Microsoft’s Xbox
Microsoft’s Xbox was launched in 2001 among much hype. The world’s biggest software company requires no introduction and it is not unexpected either-Xbox was referred to as the “gaming console of the millennium”, technically ahead of everything that the competitors had to offer. Before the release, the reviews were all over the electronic and print media with the development details, third parties’ role and Microsoft’s entry into the gaming industry. This paper would analyze the journey of Xbox from birth into the gaming console market in light of the overall strategy of Microsoft.

Taking a look at the gaming console history, it is evident that the breakthroughs have come with sophisticated technology, good graphics, storage capacities and price. These factors played a key role in the popularity of Atari 2600, which made its mark in 1977. Sony and Nintendo along with Sega have been the major players in this industry with Microsoft being the later entrant. Though, Microsoft and Sega did partner with each other to come up with Sega Dreamcast (Windowplanet.net, 2001). Microsoft’s business level strategy has always been marked by joint ventures or acquisition of applications or ideas from third party vendors. In this case too, Xbox’s development took place mostly with the third parties like Hasbro and Edios owing to the enormous returns expected. However, this involvement has had a contradicting impact, it has made the incorporation of the most advanced technology but it has also made the gaming console expensive which limits the sales as the market is not for high solutions. Xbox was based upon the PC centric background and gave the developers more margin to write codes and innovate with the technology; however, on the other hand this also meant that Xbox would become like a PC with some limitations with a high price tag which also has now resulted in Sony taking the lead (Windowplanet.net, 2001). The technology favors the programmers with the platform that it uses, the software and hardware friendly Direct X gives the programmers more liberty

If we do an analysis of the Microsoft’s environment, it becomes evident that not all the factors are playing in favor of Xbox. This is manifestation of the idea of a next generation TV game machine. Microsoft’s strategy to expand its domain into hardware as well resulted in the advanced technologies in the Xbox. With its ability to be connected online, Xbox gives the users the opportunity to play games online and create online gaming communities thus establishing a network of gaming virtually. However, with all these specifications talked about before the release of the game, Sony also invested in the online gaming console technology and the result has been Sony’s online presence and Sony’s lead in the gaming console market. The environment of this market required good graphic display and compatibility. The issues with Xbox related with its non-customizable nature, non-executable character with even Windows 2000 format and absence of dynamic link loads (Windowsplanet.net, 2001). With all of these moves, Microsoft positioned the PC into the gaming console market, which rebounded despite the advanced features of the console in comparison with its competitors. Through the past few years, Microsoft has been accused of taking leads of other companies, copying them and launching them as their own original products. The lawsuits surrounding the company have also left mark on the credibility. In gaming console domain, Microsoft has seen sluggish growth with Sony outplaying it in sales in Japan at a ratio of 4:1 (Dvorak, 2004). As the Xbox was selling at $299 initially, still the sales did not cover the development cost and when Microsoft came up with the Xbox 2, with the PowerPC processor and more enhanced hardware features, the company will not be able to cover the cost of components. Another concern has been that the developers have not been coming up with the original material. Microsoft has been criticized for its new True Fantasy Online game as well, though it is anticipated highly, but the name resembles the Sony Play station’s Final Fantasy game, for lack of originality. There have been some key problems with the marketing strategy that Microsoft has been employing. It has been too aggressive in the development as well as the launching of Xbox while Sony adopted the slow growth strategy and despite a low profile campaign, the Sony Playstation 2 was received warmly and it has also expanded its network more rapidly than Xbox.

The biggest failure of Microsoft Xbox has been the high-expectation or hype that has been around before the launching. It has also been compared to the death environment that surrounded the 3DO machine and Sega, which were also much hyped up items but saw deaths owing to the same symptoms. Despite all this, Xbox is number two platform in America, just down to Sony but ahead of Nintendo GameCube (Dvorak, 2004).
If we do a technical analysis then Xbox’s weaknesses have been attributed to the weak RPGs, which are the essential success component of the Japanese market. This has been termed as the “it” factor that is absent in the Xbox (Brickey, 2004). With the Xbox, Microsoft intended to establish online networks, which ultimately users would subscribe to; however, in reality while Microsoft has been engaged in fighting the competition, Sony has been building the inroads in this arena as well (Dvorak, 2004). Another problem is with its controller that gamers have complained about and the limited number of games that Microsoft has to offer. This may be linked to Microsoft’s dependence upon the third parties, in the development phase, they joined hands but now as the profits are not coming in, the innovation is also on a hold.

On the other hand, the strengths of the console are the capabilities that it has in terms of hardware and the network and online connectivity. Thus the success of Xbox has been limited as well and its biggest issue is that it will not become a profit center for Microsoft (Dvorak, 2004).

In light of the above discussion, the future of Xbox is dependent upon the two options for Xbox. In order to combat the lead of Sony, it needs to invest more to come up with the next generation consoles; however, that definitely means more investment. The other way is to give in the competition; that would seriously damage the reputation and credibility of the company. Amongst the lawsuits and negative reviews about the originality issues, in 2004, Xbox faces competition from launch of Sony PSP and Nintendo DS. With the entrance of the portable gaming consoles, both Sony and Xbox have to endeavor to get the maximum market share. In Asia Pacific region, the online console market is expected to grow from $640 million in 2003 to $720 million in 2004 (DFC Intelligence, 2004). However, the market players have to cater for customized aspects e.g. there are mass consumer markets like Europe and America and then markets like Asia Pacific require cultural adjustments. At the end of 2003, Xbox held the fifth slot even down to EA, Sony and Mythic Entertainment. NCsoft held the No. 1 position; this included total gross revenue, subscriptions, advertising and sponsorships (DFC Intelligence, 2004).
In the present scenario, Xbox does not enjoy a competitive sustainable advantage and will continue to face tougher competition. Nintendo has found its niche in the children games and enjoys success in that domain; however, as Microsoft has expanded the horizon of the gaming console market, it will be vulnerable to a variety of threats from its competitors and remove the inherent problems in the Xbox technology as well.

To conclude, one can say that Microsoft will have to reanalyze the gaming market and reassess its overall business strategy and align its marketing strategy accordingly as well.