First Impressions

My sons had already logged about 5 or 6 hours of gameplay on the new xbox 360 by the time I got home last night. The xbox 360 is clearly better than the original xbox platform. Visuals are similar to a high-end PC gaming platform. Good but not as great as I expected. Perhaps the software guys need a little more time to take full advantage of the xbox 360.

It is an interesting device. First and foremost the xbox 360 is a gaming platform. I’m not sure how successful it will be as a multimedia platform. You can equip the xbox 360 with hi-def interconnects, surround sound digital audio, although no DTS, and a set of other peripherals like remote controls and webcams. You can connect a portable music device, you can playback DVDs and CDs and you can view digital photos. How many people with higher end home theatre environments are willing to do battle with their kids for access to the hi-def screen?

We aren’t. The xbox 360 is plugged into a second TV set with a two-channel audio interconnect.

I don’t see the xbox 360 becoming the centrepiece of my home theatre.

Some interesting background on the manufacturing of the xbox 360.

The Xbox operation is centered at two factory sites in southern China, each run by separate contract manufacturers — Flextronics Corp. and Wistron Corp. — as a hedge in case one stumbles. Also near these sites are makers of many of the parts, from cooling fans to capacitors, and the 30 or so pieces of plastic that form the box. Using local suppliers means a lower risk that parts will arrive late. Local parts also eliminate the need to navigate Chinese import rules.

Microsoft and IBM started production of the processor — the heart of the Xbox 360 — in early July, gradually increasing production over the summer. Those chips now join a parade of other parts flowing to the Chinese factories: hard drives from Japan and Korea; graphics chips that were designed by Ontario, Canada’s ATI Technologies Inc. and come from Taiwan; and buttons for the machine’s controller from Lacrosse, Wis.

In all, 250 suppliers make parts for the machine. Some 25,000 workers world-wide have roles in making either the parts or the Xbox 360 itself, Mr. Holmdahl says. The two Chinese factories started rolling out finished Xbox 360s in August and now push out tens of thousands of units a day.

After each Xbox 360 rolls off the line, it undergoes two hours or so of automated testing and five minutes of manual testing before being packed into a plane or a 40-foot-long ship’s container. Back at Microsoft’s headquarters in Redmond, Wash., Mr. Holmdahl keeps a database chronicling the genealogy of every Xbox 360, including where it was made and shipped and exactly which parts are in it, so that any problems can be traced quickly.

The finished machines move through Hong Kong, then by boat to Chiba, Japan; Rotterdam, the Netherlands; or Long Beach, Calif. Some units reach the U.S. by air freight, landing in either Chicago or Toledo, Ohio. All U.S.-bound Xbox 360s eventually pass through a central distribution center in Memphis, Tenn., where they are packed onto trucks and trains bound for stores run by Wal-Mart Stores Inc. and Best Buy Co., among others.


10 replies
  1. kbartha
    kbartha says:

    I wonder how much negative margin there is on each new unit… the former xbox made $200 in the negative with microsoft hoping to make up the difference in games sales… I got that number (if its right…from memory) from “Best Practice” 2003. Let me see if I have the quote here somewhere….

    “Analysts estimate that every Xbox sold will cost Microsoft nearly $200 in negative margin, but that Microsoft will make up the difference ”“ and ultimately reach profitability on the platform ”“ by selling games, upgrades, and networking services (Best Practice p.273).”

  2. richard cleaver
    richard cleaver says:

    The Bill of Material for the top of the line xbox 360 is roughly $525 in components. You can read the details here. So the cost is already about $126 more than the retail price before the cost of assembly, packaging, distribution and marketing are added to the box-cost, and the retailers’ cut is deducted from the price tag.

    Microsoft’s entertainment division has yet to make a profit. The xbox 360 is a long-term strategy for the company. It is not expected to break-even until perhaps 2007.

  3. Matt S
    Matt S says:

    “The two Chinese factories started rolling out finished Xbox 360s in August and now push out tens of thousands of units a day.”

    And microsoft cut distribution of the unit, why? Obviously creating extra hype!

    I was lucky to get my hands on a unit on release day. Sadly, it will sit beneath the Christmas tree until December 25…lonely and bored (maybe this better describes myself? lol!)

    Some other people who prebooked the console through EB were not so lucky. I feel sorry for whoever was pinned with “making the calls,” as microsoft let retailers know about their distribution cut *after* people had prebooked it.

  4. Stephen Meyer
    Stephen Meyer says:

    Between my brother’s and I we have owned quite a few gaming consoles over the years: the first nintendo, sega genesis, playstation (two at one time actually), SNES, N 64, Xbox, not to mention sega’s gamegear, different gameboy releases… The list goes on. Point being, I have never even heard of an Apple Pippin. What on earth were they thinking? I find it interesting how they marketed it as a “inexpensive computer” and it didn’t work out. Now you see Microsoft, as you mentioned, marketing the Xbox 360 as a center for home entertainment. I saw one ad where they were pushing a similar idea except in conjunction with an HP entertainment network. I spent a year selling these products and I’ll tell you; there is no way they are going to be able to sell this type of market.

  5. Michael
    Michael says:

    They are not holding back .. Robbie Bach (Head of M&E division) is forecasting sales of 3M units in the first 3 months, and it is being launched in NA, Europe and Asia all at once (December in Europe, Feb for Asia).

    3M units at say 20,000 units per day … that is August, September, October, November and December production .. to be spread out across 3 geographies. Plus, a few articles make it clear that they are not keeping logistics costs down – they are air shipping (Way more expensive on a 747 than on a 3 week boat trip).

    A source tells me the next drop is Tuesday (smile).

    It would appear to be the Cabbage Patch doll or Tickle Me Elmo of 2005 (LOL). Tickle me Microsoft.

  6. Josh
    Josh says:

    After having enjoyed the 360 since last tuesday I have been hearing various comments from people in my school about the 360 being recalled, power cables catching on fire, games getting melted, fried, shattered, etc. One even told me that all of the 360s break all disks (new and old games) that are put inside. Personally having logged….. a few…. hours on the machine for my fourth day today I have not seen this problem and will assume, if it is true, that the incidents are isolated and will continue entering into gaming bliss.

  7. Rod
    Rod says:

    Here’s a comment from Microsoft on the problems some are having…

    “It’s a few reports of consoles here and there not working properly,” said Molly O’Donnell, a spokeswoman for Microsoft’s Xbox division. “It’s what you would expect with a consumer electronics instrument of this complexity …. par for the course.”

    Amazing! “par for the course”… that’s so sad and SO MICROSOFT!


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