Microsoft Xbox Entering the World of Video Game

Table Of Index

Microsoft: Entering the Gaming Industry 3

Microsoft Xbox 3

The Strategy 4

Positioning 4

Pricing 4

The Result of the 1st Round 5

The Next-Gen Gaming War Announced 6

The Economies of scale - What it has Learned 6

The Timing - Being the first on the market, an advantage? 7

Securing the Production Chain 8

Securing the Market - Microsoft Innovation Breaking Through 9

Securing the Market - Product Segmentation 10

Securing the Market - Japanese Game Developer 11

Launching The XBOX 360 13

Conclusion 15

References 16

Abstract

People start hearing the words "video games" 1970s, but it actually it already began 30 years before. The idea originally came from the imaginations of scientists in research lab in the late 1940s. And now it has become and still one of addictive product in human history. In 1980s nearly 20% of U.S. homes had video game system, and more game licensers releasing new titles expanding the industry into billion dollar industry. Having a dark age period in 1982 - 1984, in 1985 - 1984 the industry revived and reaching an industry worth $2.3 billion with market share 77% owned by Nintendo.

Considered as a profitable business the industry has a lot of big Players ATARI, Nintendo, SEGA, Sony and even Nokia who started in Cell phones trying to make way to the Gaming Industry and the late entrant Microsoft. In This Paper writer trying to open the Microsoft Xbox the late entrant whose trying to make way to defeat Sony (market Leader at that time) and have the biggest market share in the gaming Industry. Will it be success?

Microsoft: Entering the Gaming Industry

The meeting between Microsoft and Capcom, a Japanese video game publisher, was going poorly. One of the Japanese game developers at the table in Capcom's Tokyo headquarters said, "We know the philosophy of Nintendo. Game is toy. We know the philosophy of Sony. Game is entertainment. What is Microsoft's philosophy?" Kevin Bachus, who was then director of third-party relations for Microsoft's Xbox console, replied, "Game is art."

--Red Herring "The Game of War"

Microsoft Xbox

In 2001 Bill Gates the owner of the biggest Operating System corporation "Microsoft Corp" announces the birth of their ultimate gaming system. Wrapped in black case, with green jewel in the center of the console called "XBOX" offered claiming to be superior then its competitors Nintendo GameCube and Sony's Playstation2. Hitting No. 2 spot in the shelves in just 18 months.

In Order to penetrate the market which the mind set of its customer already mature and considering Sony's PlayStation2 is the No.1 Console delivering No.1 game titles is not easy. Microsoft facing an uncertain economy and strong competition, anticipated absorbing $2 billion in losses before attaining profitability. Microsoft has to develop a Good Marketing strategy and with support of the superior console quality. Delivering something new to the market.

The Strategy

Trying to penetrate the gaming industry Microsoft a company with endless financial capacity intends to give a full support for the success of its new born baby. The Xbox offers:

1. Technology Differentiation

Combining all the latest technology developed by various company Microsoft reduces its cost for R&D because they only buy the Personal Computer based hardwares from other vendors and manufacture it into a console, and call it Xbox. Microsoft target is creating a platform with 3x the performance of the PlayStation2 its No.1 Rival at the time. Offer a built in Hard Disk Drive, Ethernet broadband card, Dolby Digital Suround and Online Game and market.

2. Free Development Kits for Games Supplier

Offered SDK for free to game developers for free an easy to use programming system. Equality among big and small developers Microsoft gain respects from the developers.

Positioning

Micosoft positioning in this project is being the competitor of the market leader and took the market share.

Pricing

Microsoft Pricing strategy is Low price high quality, they actually sells the machine lower $300 then its cost of production $425 (EDN Magazine) the same price when the PlayStation 2 launched in 2000. Trying to seduce and attract gamers with low priced console it has sold about 8 million Xboxes (2003). Sony has sold 60 million PlayStations. Determined to show its grounds Sony announces its new version of Playstation2 called PSX, according to the industry experts it will be almost impossible for Microsoft to catch-up with Sony.

Trying to open the door by using incorrect equipment, according to filings with the Securities and Exchange Commission, Microsoft's Home & Entertainment division, where Xbox resides, lost $190 million in the fiscal quarter ended March 31, nearly twice the $97 million lost during the same period in 2002. Supporting this filling David Hufford, a product manager in Microsoft's Xbox group said "We lose money on every console we sell," Hufford said. "So the strategy is to make money selling software". All these software and service enhancements are intended to extend the life of the current console." But apparently the profit their expecting to get from software has become nothing but zero. This is because hackers managed to crack the Xbox security code and totally tears apart the software. Hackers can install almost anything into the Xbox. Pirate's software is not contributing anything both to Microsoft and software developers. No doubt Sony's has the same issue