Robbie Bach @ X05

[Paco]

Here is the link: http://www.gamesindustry.biz/content_page.php?aid=12103

Nothing all that interesting, but I wanted to bring this up for ABF...

How do the Xbox and the Xbox 360 compare in terms of manufacturing costs and subsidies?

They're quite different. Let's just put it that way.

Basically, Xbox was done, as I said, in 18 months. We used a lot of off-the-shelf parts, which was required to get the product to market in time and made it easy for developers, so that was good. The challenges over time have been that it's tougher to cost-reduce the product. We couldn't combine chipsets - we actually couldn't change the chipsets at all, because they weren't ours. NVIDIA and Intel were just producing the chips and then supplying them to us.

So there wasn't anything we could do to combine chips, or merge the silicon architecture - and that's where the huge amount of cost reduction actually comes from. You know, in hard discs and DVD drives, there's actually not that much cost reduction that happens. There are physical laws - a spinning platter costs so much, and there's very little you can do about that.

In this generation, we actually manage the intellectual property for our chipsets ourselves. We have the capability to combine those chips, to redesign them, to cost-reduce them - and so this will be a far more cost-effective product from a manufacturing perspective. The beginning of a cycle is always high cost, but that will go down in a more straightforward and predictable fashion on Xbox 360 than it did with Xbox.

...

Is that something that happened with Xbox? Have you ever hit a break-even point on hardware costs against sale prices?
In the hardware, I think we've said pretty consistently that the hardware has been subsidised throughout the life cycle of the product. Again, part of the design for it was that we had to make an investment to get into the marketplace; we had 18 months. We didn't design the hardware to be a break-even endeavour over the life cycle, we designed it to be the most powerful console, and to have an impact.

We think it did that successfully, and it just required us to fund that. Now with Xbox 360 we have the opportunity to make that investment pay off.

I just wanted you to see I wasn't making all that stuff up about Microsoft having changed things up concerning the hardware and cost-reduction.

Cheers:)