Microsoft’s (NASDAQ:MSFT) line of Xbox video game products and services is at a critical juncture. The Xbox 360 is coming off of its best year of sales but, at six years old, the technology is starting to show its age. Kinect sales have stayed strong, but with no new games on the immediate horizon, sales are likely to drop off significantly until the holiday season.
Meanwhile, Nintendo (PINK:NTDOY) has dropped the price of the competing Wii to $170, which should allow it to eke out a few more months of good sales before debuting a new console next month. Apple (NASDAQ:AAPL) is rapidly altering the video game market with the iPad and iPhone. Sony (NYSE:SNE) hasn’t matched the Xbox 360’s sales with its Playstation 3 in the U.S., but the two are neck-and-neck in the worldwide market — Sony has an installed base 50 million consoles, while Microsoft is around 53 million.
How can Microsoft stay at or near the top of the heap? Here are five strategies:
Price drop
The Xbox 360 gained huge momentum last summer when Microsoft released a redesigned model of the system. There were a number of significant changes to the box: Its wireless internet adapter came built in to the machine as did the 250-GB hard drive, two accessories that were costly extras at retail. However, it kept the device at $300. By dropping the price to $200 this summer ($250 for the 250-GB hard-drive device with a Kinect), Microsoft could ensure that sales stay steady across the summer months and widen its lead over Nintendo and Sony in the U.S.
New Kinect games
Microsoft has not released a single significant Kinect-related game in 2011. While the device is still novel to consumers, the market needs fresh blood. It’s guaranteed that Microsoft will debut a wide selection of new Kinect games at the E3 expo in June, but many of those games will likely be released in the fall or even next year. Microsoft needs to announce one or two major titles for the motion controller that will be available between May and August — unless it wants to see sales of the accessory drop off completely. A new dancing title, possibly from Ubisoft’s Just Dance line or an expansion of the Dance Central series, would be perfect.
No new console
Both Sony and Nintendo are planning to announce new game consoles at E3. That’s what Microsoft needs at this point, not when its old, cheap-to-manufacture hardware is performing so well. Microsoft has the opportunity to do with its Xbox 360 what Nintendo did with its Wii in 2006 — keep outdated game consoles on the market as an affordable platform for game developers and consumers alike. While Microsoft may feel pressure to match Sony and Nintendo’s respective announcements of the NGP and Wii 2, now’s the time to stay the course.
Get the TV service ready for primetime
It’s been heavily rumored since last fall that Microsoft has been planning to launch its own cable-style television services through the Xbox 360. Subscribers to Xbox Live Gold, the premium version of its Xbox Live online gaming network and media service, would be able to view content from a number of exiting channels as part of their subscription. Microsoft already has relationships with Disney’s (NYSE:DIS) ESPN and Viacom’s (NYSE:VIA) Comedy Central on the Xbox, making them likely partners in the new service. Given the popularity of streaming video right now, augmenting an already successful service like Xbox Live with even more content will help extend the Xbox 360’s lifespan even further.
Strengthen mobile
This is dicey. It would be unwise to pour too many resources into developing the Xbox brand on Windows Phone 7 devices considering consumer apathy toward the platform. With the big Nokia (NYSE:NOK) Windows phones coming soon, though, the time is now to start building a stronger foundation for the Xbox brand in the mobile arena. The key is to announce games that users will be able to play on both a Windows Phone and an Xbox 360 on the same Xbox Live account.
