November marks a new era for Microsoft’s (NASDAQ: MSFT) entertainment division. As it has every fall since the Xbox 360 video game console released back in November 2005, Microsoft has released an update that for the system’s Windows-based operating system that completely overhauls the gaming machine’s interface. The update was made available on Monday morning. 2010’s update to the Xbox 360 Dashboard brings a host of welcome improvements to Microsoft’s customers, including upgraded voice chat support over the Xbox Live online gaming service and a new streaming video hub from Disney and Hearst’s (NYSE: DIS) ESPN.
The latest remolding of the Xbox 360 experience carries new significance for Microsoft’s entertainment division as it looks to recast the console as an entertainment hub geared more towards the families that have made the Nintendo (PINK: NTDOY) Wii a success in recent years. Rather than the Halo and Call of Duty players that have helped Microsoft become a major competitor in the game space over the past decade, the Xbox 360 Dashboard update is meant to make for a softer, easier to use experience, one tailor-made for the company’s other major gaming release this week: the Kinect. Microsoft’s bid to capture the family audience to extend the Xbox 360’s lifespan is centered around the new peripheral the Dashboard update precedes. Much like the system’s updated interface, Microsoft’s new control peripheral takes its cues from Nintendo’s home console. The Kinect itself is a thin, rectangular bar that hosts a camera, microphone and other tech and rests in front of the television where it senses users’ movements for video game and console navigation free of a traditional remote control. Following an update scheduled for the next six months, it will even allow for voice commands, recognizing multiple user voices.
Kinect is hardly going to make or break Microsoft’s game hardware business. Since it released a newly redesigned model in June of this year, Microsoft has sold more than two million Xbox 360s. The latest entry in its best-selling science fiction franchise, Halo: Reach, sold more than 3 million copies during September. While current game hardware leader Nintendo is starting to see significant declines in the sales of its aging machines, the five year-old Xbox 360 is continuing to find new customers without dramatically reducing its retail cost. Still, the company is positioning the motion sensing Kinect as a new console rather than just a new peripheral, creating new branding for the device and the system reflected in the new Dashboard update. Xbox product director Aaron Greenberg said in September that he expects 3 million Kinects to be sold worldwide following its release this Thursday, Nov. 4.
While some retailers have reported selling out preorders for the device, it’s difficult to judge how strong public interest in Kinect really is until its available. The selection of launch software for the device, including Microsoft developed titles like virtual pet game Kinectimals, sports game collection Kinect Sports, and Dance Central do little to distinguish themselves from competing motion and camera controlled software on Nintendo and Sony’s (NYSE: SNE) consoles (Wii Sports, EyePet, Just Dance) beyond the novelty of not needing a remote. Investors wondering if Kinect will reinvigorate the flagging game market shouldn’t bet big on this unproven device. For those who already own Microsoft shares, however, hold on to that stock as it should stay healthy regardless of the Kinect’s success or failure.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
