At the annual Tokyo Game Show this week, Microsoft (NASDAQ: MSFT) came out with its technological guns blazing. Its press conference focused on its new hands-free motion controller, the Kinect, and a host of video game software made specifically for the machine by long-standing Japanese publishers.
New Kinect-only games from Capcom, the creators of international bestsellers Street Fighter and Resident Evil, Sega and the third biggest publisher in the world, Ubisoft, were shown off at the conference. While Japanese publishers and developers have largely been outpaced by Western outfits like Activision Blizzard (NASDAQ: ATVI) and Electronic Arts (NASDAQ: ERTS) in terms of earning potential and audience reach over the past decade, the software at last night’s event showed not just an impressive level of confidence in Microsoft’s new hardware.
The event also demonstrated that Japanese publishers see potential for stealing away some of the core gamer audience that typically flocks to the shooting and action games published by ATVI and others.
Microsoft is also confident in the Kinect. In an interview with Web site Gamasutra, Microsoft’s Xbox product director Aaron Greenberg said that the company expects 3 million units in global sales for the Kinect when it releases in November. That number, says Greenberg, is based not based on consumer surveys but retailer feedback and existing preorders for the machine. He also said that Microsoft is viewing the Kinect release as a way to extend the lifespan of the Xbox 360 hardware, keeping it a force at retail until at least 2015 if not beyond.
The Xbox 360 has been enjoying a surge in hardware sales over the summer thanks to a redesign of the hardware and strong marketing push. Whether the Kinect will be able to capture the coveted casual and family video game market that Nintendo (Pink Sheets: NTDOY) has dominated in recent years will depend on whether Microsoft can convince families to invest in expensive equipment intended for HD televisions. The Kinect will retail for $149 independent from the $299 Xbox 360 proper, in addition to a SKU that bundles the Kinect with an Xbox 360 with only 4GB of memory at $299. It’s also questionable whether or not Microsoft’s plethora of new software from Japanese developers, such as Capcom’s Steel Battalion: Heavy Armor and Ubisoft’s Child of Eden, will be enough to convince the core audience to invest in a Kinect rather than the latest version of Call of Duty from ATVI.
When it unveiled the Xbox 360 in April of 2005, Microsoft emphasized their goal of capturing the small but influential Japanese audience. The original Xbox sold just 473,000 units between 2001 and 2006 in the land of the rising sun. To put this in perspective, Microsoft sold 356,700 in the United States in August 2010. They have had greater success in Japan with the Xbox 360, but not by much, selling 1,354,685 systems in the last five years. These new games from Japanese publishers are clearly hoping to capture Western audiences rather than native players. Still, it’s doubtful that these new Kinect games will ignite the flagging games industry. Investors looking for hints on whether or not they should put their money behind Kinect developers this fall should wait a while yet. Remember: Activision Blizzard still hasn’t announced any development plans for the hardware. Its success is far from guaranteed.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
