Microsoft Corp aims to upstage rival Sony Corp with a console that goes well beyond gaming and helps transform media viewing, a long-cherished but elusive goal.
The software giant is betting its first new
video game console in eight years, which goes on sale on Friday, will help
sustain its position as a dominant player in gaming hardware. It also hopes to
build a high-margin, rapid-growth business that plays a bigger role in how
people watch television and consume media content.
"We continue to be on track for the biggest
launch in Xbox history," Mehdi said.
"We're building the largest volume of consoles that we've ever done."
He added that the company is anticipating an adequate supply to meet demand.
Revenue from Xbox games and consoles, including the blockbuster
"Halo" game franchise, yielded 10 percent of total Microsoft sales in
the last fiscal year. A successful launch could give a much-needed lift to the
software titan, which is trying to become a significant player in hardware.
Microsoft wants to become a "devices and
services" giant as it struggles to find the right formula and hire a new
chief executive to take on Google Inc, Apple Inc, and Amazon.com Inc in a
The Xbox One, which will launch in 13 markets worldwide,
will cater to its loyal gamer fan base with exclusive titles like "Forza
Motorsport 5" and "Ryse: Son of Rome." Beyond that, the company
hopes the device crosses over to the mainstream and becomes a family
Money in the living room
To entice TV viewers and simplify their viewing
experience, the new device comes with features like voice control via its Kinect
input device -- ostensibly in place of a remote -- and the ability to integrate
it with cable boxes.
To bolster its entertainment offerings,
Microsoft launched its Xbox Music app, a digital music service that vies with Apple's
iTunes, last year.
"The profit margin of that business is more
defensible than the current PC business. Microsoft has a more solid shot at the
living room, by way of Xbox, than it does through PCs," said Roger Kay, an analyst
at Endpoint Technologies Associates.
"There's a lot of monetization possible if
you can take over the living room, so Microsoft is highly motivated to make
that game platform as versatile as possible."
Microsoft is battling Sony, which sold 1 million
of its PlayStation 4s within the first 24 hour of its Nov. 15 release in the
United States and Canada, and is currently sold out in many retail stores and
online. At $499, the Xbox One costs $100 more than its rival console.
Tank of sharks
Robert W. Baird & Co analyst Colin Sebastian
has said he expects shipment of 2.5 million to 3 million units for both the Xbox One and PS4 in the
Microsoft is pulling out the stops on marketing,
producing creative stunts such as immersing the first Xbox One console to go on
sale, in New Zealand, in a tank of 20 sharks.
"With everything they're going through ...
one shining light there that they really feel good about" is the Xbox franchise, said Peter
Moore, chief operating officer of Electronic Arts Inc, who led the launch of
the Xbox 360 when he was at
Microsoft hopes to avoid the glitches that
plagued Sony, whose PlayStation 4 launch was marred by problems while booting up
the machine and units being damaging during shipping.
Selling something more than a game console is
imperative, with more and more potential customers gravitating to free online
and mobile games, analysts say.
Over the last eight years, Sony and Microsoft
both sold more than 80 million PS3 and Xbox 360 units each, while Nintendo sold over 100
million Wii consoles. The industry has debated whether the console heyday is
over, with hardware sales in decline for the past four years.
But analysts expect new consoles to reignite the
sector. The PS4 is currently in short supply at many retail stores and online
after a robust launch.
"All of those questions have been put to
rest by the strong pickup this weekend of the Sony platform, and we're very confident
Xbox will have a strong
launch this weekend as well," EA's Moore said.
EA games like "Battlefield 4" and
"FIFA 14" had strong sales as PS4 machines flew off store shelves,
Moore said. The same titles will be released for Xbox One, in addition to some upcoming exclusive
titles like sci-fi shooter "Titanfall."
In a rare display of solidarity, Xbox sent a congratulatory tweet
to Sony shortly after the PS4 hit store shelves.
"This isn't so much a competitive effort. It's really about how we grow the broader market ... that should really be the focus and a little bit of that was the spirit behind congratulating Sony for the good work they've done," Microsoft's Mehdi said.