But again, they're predicting profit margins of around 25% by 2017, and yet again, this is a business strategy looking over several decades. They were both prepared and expecting to make a loss to begin with.

In fact, according to figures, the profit margin for the Xbox division is expected to exceed the margin for their server/SQL division by 2017. Does that mean they're going to pull out of server software too? Software...for the manufactured hardware. The Xbox Divison is the only division of MS that has a manufacturing process (IIRC all their mice,kbs etc come under that now too). Manufacturing has a lower profit margin than pure software. I thought that would be obvious.

MS takes a fee from anyone who publishes games on the xbox. That is also the true source for the operating profit. The selling of the xbox device is done at a loss. As it is always with consoles.

Well, the selling of the Xbox is done at a loss to begin with (hence loss leader), but even the hardware itself is making profit now - http://www.techspot.com/news/23612-microsoft-makes-tiny-profit-on-xbox-360-hardware.html

The big losses of the division come from R&D and initial production. Again, it's a long term strategy.

But the consoles are already old in technique etc.
Compare them to a new pc......
So how can this be a long term strategy. Do you really believe the actual xbox will be around 2017 ??

Irrelevant. As the Wii has shown, raw power and new tech mean absolutely nothing. I expect they'll still be making profits off it, yes. Just like the 12 year old PS2 is still doing business - http://www.electronista.com/articles/11/02/03/ps2.sales.surpass.150.million.in.11.year.run/

I'm no longer sure what point you're trying to make. The long and short of it is that the Xbox Divison is profitable and growing, and shows no signs of crashing or MS pulling out.

What my point is ?
Why did they start it in the very beginning ?
Since it is not core business for MS. The margins are far too low in comparison to their core business. Why then waste time and energy on it ?

Because they want to position themselves as the entertainment centre for homes. For the fourth or fifth time, this is a strategy plan for 20-30 years.

Again I point out to you that the profit margin for the Xbox division is forecast to exceed the profit margin for the Server/SQL division within the next 5 years.

Because MS aren't dumb enough to be a one-trick pony. The more divers they are they higher the chances of (1) getting more money, (2) not going under in case of a major shift in one of their core areas and (3) allow easier expansion into new markets.

Microsoft are terrified of being another IBM, i.e. having their core market eaten away by alternatives. IBM did a good job of re-positioning themselves in the 90's, and Microsoft is trying to do the same while it has the income to let it do so from Office and Windows. They were slow to realise what the internet would mean for platform independence and the resultant loss of importance of the operating system and even their Office products. Microsoft are tied into Intel's x86 (and x86-64) architecture, and are scared that in 30 years time they won't have a viable business model. This is why they are moving towards multi-platform (i.e. .NET) and internet applications (e.g. Skype). Oh yes, and Windows 8 working on ARM architecture :)

If Steam was the only provider of games, I'd say you have a point.

But they aren't. You can get games other ways.

Now, I have limited time and I have limited cash.

The number of games I'll play will be limited and there will be some great games that I'll never play.

So it comes down to purchasing philosophy.

I've been doing that forever: I never get infatuated with a particular upcoming title.

Rather, I look at what is affordable first and then I lookup the games to see what is good (in essense, I make up my mind at purchase time).

It's not as much about THE GAME as it is about A GAME for me.

So with this approach, why shouldn't I give Steam the cold shoulder when there are some good games left to play elsewhere?

I've been doing it to consoles for over a decade now.

Agreed 100% with what Magnitus said. I don't buy Valve games and refuse to buy any non-Valve game that requires Steam. A philosophical position, to be sure. But it works for me. I have a huge backlog of games I need to play and I have no troubles finding others to buy. My foot's just fine. :)

My foot is also just fine and i can skip ALL DRM games. You do not need games to survive; they are not like water.....

They do.

Shhh!

*watches Arrowhead put an EULA on all their bottles of water*