The US is the largest market for video games, worth some $10.5 billion in 2005. Almost half of US households own and play games on a PC, game console, or portable game player. But the video gaming industry is in the middle of a midlife crisis facing aging consoles, layoffs, slower growth, and a disgruntled customer base. The industry is responding with major equipment upgrades, online gaming, new titles to reach non-gamers, and ad-supported online and console gaming. The next three years will see a generational shift for home game consoles and increased broadband connectivity for all game-playing devices, but this will be an evolutionary rather than a revolutionary shift. Publishers and hardware manufacturers must explore new business models and distribution options to add revenues and retain profitability. Microsoft's Xbox 360, shown to industry professionals at the E3 2005 expo, has Redmond lighting up the leader board in the game console market. High-definition games, free online connectivity, and a high degree of device and gaming personalization set the pace for where Microsoft wants to take the market. But with the unveiling of the Sony's more powerful PlayStation 3 and the continued huge loses from Microsoft's games division, the Xbox 360 is by no means a guaranteed success.
At Microsoft's pre-E3 press event on Monday, the company showed its next-generation video game console the Xbox 360 to video game industry professionals for the first time which followed the MTV unveiling show that aired at the end November last year just in time for Christmas. Microsofts strategy is unashamedly ambitious to be the thought leader and biggest hardware player in the next-generation console battle. E3 is the main conference for new game platform announcements. This year Sony will unveil the PlayStation 3 and Nintendo, in classic fashion, may or may not show its "Revolution" console. Microsoft's decision to launch their console prior to Electronic Entertainment Expo represents a deliberate strategic move that accomplishes several key objectives and allows it to do the following: Sidestep the industry shindig and talk directly to potential consumers. New hardware is usually unveiled first to partners and developers behind closed doors, then to industry players and analysts at events like E3, and finally to consumers a couple of months before release. Microsoft is breaking this golden rule and taking its offering directly to consumers- despite a wait of at least six months until the console ships. The company risks killing its existing hardware-line sales and stunting software sales, but puts even more pressure on Sony and Nintendo to get their offerings to the market. Microsoft appears willing to jeopardize first-generation Xbox sales in order to ensure the success of the Xbox 360. They're hurting themselves, but they hope to hurt Sony and Nintendo even more by locking consumers into an affinity for the Xbox 360 earlier than either of these competitors. Build a frenzy of community speculation and support. Sony is widely credited with bringing the image of game consoles up-to-date with the marketing, product placement and design work it did around PlayStation and PlayStation 2. But this was in the days before blogging. Speculation around the next Xbox among gamers has built to a frenzy over the past six months- carefully fed by occasional press quotes from Bill Gates, leaked images and viral messaging spread via Microsoft's net site.
The video game industry is about to enter another period of extended growth, and it's widely acknowledged that, Asia-Pacific aside, Microsoft has been more successful with its Xbox market entry than many people expected. But that isn't enough for Microsoft: It wants to be the No. 1 player. As a recent entrant to the game console market, it needs impact and is not afraid to overturn old conventions and try something new. Microsoft's Xbox marketing strategy is: A key building block in the...
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