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November 27, 2006 - In a [Register or Login to view links] with the San Jose Mercury News, Microsoft's Robbie Bach spoke up about Sony's future with the PlayStation 3. The interview focused mainly on the Zune and Microsoft's business stance regarding the device, but that didn't mean that Bach was unable to find some time to slam the competition.

Bach indicated that the main reason why Microsoft had avoided any substantial games support for the Zune was that they were worried about spreading themselves too thin like Sony had done with the PS3. Instead of building a Game Boy competitor, Microsoft focused its game-related attentions on the Xbox 360 exclusively.

"I need the people who are focused on gaming to focus on Xbox 360... you have to distract a whole group of people that are doing content and the Live service and a whole bunch of other things to do that," he said. "I think Sony, frankly, suffers a little bit from this problem, which is they're spread really thin across all these areas. And trying to do PSP, competing with Nintendo, PSP to DS; competing with us, 360 to PS3, I think it does strain -- it would naturally strain any organization."

Between interrogating Bach about Microsoft's marketing philosophies for the Zune and slamming the company for their "defensive" business tactics, the interviewer found time to question Bach about this current holiday shopping season. "The No. 1 thing happening in the holiday season is where is the content... The second thing is frankly our value proposition is just better," said Bach. "Our console is at $299 and $399. Sony is going to have a pretty limited supply of consoles at $499 and $599. Consumers want to buy during the holiday. We're going to be a great logical choice for them."

Bach went on to state that Microsoft is on track to meet their goal of 10 million Xbox 360s shipped by the end of this year. He did manage to slip in a minor jab at Sony for their allegedly misleading shipped numbers while he was at it. According to Bach, Microsoft's shipped numbers are "reasonably close to sold through. To make sure we're clear, Sony does shipped from factory. We don't. Our shipped means it has left a distribution warehouse in Memphis to a retailer. There is a big lag of six week to eight-week lag between what we called shipped and what Sony calls shipped. That's the way we do the accounting."

When asked about the proposed jump in market share for the Xbox 360 (up to 40 percent), Bach replied, "There are a couple of things you have to look at. You do have to look at the content. Where's the best content? Is it cross-platform? Where was it first developed? I think that does matter in the marketplace. The second thing you have to look at is economics. You have to ask the question, over the life cycle, who has the cost advantage? Who can price most effectively? Who can reach the price points quicker? That has a huge impact on what gets driven."

When asked to comment about the development of a successor to the Xbox 360, Bach replied that, "The engineering team is always thinking about the future. Right now we are thinking about how to cost reduce the Xbox 360. That seems to be the first order of business... Most publishers are doing their initial development work on the Xbox 360. That plays to our benefit. Because we are out there first, we have a bigger installed base of consoles. We can drive down the manufacturing curve sooner and faster. And because we designed a box that was fundamentally easier to manage on costs, we're going to have that advantage."

Finally, Bach touched upon the subject of the Xbox 360's potential for profitability. Bach reiterated earlier statements that the entertainment and devices division in general would become profitable by the end of 2008, but that this does not necessarily mean that the Xbox itself would be making a profit. According to Bach, Microsoft doesn't "break profit down by business. And there are parts of entertainment and devices that make money. Xbox doesn't. Xbox has to make significant progress to enable E&D to get there. We feel we are on track."


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