NEW XBOX RIGGED FOR EXTENSIVE PRODUCT INTEGRATION

Microsoft Creates Global Online Game Environment and Marketplace

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LOS ANGELES (AdAge.com) -- Microsoft Corp.'s new Xbox 360 console has been engineered to accommodate product integration as never before, and its global audience of gamers will be sold aggressively to marketers when the system hits the stores this fall, according to the company.
Microsoft's goal is to sell 1 billion of its Xbox 360 consoles, creating a massive online global audience that can be sold to marketers.



“Picture a video-game racing season on Xbox Live sponsored by one of the world’s leading auto manufacturers,” said Peter Moore, Xbox’s corporate vice president for worldwide marketing and publishing. “At the start of the season, 250,000 people pay $10 each to sign up for a head-to-head 30-race competition. The stakes? How about a million bucks to the overall champion? In the final race, 16 finalists go head-to-head for the million-dollar prize. And with spectator mode, 250,000 fans will log on to watch the competition. If you are the sponsor, you've captured the attention of hundreds of thousands of people who've spent the last six months living and breathing your tournament and your brand.”

Xbox Live Marketplace

At the recent E3 conference, Microsoft executives also pushed the console’s Xbox Live Marketplace, an online bazaar in which companies will be able to distribute game trailers and sell new titles, as well as additions like levels, maps and vehicles, while gamers can sell stickers, T-shirts, sound tracks or in-game elements that they designed.

But Microsoft has bigger plans for the Xbox marketplace than just games. It envisions a Myspace.com-like community through which record labels will be able to launch new bands with free MP3 downloads and videos or host live concerts, or a studio to unveil an exclusive film trailer. Users will also be able to buy music and movies.

The Marketplace opens the doors for advertisers to showcase short films or other branded entertainment they may have produced, and offer up other content consumers could download for free or for a fee.

DVDs, CDs, iPods

In addition to playing games, the Xbox 360 will also play DVDs and CDs, and include ports for Apple’s iPod or other music devices and digital cameras, and can connect wirelessly to a PC through a Wi-Fi connection. It will also enable users to send e-mail, instant message and chat via video conferencing during game play or while watching TV or a movie.

Microsoft hopes all that functionality, in addition to cool games and fancy graphics, will help the company sell 1 billion consoles. The current system, introduced three years ago, has sold 20 million units to date. Its Xbox Live service has 2 million subscribers. Xbox wants over half of its 360 consoles to be connected to Xbox Live.

Some industry watchers likened the potential for advertisers on the Xbox 360 to the current practice of sports sponsorships and naming rights on stadiums and other venues.
Microsoft's goal is to sell 1 billion of its Xbox 360 consoles, creating a massive online global audience that can be sold to marketers.



Intrinsic added value

But there’s an intrinsic added value for a marketer who’s involved with the Xbox 360, said Jamie Berger, general manager of the consumer products division at IGN Entertainment, which runs Web sites and events for gamers.

“For a typical sporting event, there are a few people playing and the rest watching,” he said. “For an Xbox 360 event, lots of people can participate and lots can watch. That makes for a lot of highly engaged people.”

Executives from Microsoft declined to comment further on their upcoming plans to attract marketers. In the past, Xbox has tried to steer clear of turning off gamers with the image of its console serving as a marketing platform for advertisers.

In-depth personal data collection

But Xbox 360’s ability to collect information on gamers -- from hardcore to casual players -- is exactly what will make the system appeal to advertisers looking for news ways to connect with a lucrative demo. Microsoft is hoping to broaden the console’s appeal beyond the core 13- to 34-year-old gamer and target women and casual gamers as well, who tend to gravitate to online play. That opens up the possibilities for more ad categories.

“We thought very differently about our approach when designing the product,” said J. Allard, corporate vice president and chief architect of the Xbox at the company’s press conference at E3. “We knew we had to tap into a lot more markets, we knew we had to fit into a broader range of lifestyles. We love that guy, the 18- to 34-year-old-male; he’s the backbone of the industry. But 360 is also the product that’s going to push gaming back into the mainstream, the product that will fill that couch up with people from every demographic and every market.”

Through Xbox Live, users will register in order to play games online, meaning Microsoft will have a reservoir of data on its consumers. Audience measurement “will be state of the art,” said Jonathan Epstein, an agent specializing in the video game and marketing arenas at Hollywood’s United Talent Agency, “which gives this platform a significant advantage over less regulated environments like the Internet.”

Madison Avenue and Hollywood

Microsoft has yet to reveal any deals with sponsors. And it’s still too early for many to even consider what they might do with the device. But Microsoft’s plans are certainly generating interest -- from Madison Avenue and Hollywood.

Amy Powell, Paramount Pictures’ vice president of interactive marketing, said she hasn’t yet discussed advertising on Xbox 360 with Microsoft executives, but she’s interested in the medium as a tool to promote films.

“It’s an excellent opportunity because that audience is so important to us,” she said.

Of course, the Xbox 360 will prove even more attractive to advertisers should Microsoft manage to meet its lofty goal of selling 1 billion consoles.

However, the Xbox 360 won’t be the only video-game player advertisers can turn to.

Sony PlayStation Portable

Marketers are also eyeing Sony’s new PlayStation Portable as a way to reach consumers, because the new handheld game system also plays music and movies and downloads content from Web sites. Sony’s next-generation PlayStation 3 will also enable gamers to connect to the Internet to play other gamers and download content. The PlayStation 2 dominates the console market with a 68% market share vs. Microsoft’s 17% according to DFC Intelligence.

Video-game devices are “becoming an exciting new medium, and we're all waiting for the rate card,” Mr. Epstein said.

Industry watchers advise advertisers to be cautious, however. Mr. Berger said there will be many opportunities for marketers on the Xbox 360, but he thinks they need to be more innovative in the way they approach the medium. Simply applying the thinking that goes into traditional ad campaigns and media buys is the least effective way to try to grab gamers’ attention.

“Marketers need to tailor their approach and make it special and unique to the platform -– not just an ad, but a brand experience,” Mr. Berger said. “They need to use the medium in a way that adds value to the consumer and show that they’re embracing the gaming culture.”
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