ABSTRACT
The Microsoft investor could not believe the news. Seven years after entering the video game console business, Microsoft was still losing money in its video game business. Its Xbox, launched in 2001, had lost billions, and the sophisticated Xbox 360 did not appear to be making much money. Sony’s even more sophisticated PS3 was also losing money. In contrast, demand for the Nintendo Wii had been so strong during the 2007 Christmas season that Nintendo had been forced to issue rain checks to customers. In fact, it was not unusual for eager Wii customers to pay prices well above Nintendo’s suggested retail price of $249 in live online auctions. Why had the Nintendo Wii performed so well? Why had Microsoft done so poorly in video games? Why had Sony started doing so poorly following its initial success in video games? The Microsoft investor wondered if Microsoft had learned from the Nintendo Wii.
