The software giant wants to climb the ladder in the game console market to better compete with Sony and Nintendo and convert more gamers.
Microsoft thought it could shake the competition when it launched its Xbox 360 video game console at the end of 2005, a year before its competitors launched an equivalent product. The idea being to reinforce its advance, question which had been evaded with the publication of the first Xbox four years before. However, the Xbox 360’s lead literally vanished this summer when rival Nintendo’s Wii engulfed Microsoft’s device in number of consoles sold.
The Wii’s highly innovative ability to detect movement won over ordinary gamers, allowing Nintendo to make more than $48 billion in one year.
Microsoft is now taking note of the Wii’s strategy in its battle against Sony and Nintendo in the video game market. Microsoft will cut the prices of the three existing Xbox 360 models in the United States from September 5, following a reduction already practiced in Japan since September 1, 2008. The latest price reduction amounts to 80 dollars on the model base Xbox 360 Arcade, which at 199 dollars becomes the cheapest console on the market (for equal generations), 50 dollars less than the Wii. The fall in prices will then have to continue on the European market.
Microsoft is also trying to make its Xbox more attractive to ordinary gamers. The firm has redone its navigation system, making it clearer and more intuitive, replacing the current hierarchical system which is too similar to that of a computer according to the players. Microsoft is also working on creating a games channel on its Xbox Live Web site, dubbed “Primetime”. There, players from the four main markets, namely North America, France, the United Kingdom and Germany, will be able to compete against each other. One of the very first games: a trivial battle called 1 versus 100 , concocted by Endemol.
“They’re trying to reach a broader category of consumers,” explains Bob MacKenzie, vice president of game retailer GameStop Stores. “It’s really about reaching as many people as possible.”
A SECOND PLACE?
Reaching such players should allow Microsoft to maintain its lead over Sony, even if Microsoft’s Xbox manager doesn’t think it can catch up with Nintendo. “I can’t tell you that we’re going to catch up with Nintendo,” resigns Don Mattrick, vice president of Microsoft’s Interactive Entertainment Business, Microsoft’s Xbox branch. Meanwhile, Nintendo seems to be soaring to the top of last-gen console sales, leaving Sony and Microsoft to battle for second place. Microsoft’s lead over Sony, along with changes to the Xbox, cements Microsoft’s leadership position over Sony, prompting Mattrick to say, “We’ll sell more consoles of this generation than Sony.”
Microsoft has a competitive advantage here. While Nintendo sold 11.4 million Wii in the United States at the end of July, Microsoft consolidates its second place with 10.7 million Xbox 360. Sony finds itself far behind with 5.1 million Playstation 3 sold. Globally, the gap is smaller, although Microsoft retains some lead over Sony, according to sales estimates. By the end of the year, estimates show that Microsoft will have shipped 27.7 million Xbox 360s, with Sony shipping 24.2 million Playstation 3s. Nintendo smashes them both with 44.5 million consoles sold.
Scale of sales matters when it comes to video games because a console’s popularity feeds on itself. Video game designers want to make themselves known through the most used consoles, which has the effect of making the best-selling consoles even more popular because they present the most attractive games. It also gives companies a launch pad for their new non-gaming services, such as social media and movie downloads. However, it requires millions of users to make these services profitable.
The price drop is expected to boost Xbox 360 sales. In addition to the announced Xbox 360 Arcade drop, Microsoft is also slashing the price of its mid-range Xbox 360 from $349 to $299, as well as that of its high-end category, from 449 to 399 dollars. MacKenzie hopes her sales will soar. And for good reason, the cheapest Xbox was already too expensive for the majority of its customers.
Microsoft hasn’t been able to keep its first place in the market. But with an entry-level price of 199 dollars, the firm should be able to maintain its second place.