Microsoft Vs. Sony Enters New Stage In Video Game Consoles
biz.yahoo.com
Friday November 18, 7:00 pm ET ; by Patrick Seitz
Microsoft's grand plan to take the lead in the video game console business from rival Sony gets under way Tuesday when the software king releases its next-generation game machine -- the Xbox 360.
Microsoft (NasdaqNM:MSFT - News) is counting on its head start over Sony's (NYSE:SNE - News) next console, the PlayStation 3, to give it an edge this time around. PS3 won't hit the market until next spring.
The Xbox 360 goes on sale Tuesday in North America, Dec. 3 in Europe and Dec. 10 in Japan. The company expects to sell up to 3 million consoles in the first 90 days.
Sony hasn't said how it will launch the PS3. If Sony follows the staggered regional rollout it used with PlayStation 2, the PS3 might not hit stores in North America until next fall, roughly a year after Xbox 360.
Analysts say Microsoft's head start in the next-generation video game console race is a huge advantage.
"There clearly is a first-mover advantage to getting into the market, particularly if you can get in during the holiday season," said Michael Goodman, a Yankee Group analyst.
Come holiday season 2006, when the consoles go head to head at retail, Microsoft will have a deeper roster of game titles and could be in a position to cut its price, he says.
Plus, a year from now, software developers will have figured out how to make the most of the Xbox 360 platform, he says. That should translate to better visuals and game play. Meanwhile, developers for PS3 will still be on their first round of software. (See related story, A6.)
But Xbox 360 consoles will be in short supply this holiday season.
Online pre-order programs sold out quickly, even for high-end bundles. Retailer GameStop (NYSE:GME - News), for instance, sold out of its $2,000 Omega bundle, which included the $399 Xbox 360 premium pack, 20 games and a bunch of accessories. It even sold out its $4,500 Omega bundle that included a 42-inch plasma TV from Dell (NasdaqNM:DELL - News).
Microsoft is selling two versions of its Xbox 360. The cheaper Xbox 360 Core System sells for $299, but lacks a hard-disk drive and key accessories such as a wireless controller and headset.
Analysts say the core system is a way for Microsoft to advertise a low starting price. But without the hard drive, Xbox 360 players can't use the Xbox Live online services or play certain games.
Microsoft will expose mass-market consumers to its device. It has set up displays in retail chains such as Best Buy (NYSE:BBY - News) and Wal-Mart (NYSE:WMT - News).
Microsoft will use advertising and promotions to create buzz for the Xbox 360 going into next year.
"Their main goal this holiday season is to get people looking and talking," said David Cole, an analyst with DFC Intelligence. "A lot of people aren't going to be buying this holiday season. Next year, they will have saved up their money and will be ready to make that purchase.
"You've got to build that mind share, and then you complete the purchase later on." At stake for Microsoft is a larger share of the $28 billion worldwide video game market.
Sony has led the video game console business the last two tech cycles -- first with the original PlayStation, then with PlayStation 2.
PlayStation 2 debuted in March 2000 in Japan, but didn't arrive in the U.S. until October that year.
Microsoft bowed its original Xbox in November 2001, starting in North America.
Worldwide, Sony's PS2 is tops with 89 million consoles sold.
Microsoft's Xbox is second with 23.7 million and Nintendo's GameCube is third with 20.6 million, says International Data Corp.
Microsoft's installed base of Xbox 360 consoles should exceed Sony's PS3 for a couple of years, says IDC analyst Schelley Olhava.
Microsoft executives say that if they can get to 10 million consoles sold before Sony, they will remain the leader of this generation of video game hardware.
"To us, getting to that milestone is really critically important," said Maroof Haque, lead business manager for Microsoft's Xbox business unit. "There's a head of steam that you get by hitting that level. You see it in other consumer products."
With Xbox 360, Microsoft will be touting improvements to its Xbox Live service as a big differentiator, Haque says.
Microsoft added an online arcade of classic, easy-to-learn games for casual players. It also bucked up the communications features, letting users chat with friends when they're not playing games and even do videoconferencing.
Users also can hook up their mobile devices, such as MP3 music players and digital cameras, to the Xbox 360 and link the console to Windows Media Center PCs.
This holiday, Sony will counter Microsoft's Xbox 360 hype by promoting its current PlayStation 2 console and its new PlayStation Portable mobile game device, says Jack Tretton, executive vice president for sales and marketing with Sony Computer Entertainment America.
"The dollars generated on PlayStation 2 alone will far and away dwarf the dollars generated on Xbox 360" this holiday season, Tretton said. The PS2 will generate well more than $1 billion in sales this Christmas, he says.
The $149 PlayStation 2 is entering its sixth holiday season and has a raft of big new game titles, including Sony's own "Socom III."
The $249 PlayStation Portable is entering its first holiday season. "We feel extremely good about our business right now," Tretton said. |
