Microsoft Warns That The Hardware Business Is “Really Tough”

Microsoft’s Phil Harrison has issued a warning to new companies looking to jump into the console market: “the hardware business is a really tough business.”

This message comes after Valve’s Gabe Newell spoke about the Steam Box earlier this week, and while Harrison doesn’t call out Valve specifically, it’s evident that he’s addressing the Steam Box and perhaps the Ouya.

As a Microsoft Studios executive and ex-Sony PlayStation development boss, Harrison is a veteran of the console business. His exact words for would-be console makers are:

“Entering the hardware business is a really tough business. You have to have great fortitude to be in the hardware business and you have to have deep pockets and a very strong balance sheet. It’s not possible for every new hardware entrant to get to scale.

“They can be successful at small scale. But it’s very rare for a new hardware entrant to get to scale, and I mean tens or hundreds of millions of units. There are a very small number of companies that can make that happen.

“And it’s not just having a great brand or a great software experience. It’s about having a supply chain and a distribution model and a manufacturing capacity and all the things that go with it. It’s a non-trivial problem to solve and it takes thousands of people to make reality.”

When asked if Microsoft would be satisfied with attaining Steam’s level of success with its own cloud gaming platform within two year’s time, Harrison said:

“I admire Valve as a company and what they’ve achieved with Steam. So I wouldn’t in any way criticize what they’ve achieved and the role they’ve played in the industry. But I’m not sure we would choose Steam as a benchmark of success. We would always seek to innovate and push beyond.

“Xbox Live as a foundation, the reach we have and the experience we deliver is a great place to build on.”

Xbox Live currently sees over 40 million users relative to Steam’s 50+ million active users.


via Eurogamer

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7 Comments on Microsoft Warns That The Hardware Business Is “Really Tough”

Axetwin

On January 10, 2013 at 5:37 pm

So the company that charges a monthly/yearly fee for proper access to their service and fights tooth and nail against giving decent sales and discounts on any product people actually want doesnt think Steam should be considered a benchmark for success. Shocker.

Hoffmann

On January 10, 2013 at 6:25 pm

Haha, they’re trying to scare Steam into atleast holding back their investment so they don’t release before the Q3 release of the new Xbox.

Release a modular console – Auto-win

Though at the core of the argument, Microsoft certainly has a point. Just look at Samsung as they get beat up by Apple. Microsoft will barrage them with copyright violations left right and center.

How do you build a console, that has a controller unique enough to compare to xbox and playstation, without infringing? Steam is so popular because porn is just an alt-tab away.

Michael

On January 10, 2013 at 7:11 pm

Its not tough if greed is not involved.
Who the hell are these companies. Nobody buys a console for the hardware. At least I dont.
I buy it for the games. If tomorrow I decide to create a console and tell these game developers that I will only take a small percent cut of the sales of each unit sold they will jump ship. The only ones that have to worry is microsoft because they are not creating games. Sony has pumped out more exclusives than microsoft. True they dont sell over a million units but they are at least doing stuff.

Robin

On January 10, 2013 at 8:15 pm

Might want to proofread that headline. I think you meant “tough”.

R.J.

On January 11, 2013 at 12:27 pm

@Axetwin

Nail on the head, there.

Kevin

On January 12, 2013 at 9:40 am

St. Gabriel of Newell isn’t afraid of his cold company!

The console market is an entirely different beast though, he is correct. But, given Valve’s track record, I’m sure they have already accounted for this, and when the product releases, it will be nothing else if not interesting.

Ebalosus

On January 13, 2013 at 3:22 am

He’s got a point…but here’s the thing: The three major consoles use *propriety* hardware. All three use the POWER CPU architecture (y’know, what used to power Macintosh’s until they very wisely jumped to intel), which outside of commercial applications, aren’t in mainstream computers anymore. A unique processor also means a unique motherboard chipset…which of course, *have* to be propriety. This is why the current generation on consoles are relatively expensive (compared to PCs) to produce.

Combining off-the-shelf components with production optimisation, economies of scale, and a razor-and-blades business model should mean that, in an optimistic world, Valve would be able to out-compete both Microsoft and Sony on the hardware front