as toys, too. Hence the horrible sales numbers this season - people are sick of this particular kind of toy.
I'm not sure it is valuable to segment the market into those who buy "toys" and those who buy "hard-core games". At the end of the day, there is just one big market: the human population.
Yes, Microsoft sold 30 million Xboxs to "hard core gamers" and effectively conquered that market niche.
But, in the same time, Nintendo sold 50+ million Wiis to people who like "toys", making billions of dollars in the process.
As a hypothetical investor, I don't really care if Microsoft "wins" the hard-core market, I care about the bottom line. Nintendo effectively created a new market and capitalized on it, and they would get my hypothetical dollar.
Not every venture can completely pay back its initial costs in a short time period. It took Amazon.com an entire decade to finally start making an annual profit. The XBOX division is now on a very solid track of success, with significant annual profits and a substantial growth trend. This is hardly a failure any more than a family 10 years into paying off a 30 year mortgage is a "failure". The XBOX division has become a substantial profit center for Microsoft and will almost certainly turn a lifetime profit sometime in the next few years.
This is the nature of the game in the tech industry, significant returns are rarely achieved without significant risks and investments.
How much is that to Microsoft's credit, though? Nintendo deliberately targeted a different market and Sony promptly flew themselves into the side of a mountain by fucking up the PS3, so the 360 won almost by default, despite its very real flaws.
In gaming consoles, Microsoft had Sony to compete with. It's easier to beat Sony than to beat Apple or Google.
It's difficult to discount it on the grounds of innovation. It's the first gaming console to fully integrate online gaming successfully and it's earned status rather than ridden on the back of brand loyalty like Sony or gone for the casual gaming market like Nintendo.
I think it's a very unfair impression. The Xbox 360 and the Nintendo Wii are not competitor products: the people who only have a Wii would have never bought an Xbox 360 in the first place. The Wii is to console games what Flash games are to PC games. Flash games didn't cut into the strategy, shooter, simulation, or role playing genre sales on the PC at all, because the people buying/playing them are not the same people who buy RTS/FPS/sim/RPG games. The Xbox line has been singlehandedly responsible for redefining the console gaming experience. Sony has been playing catchup ever since the 360's release.
Sony may have copied some of the more successful features of the Xbox 360, but I'm going to disagree that the Xbox line has redefined the console gaming experience.
It's redefined each generation. This generation is about motion controls as the top seller of all time, the Nintendo DS, has motion controls alongside its console brother the Wii which also does. Sure the 360 has stream lined the online experience, however it has also introduced gamers to the closed era of consoles. You want a bigger HD? Sure just pay an absolute premium on it. Not to mention the 360's hardware problems which have been conveniently forgotten.
The fact that you're comparing the Wii to flash games is absurd. It's fine not to like the Wii, I know I don't like it besides some drunken debauchery, but its impact on the industry is clear. Clear enough that Microsoft and Sony are both coming out with motion control products in the next year.
The Xbox / Xbox 360 has absolutely changed the nature of online gaming. They've done more to make it accessible than ever before: The ease and transparency of playing games with your friends (voice chat, the party system), the introduction of matchmaking in Halo 2 (a huge leap from the 'choose a server' system in the past), achievements, etc, all presented with a unified interface across games.
Both the PS3 and Steam have adopted their innovations - they've become the defacto standard for online gaming.
Microsoft and Sony coming out with motion controls doesn't mean that's where they think the future of their market is, they're just trying to tap into part of the Wii's market - to introduce the casual and first time gamers to a console with a rich library of more serious games. It's kind of like a drug dealer offering a sampler of a harder drug for free to get a new customer.
And for the hardcore gamers I know, XBox Live is a redefinition of consoles. Before Live, PCs were the only serious online game in town, now the XBox actually offers a better (less painful) online experience. Sony's online system is a joke in comparison.
(I own none of these systems, but I'm an ex-gamer and know a lot of gamers.)
XBox Live might be a huge business coup, though. If you go to the trouble of paying for Xbox Live, you're gonna want to "make the most of it", and that entails doing things that make Microsoft more money (buying more monopoly money from them for downloadable content, buying more games, etc.)
I used to play quite a bit on PCs. Multi is generally free, but the experience is far from seamless in a lot of cases. My impression of Live is that It Just Works. I've heard very varied things about PS3 in comparison, many of them not kind. That's what I was drawing on.
Funny thing about the xbox 360's hardware problems, when people's 360s break the response is not "ugh, this piece of junk sucks, I want my money back, I'm buying a wii" instead it's "ugh, how long is it going to take to get repaired? I really want to play right now!" or "ugh, it's out of warranty? Damnit, now I have to buy a new one!"
These are, as they say, generally the better variety of problems to have, warranty extension costs notwithstanding.
Which is surprising to me. I guess to be a success in his mind is to completely dominate a market space. I guess when you use the market share of Windows as your barometer for success, nothing else quite compares.
