The Xbox, which Microsoft has pledged to back with $500 million in global marketing, is expected to roil the interactive entertainment waters when it debuts next fall. It will enter a console landscape already dominated by Sony Computer Entertainment America's powerful PlayStation franchise. Even so, some analysts and industry pundits contend it's as good a time as ever for Microsoft to enter the console market, as rivals Sega of America, Sony and Nintendo of America only begin to rev up their next-generation systems. The entry of a fourth console player not only will give gamers another choice, it's also expected to add a new level of excitement in the world of interactive entertainment.
`UNDERPROMISE AND OVERDELIVER'
"We think there's an opportunity for Xbox to elevate the gaming experience and to create a better games platform," said John O'Rourke, VP-marketing, Xbox. "We want to underpromise and overdeliver."
Despite Microsoft's long experience in the PC games business and a hefty war chest, the company faces a number of challenges. For starters, the company must create a consumer brand from scratch, something it has tackled before with mixed results. Consumer brands include the MSN Internet portal and access service, which after five years of fits and starts has only recently come into its own; WebTV, now morphing into something called UltimateTV; and PocketPC. Microsoft's toy partners have, for the most part, taken the marketing lead for products such as ActiMates, a line of interactive toys in partnership with the Itsy Bitsy Entertainment Co.
Brand differentiation presents another challenge. While Sony's PlayStation 2, which launched late last month, and the Xbox don't have the same technical specifications, they do share similar capabilities-both have DVD and hard drives, and both offer Internet and broadband connections.
"I think the Xbox and the PS2 will end up looking very similar," said Schelley Olhava, senior analyst, International Data Corp., a technology research organization. "The No. 1 thing that's going to sell its [Xbox's] platform is the video games; gamers don't buy the platforms because of the hardware, it's going to be because of the games," Ms. Olhava maintains. Indeed, Microsoft over the last few months has signed up 150 game developers, including Activision, Havas Interactive and Konami to write games for the Xbox. The company anticipates 20 software titles at launch, three to four of which will be Microsoft-branded franchises created by an in-house team of developers and designers. The goal is to offer 100 titles by the end of the first year. Microsoft also plans to score titles from third-party developers that are exclusive to the Xbox, similar to its arrangement for the Oddworld series, a popular line of PC gaming software.
CLOSELY HELD SECRETS
Led by Mr. O'Rourke, a veteran of three Office launches and the PC games business, the marketing team is supported by a stable of seasoned pros: Don Coyner, director of marketing, games division, a Procter & Gamble alum, who also spent seven years at Nintendo; Jennifer Booth, marketing director, research, who helped launch Sony's original PlayStation in 1995; Beth Featherstone, director of marketing, first-party games, and Goca Micic, advertising manager, formerly with Wieden & Kennedy, Portland, Ore.
Microsoft has conducted numerous global studies and focus groups to determine its target audience and brand positioning-passionate gamers ages 16 to 26, predominantly male. McCann-Erickson Worldwide, New York, handles Xbox's more than $150 million advertising account. The creative strategy, a closely held secret still in development, will start to appear in early 2001 as the interactive entertainment industry begins the run up to its annual trade show, E3, in May. Advertising, and all marketing for that matter, is expected to tout Xbox brand attributes: passion and a sense of exhilaration.
Not all gamers are alike. "Some are looking for escape, some for exhilaration, some are looking for [a sense of] accomplishment and the ability to suspend disbelief," Mr. O'Rourke said, adding, "We are building whole new worlds." The brand positioning? "Xbox enables the realization of creative visions," he continued.
"Five hundred million dollars has to work like $750 million," Mr. O'Rourke quipped. In fact, the money will be stretched across all Xbox marketing globally-everything from in-store merchandising, promotion, retailer incentives, events, sponsorships and traditional advertising. Promotional partners across the fast-food, beverage and sports categories may also share the expenses.
As Xbox enters the market a year after PlayStation 2, Microsoft's discipline, desire and drive to best its rivals can't be underestimated: Mr. O'Rourke intends the Xbox to be one of the top five consumer brands worldwide "Microsoft doesn't have a history on the console side, but it works in their favor," said Matt Gravett, game analyst, PC Data, a market researcher. "Microsoft is known, even though what they bring to the console table is unknown right now ... They're still going to need to work a bit to get the gamer mindshare; if the games are really great, they're going to buy the platform whether the Microsoft name is on the box or not," he said.
A FEW STOPS TO THE TOP
Mr. Gravett notes that Microsoft has studied the market for some time and will leverage its presence in the PC games business to the console business. He expects Microsoft to create proprietary software franchises, based on a character or an adventure.
Microsoft ranked the No. 7 PC games publisher for the first nine months of this year, with 5.1% of the units sold, according to PC Data, vs. No. 1 ranked Electronic Arts, which had 17.6% of the market. According to PC Data, the video-game console market-share picture for the first 10 months of the year (January through October 31) shows Sony's PlayStation holding 42% of all units sold. In its first week on the market, the PS2 accounted for 12% of all units sold-and a whopping 27% of revenue. Nintendo's N64 racked up 28% of all consoles sold, while Sega's Dreamcast had 17% of the units sold. The share picture for next year remains unclear given the Xbox wildcard
"If Microsoft comes out with the right games and taps the core gamer segment, I really think that they and Sony will be sparring for the No. 1 spot," Mr. Gravett predicts.