Kinect Sales Spur Microsoft’s Game Plan

by Anthony John Agnello | January 7, 2011 3:18 pm

Kinect Sales Spur Microsoft’s Game Plan

Microsoft (NASDAQ:MSFT[1]) has been confident of its Kinect hands-free video-game device Kinect from the beginning.

Product manager Aaron Greenberg told website Gamasutra last September that he expected 3 million devices sold in 2010 after its Nov. 4 release. By the first week of November, the company boasting even higher expectations, with one executive telling Bloomberg he expected sales of 5 million Kinects.

The device backed up those claims, and then some – Microsoft recently revealed that 8 million Kinects have been shipped to retailers so far. The device’s sell-through rate – what has been sold to actual consumers, not just to stores — is well above the projected 5 million, though Microsoft declined to give an exact number.

Five years after the release of Microsoft’s Xbox 360, the video-game console is getting a second wind, not just from the Kinect, but from the migration of consumers seeking a high-definition game experience away from Nintendo’s (PINK:NTDOY[2]) Wii game console, which is built only for standard-definition televisions. Microsoft’s system is maintaining a commanding lead over its high-def competitor, Sony’s (NYSE:SNE[3]) PlayStation 3, however, especially following the nine-week holiday sales period. Microsoft CEO Steve Ballmer recently revealed at the Consumer Electronics Show that the Xbox 360′s lifetime sales surpassed 50 million following this past Christmas season.

Central to the continuing health of Microsoft’s console is the Xbox Live online gaming network, which is part multiplayer gaming network, part social network, and part media suite. Its $60-a-year premium service, Xbox Live Gold, lets users play games online together, access social networks Facebook and Twitter via their Xbox, and access versions of Netflix’s (NASDAQ:NFLX[4]) streaming-video service and the Disney (NYSE:DIS[5])-owned ESPN 3. Microsoft announced at the beginning of December that the service had 25 million users, 12.5 million of which were subscribers to the premium Xbox Live Gold. Ballmer said Xbox Live’s member base is now 30 million strong.

With the lifespan of the Xbox 360 stretched into the foreseeable future, the consumer technology industry is now looking ahead to what’s next for Microsoft’s business. The answer seems to be television programming. A Reuters report at the end of November said that Microsoft is developing a new subscription-based “virtual cable operator,” effectively turning the Xbox 360 into a living set-top box — and an alternative to cable services like Time Warner (NYSE:TWX[6]) and Comcast (NASDAQ:CMCSA[7]).

The company is said to be deep in talks with television content providers to bring their programming to the Xbox Live service. Ballmer confirmed at CES that the News Corp. (NYSE:NWS[8]), Disney, and General Electric (NYSE:GE[9]) joint venture Hulu will come to Xbox Live later this year. Only the subscription-based premium edition of Hulu, Hulu Plus, is confirmed for the system. Microsoft is also going to further develop the Xbox Live service on the Windows Phone 7 mobile platform throughout the year, hoping to find a crossover audience in the massive Xbox 360 user base.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.

Endnotes:
  1. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  2. NTDOY: http://studio-5.financialcontent.com/investplace/quote?Symbol=NTDOY
  3. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  4. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX
  5. DIS: http://studio-5.financialcontent.com/investplace/quote?Symbol=DIS
  6. TWX: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWX
  7. CMCSA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMCSA
  8. NWS: http://studio-5.financialcontent.com/investplace/quote?Symbol=NWS
  9. GE: http://studio-5.financialcontent.com/investplace/quote?Symbol=GE

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