Evolution of the X-Box
The video game console market is extremely challenging. The competition is fierce between Microsoft’s
Xbox and Sony’s Playstation. Nintendo turns high profit margins with its console, the Nintendo Wii, however it competes virtually in its own market, pursuing the casual gamer. Microsoft and Sony lose money on sales of their consoles, and make up the profit on the games. Microsoft was not extremely successful with its development of the original Xbox, and made some essential changes in their gaming strategy to make the introduction of the Xbox 360 more profitable. The two important changes Microsoft made were repositioning the release date and changing the product offering.
One of the biggest problems with the original Xbox was its release date. This problem was fixed with their second generation console. With video game consoles the release date is highly correlated to market share. First of all, when the Xbox was released, the Playstation 2 already had a predecessor with market share. “In Q4 1999, when the PS2 was launched, Sony sold 1.1 million PS1 consoles, and 1.4 million PS2 consoles.” ("Evolution of the Xbox Supply Chain.") This brand presence was further established when the Playstation 2 was released 12 months before the Xbox. Customers who wanted to move onto the next generation of gaming bought the PS2, choosing not to wait a full year for the Xbox. “Microsoft did not have the established base of games and gamers that Sony enjoyed, and Sony continued to dominate the market ("Evolution of the Xbox Supply Chain.").” One of the failure’s of the original Xbox has become a success for Microsoft with the Xbox360. Xbox did not have to worry about being a newcomer into the market anymore, the problem with their first console. Not only that but now they were doing exactly what Sony did. They chose to release their console over a year earlier than the PS3 taking advantage of the early adopters. In fact Xbox planned to sell 2.75-3 million consoles within 90 days of their launch. Microsoft switched the tables on Sony, a very prudent part of their improved gaming strategy. Microsoft’s most important change in their gaming strategy with the Xbox 360 was how they adjusted their product offering. The original Xbox was differentiated from the PS2 on the basis of technology and features. The Xbox “processed 116 million polygons per second, compared to 66 million for the PS2 ("Evolution of the Xbox Supply Chain").” The Xbox also had a better DVD player and overall better technology. This was a strategic move for Microsoft, and forced them to prolong the introduction. “A 2000 launch would force the company to use technology that did not offer a substantial improvement on Sony’s PS2, ("Evolution of the Xbox Supply Chain”).” Once again the tables were switched with the Xbox 360. The graphics processor and microprocessor would both be more powerful than that offered by the Xbox 360. The PS2 had a Blu-Ray player while Microsoft installed
a HD-DVD player. Clearly the PS3 has better technology but was that the right move? Xbox UK boss Neil Thompson said, “Sony is now making people pay an extra few hundred pounds for a Blu-Ray DVD drive which we don't know is going to be the standard in the next-generation DVD formats ("Microsoft execs slam Sony Blu-Ray strategy").” This is important point because Sony is investing all of their money in Blu-ray technology. It will probably be the right move, but Xbox may be able to find a way to still compete, and still save precious manufacturing costs. Another product offering adjustment made by Microsoft is that they are trying to attract the casual gamer like Nintendo did. “Roping in the casual game fan will be a number of game show releases that promise to expand the console's limits beyond its rather traditional hardware (Dimmel).” A partnership with NetFlix will also help pursue the casual, residential consumer. 2.
With the original Xbox...
Cited: "Evolution of the Xbox Supply Chain." Stanfor Graduate School of Business GS.49 (06). Print.
Dimmel, Brandon. "Microsoft Targets the Mainstream with New Xbox 360 Strategy."
Infopackets. 22 July 2008. Web. 10 Oct. 2009.
"Microsoft execs slam Sony Blu-Ray strategy." Www.gamesindustry.biz/. 2006. Web. 10 Oct.
Scheisel, Seth. "Microsoft Reveals New Strategy for Xbox." The New York Times. 1 June 2009.
Web. 10 Oct. 2009.
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