Monday, June 25, 2007

Console Post of the Week: When Stupid Collides

Dean Takahashi had an interview with Todd Todd Holmdahl, Microsoft’s corporate vice president of Gaming and Xbox Products Group.

In it, Holmdahl managed to singlehandedly create a giant Hadron collider of stupid, with stupid smashing into stupid at incredibly high speed.

Let's take a look. Stupid particles, in this case, has a telltale "A" marker.

Q: I’m sure you’ve seen some of these complaints that we’ve written about from the guy who went through seven machines... There is a lot of anecdotal evidence that the quality of the Xbox 360 isn’t there. How can you paint the bigger picture for me there?
A: We’re very proud of the box. We think the vast majority of people are having just a great experience...They love the box. They continue to buy the box.

Q: Do you still say that is a normal return rate for the console?

A: We continue to say the vast majority of the people are really happy with it.

Q: I’ve heard varying accounts of what is considered a normal return rate. Some people say that 2 percent is normal. Sometimes 3 percent to 5 percent is considered normal. Back to that question, can you address whether you are within those rates or within a normal rate.
A: We don’t disclose the actual number.

Q: What explains this anecodotal evidence that it’s out of whack, compared to the Wii or the PlayStation 3 or other consoles.
A: I would go back and say the vast majority of people love their experience.

Q: If you have a high defect rate, won’t that ruin the business model? Won’t that ruin the profit?
A: I would say we don’t have a high defect rate. The vast majority of people are really excited about their product, and that we are targeting profitability for next year.

Q: Your returns as a category. Is there any No. 1 reason for a return?
A: There are no systematic issues. The vast majority of the people just love the product, have a great experience with it.

Q: Was there any issue here where I didn’t ask it the right way but you could say something.
A: The overriding thing, Dean, is that people have the product, they love the product, it continues to sell well.

Hey, I don't know where I got this idea, but the vast majority of people seem to love the product.

For God's sake, does Holmdahl have some sort of alien creature inside him, systematically eating his brain? And with the pecan-sized mass he has left, all he can do is mumble "the vast majority of people seem to love the product" as drool runs off his chin?

Even as I make fun of Holmdahl, though, I know it's not really his fault. He's just parroting the talking points given to him.

I respect how hard Takahashi tried to get Holmdahl to answer the question about failure rates. And after Holmdahl refuses to answer the question six times, Takahashi's point is made: clearly, the 360 is a reliability disaster.

This issue has turned into a PR nightmare for Microsoft. At this point, I wouldn't be surprised at all if the real failure turns out to be 15% or higher. That's an incredible number for a console, far higher than any console in history, but Microsoft's spectacular stonewalling seems to be pointing in the direction of a very high percentage.

Plus, and I think this is very telling, Microsoft isn't using the obvious answer. The obvious thing to do would be to admit that there were issues at launch, but that reliability was no longer a problem. That they're not saying that means the reliability for systems made last Tuesday must not be significantly different than the launch systems.

Here's some irony for you: the switch to a 65nm verion of the CPU and GPU may go a long way toward solving Microsoft's problems, but most consumers won't understand that. Once this "unreliable" tag sticks, it's going to be very, very difficult to make it go away.

When people are talking about your reliability instead of your games, it is very, very bad news.

Microsoft did have some good news this week. Trusty Bell: Chopin's Dream (which is coming to the U.S. with the title Eternal Sonata) sold over 45,000 copies last week and was the #2 selling game in Japan. Even better, the 360 almost outsold the PS3 in Japan last week (7,583 for the 360, compared to 9,481 for the PS3).

Here's something to boggle your mind: not only is the Wii crushing the 360 and the PS3 in Japan, but it's outselling the combined sales of the 360 and PS3 there by almost 4-1.

Sony made up some good news this week--they're releasing 380 games worldwide by the end of the fiscal year in March. That's a completely fabricated number, obviously, and sounds very similar to the outlandish claim they made for Blu-Ray titles last year, but the press immediately beat the drum and said hooray!

Speaking of Blu-Ray, Blockbuster announced that after evaluating the results from the 250 pilot stores involved in their high-definition DVD rollout, the only high-definition discs they'll be renting in their 1,450 stores will be Blu-Ray. HD-DVD discs will still be rented in the stores involved in the pilot program.

The HD-DVD camp tried to spin this by saying Blu-Ray titles were more heavily rented because more of them have been released this year, but that's an indictment of HD-DVD, not a defense. If they don't convince more of the major studios to support both formats, their manufacturing cost advantage won't matter.

I raised this as a possibility several months ago, that Sony might be willing to sacrifice the PS3 as a gaming console in order to ensure that they win the high-definition DVD format war. And so far, that's what appears to be happening--failure as a gaming machine (much larger market), but successful in tilting the format war in Blu-Ray's direction (much smaller market).

Oh, and here's one last thing (sorry for hopping back and forth): Microsoft scratched a check for $50M to Take-Two for episodic GTA IV content. Two pieces of episodic content. I would have far preferred they spend that $50M on, say, engineering, but this is just the opening salvo in what is going to be a very, very interesting six months.

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