Despite billions in investment, its Xbox line is still at best an equal contender in the game console business.
I think he doesn't give Microsoft enough credit on this. They entered a game console market with two entrenched players, where one was clearly dominating the other. People gave Microsoft little to no chance of succeeding and yet, on there second iteration were able to put themselves on equal ground to Sony and Nintendo. And that is with producing one of the most unreliable consoles ever made.
Consider the life-time revenue and cost of the Xbox project starting before 2001. And don't forget that $1 billion written off for RRoD warranty repairs. Over this last decade, Xbox is still in a pretty deep hole, and even optimistic earnings mean it will take awhile before breaking even.
Also, to be far, they don't actually separate Xbox earnings from, say, WinMo earnings. Xbox probably dominates, but it is hard to infer exactly how profitable they were.
More impressive is that the Xbox 360 is the most successful of its generation. The Wii may have sold more units, but game sales on the Xbox crush it. They also somehow charge decent rates for the Xbox Live service which their competitors give away for free, and they get more use out of it while doing so. It's truly amazing.
The video game console market has historically done to consumer electronics corporations what Russia in winter has done to mighty European militaries. For MS to have succeeded, and by many metrics come out on top, in 2 generations is an incredible feat.
Microsoft is ahead of Sony in the console race right now, but I think that Sony will end up leading the current generation. The Wii novelty will fade, and the PS3 will ultimately dominate thanks to a deeper line up of exclusive titles. I have always felt that exclusives were the Xbox's Achilles' heel - even going back to the original Xbox. Most of the best XBox games are not exclusives. For example Gamespot's best 360 game award went to Assassin's Creed 2 this year, and to GTA 4 in 2008. Both games were also released on the PS3. In contrast, the best PS3 games of 2008 and 2009 were MGS4 and Demon's Souls, respectively. I was really hoping that the Rare acquisition would pay off this generation but it doesn't look like it will anytime soon, if ever. I own a 360, but I am planning to buy a PS3 by the time God of War 3 ships, as I feel that it will be home to a lot of fantastic gaming experiences that will not be available anywhere else.
To make an analogy with movies, there will be no shortage of 'Spiderman' or 'Batman Begins' on the 360, but only the PS3 will have 'Return of the King'.
I'd love to see some data on how many people buy a console due to exclusive titles. I've done it, but it's always been Nintendo. (My dog's name is Link so you can guess why.)
The top 3 Xbox 360 games are exclusive (Halo 3, Gears of War 2, Gears of War) and 6 of the top 10. Xbox has the 'Return of the King' exclusive franchise with Halo.
The only company with a massive list of successful exclusives is Nintendo.
You are right about Halo, but it is Microsoft's only RoK exclusive franchise so far IMO. I.e. if both Microsoft and Sony were to launch a new system with a new iteration of one of their best franchises, Halo is the only weapon in Microsoft's arsenal that would enable them to sell more systems than Sony. Gears of War and Mass Effect are great, but they won't individually beat MGS, God of War, Uncharted or Gran Turismo.
During the previous generation of consoles, exclusives were a huge reason why the PS2 ended up on top I think. Its line-up in 2001 alone was incredible: Gran Turismo 3, GTA 3 , MGS2, Twisted Metal: Black, Devil May Cry, Onimusha Warlords, etc.
(1) The Xbox did not conflict with any of MSFT's existing businesses.
(2) It was an established product that MSFT did not add much to. It was a console, which was operated the same way that other consoles were operated. It does not require much business leadership to do that. Ironically that's kind of like Linux's development model. For a band of scattered, (formerly) unfunded hackers, that's ok. For a company in an evolving area like tech, it's not really acceptable.
That second part is not true at all. The Xbox has been an innovator in pushing online connectivity. It's de rigueur now, but they really pioneered it almost a decade ago. It's the biggest shift in console gaming since the NES.
I think he doesn't give Microsoft enough credit on this. They entered a game console market with two entrenched players, where one was clearly dominating the other. People gave Microsoft little to no chance of succeeding and yet, on there second iteration were able to put themselves on equal ground to Sony and Nintendo. And that is with producing one of the most unreliable consoles ever made.