Steve Clayton does two things. One, gets a video of Hugh Macleod “ScobleShow style.” Hugh writes those cartoons that everyone loves to hate or hates to love or something like that. Me? I love them and can’t wait to hang out with Hugh in London next week. Two: gets me to try out Microsoft’s new Soapbox player interface. Looking good! But what’s up with the 4:3 format? Go 16:9 Microsoft and let’s get rid of the old video format and make it look just as lame on the Web as it does on my HDTV screen at home.

We have Betsy Aoki, the BlogQueen of Microsoft. We have Hamid Shojaee, CEO of Axosoft (really cool bug/issue reporting system), And we have Adam Gross, vice president of Salesforce. All on ScobleShow today.

More geeks tomorrow (oh, and another Photowalking!)

Two years ago I was over talking with the Xbox team and some of the folks over there explained the facts of life to me, which came back to me after reading that Bill Gates is very happy where he is right now. They were explaining why they were in a race with Sony to get the Xbox 360 done before Sony could ship its unit. At that time they expected Sony to ship at the same time as the 360.

They told me how console business works and why you need a console on the market for four years to make money.

Why?

1) Cost for the unit declines over time and you need that fourth year for Moore’s law to really kick in.
2) Attach rate (er, games sold per console) goes way up in fourth year.

They told me that’s why Xbox 1 lost so many billions of dollars.

The two graphs:

First year, you’ll lose $200 per machine (Sony is supposedly losing $300 on PlayStation 3).
Second year, you’ll lose $150.
Third year, you’ll lose $100 (although price will probably drop too).
Fourth year, you’ll lose $25 to $50, or if market conditions are good, you might even break even.

That’ll be offset by what the industry calls attach rate.

First year attach rate? Xbox is seeing something around eight games, if I remember right, and a pretty good run rate on Xbox Live, too (I’ve bought eight Live games, for instance, in addition to the seven games I have sitting at home).
Second year will see an additional three to four games. Each game is worth somewhere around $10 to $20 worth of revenue (out of a $60 game, I’d guess $20 goes to retailer, $4 goes to distributor, $20 goes to game manufacturer, and rest goes to Microsoft for licensing fees). So, to recoup that $200 lost on each console Microsoft needs to sell something like 15 games.
Third year, another three to four games (maybe more, cause by then there’ll be a huge market of consoles and game manufacturers will have built efficiencies so can kick out new games faster.)

So, if you have your console for three years, you’ve probably bought the 15 games that Microsoft needed to sell to break even. What happens in the fourth year? You buy games #16, #17, #18 and Microsoft (or Sony) starts making huge profits.

The Sony Playstation 2 is on its fourth/fifth year right now, which is why that’s a cash-generating machine. Xbox 1 never got more than three years, which is why that lost billions.

It’ll be interesting to see whether Sony can break this cycle and get more games sold per box (if Sony really is losing $300 per box it sells, it needs to see an attach rate that’s higher than Xbox to have any chance of breaking even).

So, why did Microsoft make this bet? To keep Microsoft’s foot in your livingroom. As more and more people get HDTVs that foot is going to be mighty important.

What do you think?

Having Christopher Coulter is paying dividends already. I have four videos up today:

An interview/tour with Trulia’s CEO (that’s a real-estate Web 2.0 site).
A demo of Trulia done by its CEO.
A Channel 9 style meeting with the Microsoft team that handles all the crash data from Windows. If you’re an ISV you’ll want to watch this one.
An interview with “tech momma” Sue Polinsky.

It’s the ScobleShow. Us Scobles have been busy! Doing our best to fill up your hard drives with interesting stuff. Oh, now I understand why Seagate sponsored my show.

So, what should I do with the two Zunes today to test them out? Well, I didn’t open them last night. This morning I came in and brought them to an interview at Retrevo where we opened them for the first time and then spent more than an hour playing with them and passing them around the engineering team and talking about the first impressions of the Zune. Retrevo is a gadget search engine that’s pretty interesting. They say it’s the ultimate consumer electronics search engine.

Here’s their engine’s result set for Zune.

There’s eight guys from the Retrevo team including engineers, marketers, and the CEO, Vipin Jain.

First off disaster. The one Microsoft loaded had an error on it and needed to be rebooted, which deleted all the content on it. (One was opened and loaded by Microsoft with more content, that one arrived with an error on its screen. The other one, unopened by Microsoft, worked perfectly).

We fixed that and then started playing. The install took more than 15 minutes.

What do the geeks at Retrevo think?

Andrew Eisner (who used to be in charge of testing for ZDLabs and also ran MacUser labs) says that the radio wasn’t very good. Needed to walk over by the window to use it. But, that’s unscientific.

The entire team has iPods. So, this is an experienced music player group. The team says they are all gadget freaks, which is why they work at a gadget search engine.

Other reactions?

Box? The external box is great, Charles Wilson says.

