Microsoft entered the console race to ‘stop Sony’

Microsoft originally got into the console business to “stop Sony”, a former Microsoft executive has claimed, before suggesting that, even to this day, Xbox is “not a big money-making machine for Microsoft”.

Speaking to IGN, Joachim Kempin, who worked as the VP of Windows Sales at Microsoft between 1983 and 2002, said that “the main reason [Microsoft entered the console space] was to stop Sony.

“You see, Sony and Microsoft… they never had a very friendly relationship, okay? And this wasn’t because Microsoft didn’t want that.

“Sony was always very arm’s length with Microsoft. Yeah, they bought Windows for their PCs but when you really take a hard look at that, they were never Microsoft’s friend. And Microsoft in a way wanted them to be a friend because they knew they had a lot of things we could have co-operated on because they are, in a way, an entertainment company, you know?

“I mean, at least a portion of Sony is and they had some really good things going there, but as soon as they came out with a video console, Microsoft just looked at that and said ‘well, we have to beat them, so let’s do our own.'”

According to IGN, Kempin claims that Microsoft felt threatened by Sony’s presence in the living room, and concerned that its ‘dominance of the traditional [PC] market’ could be rattled by the ongoing convergence of computers and consoles.

Kempin also revealed that he visited “several PC manufacturers” in the hope of convincing them to develop a console and prevent Microsoft from making a loss on manufacturing hardware – something the company failed to achieve.

“I went out to several PC manufacturers and tried to beg them to do the Xbox thing and keep the device manufacturing out of Microsoft,” Kempin continued.

“The guys were smart enough not to bite, because they studied the Sony model and saw that Sony could not make money on that hardware model, ever. So they supplemented it with software royalties, and Microsoft copied that model.”

The original Xbox and Xbox 360 were initially sold at a loss, of course. But despite the hardware now expected to be turning a profit, Kempin claims that Xbox is still “not a big money-making machine for Microsoft”.

“There are actually two things,” he added. “First, every developer who now has an Xbox game pays a small royalty to Microsoft for the honour of having it on that system.

“The other way they make money is that they finally got their act together on the services and actually that’s where the money is being made. So they’re just maybe a little bit above breakeven, that’s all there is. This is not a big money-making machine for Microsoft.”

Microsoft is expected to announce its next-generation Xbox around March, with the latest rumours suggesting that the console may require an always-on internet connection.

Source: IGN