Uncloaking the Console Wars

As we march ever closer to the opening rounds in this holiday season’s battle for console supremacy, I’ve blogged about the financial prospects for Nintendo (quite good) and Sony’s Playstation 3 (not so good), but I’ve yet to put Microsoft’s Xbox 360 under any serious scrutiny.

To do that, I called in my longtime colleague Dean Takahashi, tech writer with the San Jose Mercury, author of the excellent Opening the Xbox, and much more recently, of an acclaimed follow-up, The Xbox 360 Uncloaked: The Real Story Behind Microsoft’s Next-Generation Video Game Console. He’s reported on Microsoft’s attempts to crack the console space for years (including the flubs they’d probably rather forget), so who better to help me cut through the corporate hype, and handicap the odds?

My interview with Dean after the break.

Where do you think Xbox 360 stands in the console wars versus the competitors, for this coming holiday season?

I believe that Microsoft will do well this holiday. Its second-generation games such as Gears of War and Mass Effect will look good and polished against the first-generation PlayStation 3 games. Players may not notice much difference between the two systems. Microsoft’s console will also be more plentiful and cheaper than the PS 3.

The real test will be in 2007, when all three console makers will have plenty of supplies in the market.

How important is Live Arcade to the success of Xbox 360, and why?

I think Microsoft is doing well with it, but at the moment it is a very small contributor to overall profitability. Over time, Microsoft hopes it will generate hundreds of millions in revenues. At that level, it will make a real difference. Right now, it is a nice differentiator for the system that makes it stand out from the other consoles and it will thus play a small role in helping overall sales.

How important do you think Xbox’s “YouTube for Games” initiative will ultimately be?

It depends on if they find the next Counter-Strike or not. But it’s a smart move to generate more interest and more programming resources in support of Microsoft’s console. User-generated content has stirred a lot of interest in the video space. But we may have to sift through a lot of bad games to find the good ones. If Microsoft can put the appropriate ranking system in place, it may be easier to find the equivalent of the “Diet Coke + Mentos” phenomenon.

I recently blogged about Xbox lead executive Peter Moore talking about wanting to create games that appeal to families and outside the young male gamer demographic. If that’s what he wants, why are they devoting so much money promoting “Gears of War”?

They do have to serve the hardcore gamer. They should be spending an equal amount of money marketing to Nintendo’s gamers and to non-gamers, touting titles such as Viva Pinata. And they ought to have more content that catches the attention of non-gamers the way that Nintendo’s Nintendogs and Brain Age titles do.

What’s the most important lesson from 360’s development last year that Microsoft is acting on this seaons?

I think Microsoft needs to be aggressive about pursuing its installed base without worrying so much about profitability now. That means they should strongly consider a price cut, not just to spur sales to new levels but to turn the tide of opinion against Sony. It would show they are serious about winning the console war.

I think for the other console makers, they need to learn that getting to market on time isn’t easy and that they have to stay on top of production.

Microsoft should have delayed its Japan launch last year to wait for more units and better games. If Nintendo and Sony find themselves with shortages, they should consider staggering the territory launches.

In mid-2010, what’s your prediction what US market share for Microsoft Xbox, Sony PS3, and Nintendo Wii will be, by percentage?

I can’t say that my own prediction is anything but a guess. Sony will lose, Microsoft will gain, Nintendo will gain. That means Sony will have about 40%, Microsoft will have 32%. Nintendo will have 28%.