The feel of the Zune? Great. “Brown is the new black,” Matthew Stotts says. We have one brown and one black. It feels a lot nicer than it looks on the Web. Nice anti-scratch design. “I like the translucence,” Charles says.

Interface? Scroll wheel? Matthew says he instantly tried to use it like an iPod. Was disappointed that it didn’t work.

Volume? Andrew says that the volume didn’t go loud enough.

Music sharing? They are playing with it right now. Figuring out how to send it took a few minutes. Actually sending a song took less than a minute. “It’s quick,” Charles says.

Screen quality? “Pretty good,” says Kirk Chen. “Nice looking,” Andrew says. “Better than the iPod,” says Jiang Wu. “For cartoons this screen is great,” Jiang says.
Smudging (we’re eating pizza). “No smudging,” Andrew says.

Overall feature set? “Doesn’t seem like there’s much to it,” Andrew says, which starts a discussion of what else the team would want. Games.

Video? “Not bad.” Being able to spin the screen is a nice touch Vipin says. They note that my videos that I’m filming won’t be able to be played (I record in Quicktime). On the other hand, my videos don’t currently work on iPod either (I need to re-compress them for the smaller size and format that the iPod needs.

Case? “Sensual feel,” Charles says. It’s a soft bag.

Sharing of video? Doesn’t work yet.

Andrew notes that you can’t record from radio. “Other MP3 players let you do that,” he says.

“How zune will it be hacked?” Andrew says. “If people can write third-party applications for it then you’d see people writing open-source browsers and other applications.”

Battery? Can’t be replaced and the case isn’t designed to be opened (at least that we could figure out).

We couldn’t test whether or not a ripped MP3 could be shared.

Andrew wonders how it works with podcasts (he listens to TWiT and NPR, among others).

Ruggedness? It seems more rugged, Vipin says.

Overall impression? “I don’t like the bulkiness,” Vipin says. “If I were a pre-teen or teen and I didn’t have an iPod, I’d buy this. Mostly for the sharing features,” Matthew says. Overall, though, the team gave it thumbs down compared to the iPod. But, not a strong thumbs down. It did — at minimum — intrigue them.

If you don’t know what OOBE stands for, that’s “Out Of Box Experience.”

Yesterday I was at Dave Winer’s house and got an early look at Confabb, a Web 2.0 site that just opened this morning.

Since I’ve been involved in planning, attending, or speaking at dozens of conferences and expos and other events this was very interesting to me.

In a few minutes I’ll have a demo and interview with founder Salim  Ismail up on ScobleShow. UPDATE: the interview is up (latest Quicktime required). By the way, that was done on Dave Winer’s “RSS couch.” Demo coming shortly is up now.

Is this a cool demo? Nah, not like last week’s Photosynth. Will it put Microsoft out of business? Nah. But is it something that you will probably use? I think so, at least if you’re going to go to a conference.

I’ll definitely use it to update the CES 2007 site on Confabb and add mention of our BlogHaus, which will be in the Bellagio there (Seagate, Microsoft, and AMD are sponsoring that).

Of course TechCrunch has a mention of it up already.

Heheh, Mary Jo says she’s going with Bill Gates and smacks me back into my corner.

I’m sure it drives many of the geeks crazy in the industry that so much attention is being paid to four little notes. The Associated Press has the story — nice to see Steve Ball get some attention, he’s one of the truly great guys at Microsoft. But, I find it fascinating. I wish I had the videotape I did of Robert Fripp in Microsoft’s studio. But it’s in a big box somewhere inside Microsoft.

Hugh Macleod: the Microsoft question.

Thanks Hugh for the overly kind things you wrote about me.

Truth is, I’m still interested a lot in Microsoft too.

I read both blogs.msdn.com and blogs.technet.com and other Microsoft blogs every day.

Why?

For many of the reasons that Hugh talks about.

The people I met there are, for the most part, top notch.

To me, that alone makes them interesting to watch, no matter what happens.

Yeah, I’m a little more ascerbic toward my former coworkers than I was when I was there (that’s normal, I think) but part of that is just hoping that they break out and do something amazing.

Translation: I’m still holding my meager cache (a few hundred shares) of Microsoft stock.

Tomorrow at noon Pacific Time a new company will be born. I have video with the CEO coming to ScobleShow. But what was remarkable was just how much was built without spending a single dollar.

This isn’t the first time I’ve heard an entrepreneur tell me that they built a business with zero, or almost no, money, by the way.

This is another thing that Bill Gates doesn’t understand and will have deep implications for everyone. After all, Bill is still struggling to compete with free software.

Now he’s going to have to compete with free companies (or, more accurately, micro financed ones).

By the way, the service is cool and I’m going to use it a lot. It doesn’t have a killer demo like the photo thing that Microsoft showed off last week but it is useful for many of us, which is good enough.

More tomorrow after I get released from NDA at noon.