The Xbox had to whistle by the graves of forgotten platforms Atari, 3DO
Microsoft knew all about the blades but little about the razors in a gaming realm where console makers realized losses in system sales in order to make them up in software royalties. But Microsoft had an ace up its sleeve to win back the fiscal purists: Xbox Live. For $49, diehard gamers could hook up their machines to high-speed DSL or cable modem connections and be thrust into a new world of online gaming.
Earlier this week, the company announced it has sold more than 250,000 Xbox Live starter kits since its mid-November debut. While one can argue the validity of Microsoft's claims that the tally doubled its internal expectations, it does force the market to reexamine what the Xbox will ultimately grow into for the company.
Sure, that's roughly only 5% of the established Xbox base, but it's a sum that will no doubt grow as more consumers enter the era of broadband and word of mouth spreads through high school halls and office break rooms.
The Xbox came standard with an Ethernet port for eventual online connection, but its biggest asset is a built-in hard drive. You can already feel the Electronic Arts
No inventory. Minimal overhead. It's a return to the plump margins that have spoiled Microsoft shareholders over the years.
Yes, those consoles are costing the company a pretty penny right now, but the future is coming into focus. Fat pipes. Fat margins. The nostalgic din of gluttony is starting to slowly come back into fashion at Microsoft.