November 12, 2005 in Business

Xbox grows up

Allison Linn Associated Press
 
Associated Press photo

Colin Plamondon, 17, tries out Microsoft’s newest videogame console, the Xbox 360, at a preview event last week at the company’s campus in Redmond, Wash.
(Full-size photo)

REDMOND, Wash. — When Microsoft Corp. debuted its first Xbox in the fall of 2001, the videogame console was like a teenager — decked out in black, eager to fit in with the hip crowd and embarrassed to be seen with its parent company.

The newest version, Xbox 360, has no intention of being a boring grown-up.

But Redmond-based Microsoft says it has learned from some of its youthful mistakes. And after years of distancing the Xbox from its less hip progenitor — maker of computer operating systems and spreadsheet software — Microsoft is now more blatantly touting the console as integral to a long-term plan to dominate the connected home.

“I think the thing people have to realize is that digital technology is changing the home in a profound way,” said Robbie Bach, president of Microsoft’s Entertainment and Devices division and its Chief Xbox Officer.

When the Xbox 360 debuts in North America Nov. 22, it will still mainly aim to please so-called hardcore gamers — primarily young men who spend hours each week tethered to a videogame console. Analysts say that’s smart since the console doesn’t offer enough other capabilities for those not addicted to gaming.

“First and foremost, Xbox 360 is a game machine, and so is anybody going to go out and buy an Xbox 360 if they’re not a gamer because it’s got multimedia capability? No,” said Van Baker, a research vice president with Gartner Inc.

But over time, the company is hoping that other features will draw in more family members. These include the ability to listen to music — even tracks from rival Apple Computer Inc.’s iPod — look at family photos, watch DVDs and play electronic puzzle and card games.

Analysts also expect Microsoft to improve on features in its paid Xbox Live online gaming service that let users chat and interact with other subscribers — and that could lure in more socially minded family members.

Advanced users will even be able to to link the Xbox 360 with a PC running the entertainment-centric Windows XP Media Center Edition as part of Microsoft’s grander vision to provide a sophisticated digital entertainment hub.

The push is not new: Microsoft has been trying for years to break into the den, one of many ways it is looking to extend its Windows brand amid a saturated market for regular desktop PCs.

Analysts say it remains to be seen whether Microsoft can succeed at getting lots of people to use its products for things like watching movies and recording television.

While users are beginning to embrace more sophisticated technology for entertainment — such as TiVos, iPods and even Microsoft’s Media Center — many are still intimidated by the idea of using a computer to do something as simple as watch television.

“The question is: Will people really store content on the PC, set up a home network and then access content over the network?” said Matt Rosoff with independent analysts Directions on Microsoft. “That’s still a pretty geeky thing to do,”

But Rosoff said other technical advances, such as more widespread broadband availability and the increasing popularity of high-definition televisions, are helping Microsoft’s efforts.

With Xbox 360, Microsoft also is hoping that a more aesthetically pleasing design will help convince Americans to move the game console from the den to the living room.

The first Xbox, a boxy black console tethered by cumbersome wires to a big controller, has been replaced by a sleek white design coupled with a smaller, wireless controller. Users can also eliminate more wires in the living room with a $99.99 wireless adapter.

Microsoft hopes to eventually break even on the consoles — which will initially sell for $399.99 in North America, or $299.99 for a version that doesn’t include features such as the 20-gigabyte detachable hard drive and wireless controller.

The goal is to make money on add-ons, such as games and Xbox Live, which is also yet to be consistently profitable.

“We still think in a way the console isn’t the way to make money,” Bach said. But he added that the company also thinks it’s important not to lose as much money as it did when it rushed the first Xbox to market in the face of intense competition from Sony Corp.’s PlayStation 2.

Bach said the benefit of hindsight — and a little more time — also allowed Microsoft to correct some other missteps, such as a failed strategy for getting into the Japanese market.

Despite the popularity of gaming in Japan, Microsoft has not been able to overcome the home-court advantage of Sony’s PlayStation franchise. In addition to redesigning the Xbox to better appeal to Japanese tastes, Microsoft has struck new partnerships to develop games that it thinks will draw in more Japanese gamers.

© Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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