Xbox One: Microsoft "biting off more than it can chew"

We talk to analysts about the new Xbox unveiling; David Cole fears Microsoft is "screwing up" its advantage but Pachter likes what he sees
Microsoft

microsoft.com


Microsoft has finally lifted the curtain on its next-gen console, the Xbox One. The unveiling seems to be getting mixed reactions so far, and that appears to be true of analysts as well. GamesIndustry Internationalcaught up with several leading games analysts immediately following the conclusion of the live-streamed event. With Sony first to announce its next-gen system back in February, and Nintendo continuing to struggle with Wii U sales, how would Microsoft position the new Xbox? From the looks of it, Microsoft is approaching the console market very differently than Sony and that may endanger its hardcore support.
"Just the name Xbox One says a lot. Microsoft desperately wants to have their system be the centerpiece of living room entertainment. Sony also wants that but they seem to be going in a much more game centric direction. In terms of which strategy will win we would put our bets on targeting gamers," said DFC Intelligence's David Cole. "The concern with Microsoft is that they are going after a need that isn't really there. Yes, it is convenient to have your game system play video but there are all kinds of devices that do that. If a consumer is putting that kind of money down they want the system that plays the best games."
"Overall there has to be some concern that Microsoft is biting off more than they can chew," Cole continued. "With no backward compatibility the Xbox One is starting from scratch. Microsoft had a huge success with the Kinect and that could be their downfall. The Xbox brand resonated primarily with a core gaming group but they shouldn't assume that means they will automatically stay around. Sony learned that lesson the hard way in the transition from the PlayStation 2 to the PlayStation 3."
"In the US Microsoft has a major advantage but they could easily screw that up very quickly...This will be a marketing game and right now Sony seems to be winning"
David Cole

Monthly data from The NPD Group shows that Microsoft's Xbox brand has been a huge success in North America, as the Xbox 360 has been outselling competing consoles every month. If Microsoft isn't careful, however, it could lose this momentum that it's worked so hard to build up.
"In the US Microsoft has a major advantage but they could easily screw that up very quickly. We only need to look at Nintendo's disastrous recent product launches for a lesson. This will be a marketing game and right now Sony seems to be winning," Cole warned. "Pricing is likely to be a key issue and that has not been addressed at all. Hardware price, Xbox Live as a mandatory subscription, bundles with entertainment providers and other cost issues will be the real key. We expect a lot of great exclusive content from both Sony and Microsoft but how they package and market it will be what matters at the end of the day. It is still too early to make any major calls."
Wedbush Securities' Michael Pachter and EEDAR's Jesse Divnich were much more optimistic about what they saw from Microsoft today.
"I'm actually pretty happy with what I saw. I don't think this is going to be a poor seller; I think the odds of this thing selling poorly are pretty low unless it's a thousand bucks," Pachter said, adding that he envisions Xbox One retailing for about $400. He noted, however, subsidizing the hardware with cable providers is a likely scenario still, given the TV focus of the system.
While Cole believes that the lack of a core gaming focus could hurt Microsoft, Pachter sees it as a smart move to gain a larger market.
"It's very much an entertainment focused box. They only gave us a glimpse of games. 15 exclusives and 8 new IPs, that's pretty cool... But they kind of did exactly upside-down what Sony did. Sony was all games all the time and this was all entertainment, saying games would be at E3. The gaming press was really excited by the games focus by Sony, but I think this has more mass appeal and I think E3 is a games focused show so I think maybe that strategy is smarter," Pachter noted.
"The gaming press was really excited by the games focus by Sony, but I think this has more mass appeal...I think the mainstream press will be excited by this"
Michael Pachter

"I think the mainstream press will be excited by this. It is a nice interface. That's the thing I've been talking about for a while - if it gets rid of your cable box, then it's interesting. If the only thing you have in your living room is an Xbox, that's pretty powerful. Technologically it's doable right now," he added.
While Sony talked up how the PS4 will be the most open console ever, paraded Jonathan Blow out on stage at its unveiling and has been courting indies ever since, Microsoft didn't mention independent developers even once. The company's standing among indies in recent years has already taken a hit, and this probably didn't help any. Pachter, however, isn't concerned by the lack of an indie focus. "It's great for the development community but really not that many people buy them, so I don't know... I think Sony wants to win on game content and maybe they will but we don't really know what Microsoft has got yet," he commented.
For his part, even though we didn't see much for the core gamer today, EEDAR's Divnich still believes Microsoft will have plenty in store for its loyal audience, and the mention of 15 exclusives coming from Microsoft Game Studios is just the start.
"Our communication with Microsoft has indicated that they plan on investing more resources into first-party content than they've ever had before. This is important. It's clear that Microsoft is trying to deliver the total entertainment experience to consumers across all demographics and all entertainment verticals, but it's important that Microsoft not forget the core gaming consumer," he said. "Microsoft's dedication to continue to support those core gamers with exclusive new intellectual properties is a reassurance to all us gamers that the company comprehends the important role we play in driving the Xbox One's success."
"The Xbox One is an evolutionary step in the entertainment consumption experience. Microsoft has been battling for control of the living room since the launch of the original Xbox in 2001 and has since proven they've seen eye-to-eye with how their audience consumes entertainment content. The Xbox One stands to provide the total living room experience for the entire family, while at the same time not alienating the core gaming consumer or the core gaming experience. It's an impressive leap forward and one that will resonate well with the North American audience," he continued.
Ultimately, Divnich does not see a loser in the next-gen console race. Both PS4 and Xbox One should be viable consoles that gain plenty of third-party support and the end result will be a boost for the games industry.
"With the Xbox One and the PlayStation 4 launching in similar timeframes, we believe this is a win-win for the industry and traditional console manufacturers. While competition often results in a winner and loser, we believe the near simultaneous launch will provide a benefit to the overall traditional home come market," he said. "The two marketing campaigns combined will act as an amplifier to why traditional home gaming is still relevant and an overall deeper immersive experience compared to other gaming technologies. While the market has witnessed some stumbling in the traditional space over the last 12 months, we believe confidence in traditional HD gaming will rise to pre-2010 hypes coming out of the 2013 holiday season."

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