Microsoft, Xbox, and One Small Mistake: Loss of $1 Billion

Microsoft, Xbox, and One Small Mistake: Loss of $1 Billion

Microsoft Corporation (NASDAQ:MSFT) needs no introduction as it is one of the oldest players in tech space and dominated the industry undisputedly for almost two decades when it comes to valuation. However, the enormous public image comes with great responsibility. While Microsoft’s have added many feathers in its cap over the years, it’s their blunders that generate more attention.

Whopping $1 billion is the amount the company lost due to a mistake it made with one of the successful products. And, it all started with the launch of Xbox.

At the beginning of the Millenium, Microsoft forayed into the gaming console market with its brand Xbox. The sub-brand debuted towards the end of 2001 with the Xbox gaming console. This was a first in the American gaming market after the only other American company offering consoles discontinued their product in 1996.

The first generation of the Xbox sold well and created the potential for expansion. 4 years later, in 2005, the Xbox 360 was launched, marking the beginning of the second generation of the gaming console.

The market was competitive with the likes of PlayStation and Nintendo Wii, both well-seasoned gaming brands, as competitors that were also working on launching a new generation of their products.

Microsoft, however, managed to release the Xbox 360 a year before its competitors due to successful test runs.

The Red Ring Of Death: A Major Setback

Despite a successful trial period, the consoles presented a widespread problem once they had been in the market for a few months.

Many users reported running into the “Red Ring of Death” (RRoD) which appeared around the console’s power button after which the console would shut down and not start back up.

In his book, “Xbox Revisited: A Gameplan for Corporate and Civic Renewal,” Robbie Bach, the then head of Microsoft’s Entertainment & Devices Decision, opens up about how the company dealt with this problem.

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