According to a former Microsoft exec, Microsoft
entered the console market because Sony refused to work with the company. Joachim Kempin, who was VP of Windows Sales
at Microsoft for 20 years starting in 1983, made the claim in a recent interview with
IGN. When asked why Microsoft decided to enter
the console space, he asserted that, “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 did license Windows for its PCs, but
Kempin says the two companies were never friends. But Microsoft wanted to cooperate because
Sony was, in part, an entertainment business — an area outside of Microsoft’s expertise. According to Kempin, as soon as Sony released
the PlayStation, Microsoft said, “We have to beat them.” Bill Gates himself was apparently worried
that a “living room PC” could eventually threaten Microsoft’s traditional market.
As a result, Gates and Microsoft felt they had to try and tackle Sony head-on. With hindsight we can see this worked out
well for Microsoft, but there were many roadblocks encountered along the way. Kempin explained
the main problem that still exists today is the huge loss made on hardware manufacturing.
This means companies like Microsoft and Sony are reliant upon software sales to make a
profit. Having witnessed Sony experience this issue
at the time, Kempin went out in pursuit of a PC manufacturer willing to take on the burden
of making the Xbox in an effort to spare Microsoft the financial apocalypse that accompanied
it, but was unsuccessful. He recounts, “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 continues: “Every developer who now
has an Xbox game pays a small royalty to Microsoft for the honour 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 break even, that’s all there is. This is not a big money-making machine for Microsoft.” What’s interesting about this story is that
Sony got into the console hardware market for similar reasons. Sony had been working
with Nintendo on an attachment for the Super Nintendo that would play games off CD. But
when Nintendo canceled the agreement unexpectedly, Sony
decided to soldier on alone and released the PlayStation. For all your video game news, stay tuned to