Microsoft only entered the console business to “stop Sony”, according to Joachim Kempin a former vice president of Windows Sales at Microsoft.
In an interview with IGN, Kempin, who worked for Microsoft between 1983 and 2002, said “The main reason 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.”
He claims, the decision came directly from Bill Gates himself, Gates always had qualms that the living room computer would, at some stage, metamorphosise into an alternative PC that could threaten Microsoft’s dominance of the traditional market. As a result, it was eventually felt the company had to try and tackle Sony head-on.
He 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. 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.”
Kempin says, “Microsoft never really managed to nail the whole software-supplementation thing, with Halo ending up as the only exclusive software franchise they could depend upon. This meant in the end they had to look elsewhere.”
“There are actually two things,” he added. “First, every developer who now has an Xbox game pays a small royalty to Microsoft for the honor 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.”
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