Xbox Isn’t ‘a Big Money-Making Machine’, Microsoft Entered Console Market to ‘Stop Sony’

A former Microsoft executive, Joachim Kempin, who worked as the VP of Windows Sales at Microsoft between 1983 and 2002, has claimed that the Redmond based firm entered the console market “mainly to stop Sony.”

In an interview with IGN Kempin commented:

“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.'”

The former executive states that Microsoft were concerned by Sony’s extensive presence in the living room at the time and that they felt their ‘dominance of the traditional [PC] market’ would be eroded by the convergence of consoles and computers.

Claiming that neither the original Xbox or the Xbox 360 is a “big money-making machine for Microsoft” Kempin visited several PC makers to try to convince them to make a console on their behalf.

“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,” Kempin continued.

“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.”

“There are actually two things,” he added. “First, 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 breakeven, that’s all there is. This is not a big money-making machine for Microsoft,” he concluded.