Console wars: What MS plans with Xbox 360

On Tuesday November 22nd, Microsoft unleashed the Xbox 360 in shops around North America, where battle-hardened and die hard gamers had queued for long hours for a place on the frontline. The new Xbox will go on sale in Europe and Japan in coming weeks.

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With the release of Xbox 360, Microsoft sounded the battle bugle on Sony who is the current runaway market leader with over 96 million PlayStation consoles worldwide and is going to launch PS3 with cutting-edge features and technology. If this turns out to be so, MS may want to make more incursions into the competitive market for home-entertainment hardware.

Despite being an unrivalled behemoth in software production, MS's performance has rather been lackluster in the hardware sector (read gaming consoles) in the face of formidable adversaries who already established in this field like Nintendo and Sony. However, having said this, Nintendo's sales were bettered by MS with its first Xbox in 2001 and it is now in 3rd position after Sony and MS with sales of only 19 million consoles as compared to 22 million units by MS and a mind-boggling 96 million by Sony. The dominance of PlayStation 2 was result of mainly the following factors -

1. Its early arrival on the market.

2. The console backward supported for games made for the original PlayStation.

3. It could be used as a DVD player.

4. Sony's good relationship with publishers ensured a steady supply of top-selling games.

5. Sony aimed its PS2 not only at the teenagers that were Nintendo's core market but, by producing more sophisticated and violent games it targeted at older and wealthier players as well.

There is no doubt who was the winner in the first battle but MS beating an already established console maker Nintendo in its debut venture in this field was significant enough.

The Xbox 360 has been launched with an impressive selection of new games. Some may differ from this view, but I certainly believe so. Microsoft hopes the new console that's priced at around $300 for the Core version, will at least break even. This ain't as bad as it sounds because video game consoles are traditionally sold at a loss initially.

Microsoft's main aim is to get close to Sony first and then go for the kill in the coming years. Sony is pinning its hopes on the processing power and storage capacity of its new console, which will include a revolutionary processing unit based on the new Cell chip, developed with IBM and Toshiba. Such radical is the change from the operation of the old console that game-developers will be forced to start from scratch to produce games for the PlayStation 3. Any hitch with the new technology or the supply of games could place Sony at a disadvantage. Besides, when it comes to online gaming, the PlayStation3 is deemed to be some way behind the Xbox 360 (recall Xbox Live). Significant, because broadband access is making online gaming popular as never before.

MS's push in console gaming is peanuts when compared to its grip over the global software industry. But as we have discussed this before, MS is determined; the character of MS is such that it will not give up unless it achieves what it has aimed for. We believe that it will catch up with Sony and eventually beat it. If MS tastes a fair level of success with its new console Xbox 360 in the console industry, it will provide tremendous impetus to the company to invest even heavily on hardware. If the first attempt at this pushed Nintendo to 3rd place, we can be sure that MS will try its hand on other hardware sectors as well. That's the strategic plan with Xbox 360 used as a testing device.

Bigger and diverse things can be now expected from the MS stable and battle on all fronts. Who knows what might come next?

Based on The Economist's article The Xbox factor. Thank you very much.