Why Microsoft Should Absolutely Sell Off Its Xbox Business
When I heard this morning’s news about Microsoft CEO candidate Stephen Elop (former Nokia CEO) wanting to kill Bing and sell off the Xbox division I immediately thought that killing Bing was a good idea (and I’m sure most agree or just don’t care either way) because all it does is burn money, but I was a little conflicted on the proposed plan to sell the Xbox division of the company. However, the more I thought about it, the more I think it makes sense for Microsoft to sell Xbox and become a leaner more-focused company.
Why Microsoft Should Sell Off Xbox
Many people will say that selling off the Xbox business is totally a bad idea, but in the long-term it’s really not a bad idea at all. I’ll explain. Microsoft is coming off a great high with Xbox 360, which has been its console since November 2005. The Xbox 360 sold extremely well, selling 79.4 million units worldwide as of September 30, 2013, crushing its predecessor (Xbox) which only sold 24 million units worldwide. Sony’s PlayStation 3 by comparison sold 80 million units as of November 2, 2013 (so the two consoles are neck and neck). This is pretty impressive for a company that only got into the gaming industry around a decade ago. By selling the Xbox business coming off this great run with the Xbox 360, Microsoft will be able to get top dollar for it.
As our own Brian Rubin pointed out in his post earlier today, “Entering the console market cost a lot of money, and considering the ever-shifting tastes and opinions of gamers, it’s hard to keep the bucks flowing consistently. With every new generation of game hardware, consoles are sold at a loss, with the money made up in game sales, accessories, and add-ons like Xbox LIVE service. Over time, as the console’s install-base grows, the cost of manufacturing drops, and the profits start to go up. The company has recently said that its newest console, the Xbox One, will either break even or make a profit—but right now it’s gambling by sticking a $500 price tag on the machine.”
Sure the Xbox One could do just as well as the 360 or perhaps even better, but what if it doesn’t? Microsoft is already at a disadvantage on price point. The PlayStation 4 retails for $399, while the Xbox One retails for $499. Additionally, Microsoft blunders prior to launch have upset gamers and potentially steered them away from the console. Then what happens if the Xbox One does terribly in the marketplace? Will Microsoft continue to burn more money on it or will they now have to sell the business for a much reduced price?
Regardless, even if the Xbox One does do well, Microsoft should still sell it off — and sell it off as soon as possible. The company clearly has lost its focus and it needs to regain it to continue to exist. Focusing on Microsoft’s core competencies is a great place to start. Those core competencies being software. That’s how the company started, that’s how the company found its success in the past, and will likely be how it finds success in the future.
So if you ask me, shutting down Bing and selling off the Xbox business sounds like a good start to what will be a major revival plan.
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