Monday, May 20, 2013

For Microsoft, life's a game!

When it comes to Microsoft, I am often conflicted.  As an IT practitioner and leader, I've lived with them since the early 1990s.  They have at times innovated and are responsible for technologies that run much of the world today.  Yet, Microsoft is living on past glory with their Office and Windows products.  Over the past five years it is hard to point to much of anything that Microsoft has done well.  Let's take a look at some of their recent efforts:

Given the three points of information above things must be pretty bleak for Microsoft, or so you'd think?  Maybe not.  Last week Bill Gates once again resumed the title of "World's Richest Man" with a net worth of just over US$72 Billion.  Since Gates' fortune is tied to the value of Microsoft stock I went out and checked its progress after reading about his renewed fortune last week. The stock started the year around $26/share but has now soared to $35/share as of today.  That's a surge of almost 40% in just four months.  For all the talk of Apple, Google, and even Berkshire Hathaway, Microsoft's stock has just crushed them this year in terms of performance.

The big question is WHY?

It all comes down to passion, emotion, and the human connection to technology.  The fact is that people will always pay more often and more freely for things that excite and entertain them.  You need look no further than Las Vegas to confirm that fact.  It's also why a person will gladly pay $3 for a 12 oz. beer consumed at a sports bar but complain about having to spend the same amount on a 128 oz. gallon of milk. 

Based on my assertion that people pay more for entertainment, one should not be surprised that an average console video game costs about $60.  That seems like a lot of money and in fact is a hefty sum.  But people just don't seem to care based on purchasing habits.  Here are two pieces of information that will surprise you.
  1. In 2012, the total box office gross for all movies shown worldwide was just about US$28 Billion. (http://www.boxofficemojo.com/yearly/chart/?view2=worldwide&yr=2012)
  2. In the same year, 2012, the total worldwide revenue for video games was a whopping US$68 Billion.  Games represent the fastest growing component of international media of all types. (http://vgsales.wikia.com/wiki/Video_game_industry)
So why is Bill Gates smiling and Microsoft surging?  The answer is simple: tomorrow on Tuesday, May 20, 2013, Microsoft is set to unveil it's next version of the XBox.  From the inception of the XBox, Microsoft has sold about 66 million consoles (http://www.vgchartz.com/article/250111/2012-year-on-year-sales-and-market-share-update-to-april-21st/ ) and that number will explode with this next, newest iteration.

Microsoft knows that the future of computing will always include a space for operating systems and productivity.  That's why the Office suites and various versions of Windows will keep coming out.  But the true future revenue growth is going to be driven by games.  Since they are just about to beat Playstation to the punch by being first to market, Bill Gates and Steve Ballmer will be counting their billions for years to come.

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