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Microsoft remains in first place in the current generation console race, having sold 67 million Xbox 360s life-to-date around the globe. According to The NPD Group, U.S. consumers purchased 270,000 Xbox 360s in September alone. Total U.S. revenue from Xbox games and hardware for the month topped $380 million.
Thus far, the bulk of these console sales have come through the traditional business model of selling hardware and offering some software bundles. But this fall, Microsoft is expanding its pilot program of selling a 4GB Xbox 360 and Kinect sensor for just $99 with the commitment of a two-year contract for Xbox Live Gold. Originally only available at Microsoft stores, the program will be expanded to Best Buy, GameStop, Walmart and Toys “R” Us just in time for the busy Christmas shopping season.
“I think that the $99 program has always been a test to see if Microsoft can do it with the launch of the next Xbox,” said Michael Pachter, video game analyst, Wedbush Morgan Securities. “They’re rolling out to broader retail so everyone is ready for the next generation launch, likely to be subsidized by cable companies since the next generation will likely have a TV tuner built-in.”
That $99 price point, which actually becomes $420 when you add in the two-year subscription, could give Microsoft a bigger edge over Sony’s PlayStation 3, which retails from $250 to $350 depending on bundles, and the Nintendo Wii, which sells for $130 and includes two pack-in games. Pachter believes Microsoft will be lone game maker to employ this business model, for now.
“I don’t think Sony will try to compete with this business model until they figure out that the Xbox is a TV tuner, then they’ll patch their software and do the same thing,” said Pachter. “But that’s a 2014 event.”
Microsoft is also rolling out Xbox SmartGlass, which extends the console gaming or entertainment experience to any PC, smartphone or tablet, including Microsoft’s new Surface devices and Windows 8 phones. First announced at E3, this technology will allow gamers to consumer all types of entertainment using multiple screens.
“While our success with Xbox to date has been led by a box in the living room, we’re now reaching individuals in new and exciting ways across PCs, tablets and phones,” said Yusuf Mehdi, Chief Marketing Officer for Microsoft’s Interactive Entertainment Division. “Xbox will be a gateway to the best in movies, TV shows, music, sports, your favorite games and instant access to your friends, wherever you are.”
SmartGlass turns any touch screen device into a remote control for the Xbox 360, while opening up new interactive options like pulling up real-time stats during a football game, further exploring the mythology of Halo 4 while in-game or accessing additional information about an actor or director while watching a film.
“We live in a multi-device world,” said Mehdi. “The millions of people enjoying entertainment on their Xbox are doing so within arm’s reach of another device. We believe your entertainment should travel seamlessly across devices, that devices should work together to make your entertainment more accessible and create entirely new experiences.”
With Xbox Video, gamers can start a TV show or movie on their Windows 8 tablet and finish it on the big screen through Xbox 360. Microsoft has partnered with HBO Go’s Game of Thrones to introduce new interactive options for the next season of the show for Xbox SmartGlass users.
Pachter believes SmartGlass will make discovery of entertainment and games easier for consumers. He said this multi-screen approach to games is completely different than Nintendo’s approach with Wii U and its tablet-like GamePad. Nintendo launches Wii U on November 18 for with $300 and $350 options.
Microsoft is also expanding its entertainment service, which includes 67 TV and entertainment partners, from 35 countries to 222.
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