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The case chronicles Microsoft's difficulties with the Xbox 360 home video game console. Microsoft launched the Xbox 360 one year ahead of the competition, and used its advantage to gain a solid lead in the market for next generation video game consoles. Despite early technical problems, users were willing to accept a certain degree of unreliability because the Xbox 360 was the only high definition console on the market. Microsoft also had valuable game franchises. To play any of the exclusive video game content available for the Xbox 360, users had no choice but to buy a system. However, Microsoft's early lead quickly disappeared after Nintendo's Wii become all the rage, especially among families and casual gamers. Sony also began to catch up to its Redmond rival following media reports that the PlayStation 3 was far more reliable. When Toshiba abandoned HD-DVD, a high definition movie format supported by Microsoft, Sony's Blu-Ray players (including the PlayStation3) became the de facto standard. Finally, Sony began to release its own exclusive games and began to quickly close the gap between its online service and Microsoft's Xbox Live. Microsoft's inability to resolve the quality problems that had plagued the Xbox 360 since its launch caused a loss of goodwill among its core customers. By extending the console's warranty to an unprecedented three years, Microsoft was able to allay the fears of some buyers. Nevertheless, by the end of the case, Microsoft has fallen to second place in overall console sales and third place in monthly sales. Moreover, it was unable to reverse the huge losses that Microsoft's gaming division had incurred every year since the launch of the original Xbox. The case may be used with The Launch of the Sony PlayStation 3 (Ivey case 9B07A014) and A Note on Computer Games

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