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"Yes, XBox 360 sales faired much better over the summer, but we will have to wait and see if this indicates a sustainable trend or a blip."True, but I firmly believe this trend will be further cemented by Kinect. The amount of marketing and public awareness of the product is incredible (and damn well better be given how much marketing force MS is applying), and having used it myself I firmly believe this will be a bigger hit than the Wii. Sales compared to the Wii will be tempered by the higher price point, but overall public opinion will go towards it - and IMHO that's going to cause a sizable drop in Wii sales.
> "In the fiscal year 2010, Microsoft's Entertainment and Devices Division (which includes the Xbox 360) generated $8.5 billion in revenues and just $679 million in operating income. Considering Microsoft's consolidated operating income in 2010 was $24 billion, this $679 million represents only about 3% of Microsoft's profits."
Agreed. It's unlikely (if not outright ridiculous) that the Xbox will ever be a primary revenue driver for MS to the same tune that Windows and Office are. Even if MS owned the entire console market it still wouldn't be the case.
My point though, was that as far as their consumer products go, the Xbox team is the only one demonstrating any appreciable success - building products that are not only well respected in-industry, but outright loved by their customers. That's a level of success, vision, and loyalty that MS has never shown anywhere else in the consumer space. They've also demonstrated a willingness to toss out things that don't work and start anew (see: the new Dashboard UI that replaced the Blade UI). Heck, they're the only MS product out there that shows any real focus on the user experience - Windows is a damned joke in that regard. The success of the Xbox holds a lot of key concepts that the rest of MS must adopt it it wants to survive in the consumer space (and that includes home computing /w Windows)
> "Ultimately, the Xbox 360, the PS3, and the Wii may be irrelevant given the emergence of connected televisions, thin devices, and cloud-based gaming."
Possible, but IMHO unlikely. Consumers are very price sensitive to commodity items, and TVs are just that. Current connected TVs offer an incredibly poor user experience (I have one), and I don't see it getting much better anytime soon.
Software is not a demonstrable strength of the likes of Samsung, Sony, etc, and the level of hardware required to give a proper user experience adds significant cost to the set - something that IMHO consumers will select against.